Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Loan Market Commentary 05/21/2010

Maybe this week will teach public figures to be a little more careful when they decide to come into our sandbox and play with our toys. It was like 2008 all over again and fear got the best of the market. However things were a little more subdued today. Bids were down around a point in early morning trade after a late day sell off yesterday pushed everything lower. We were able to recover a bit in the latter half of the morning as dealers get lifted on their offers as buyers emerged looking to for some of the badly beaten up paper like TXU and FDC. Overall names came back a quarter point, but were still lower on the day. The afternoon was very quiet, volumes were thin and the market stayed flat.
 
Sentiment was helped out by the Lipper FMI numbers. They reported Bank Loan inflows of $112.4 million after showing a modest outflow of $44.1 million last week. But, advancers continued to outpace decliners by nearly 9 to 1 as dealers continue to mark down paper in order to find buyers. The market is still nervous and people are looking to de-risk. Despite all the fear the primary market continues to perform. Sedwick and BWAY’s new term loan broke for trading today atop their OID’s. Johnson Controls made a bid for Visteon, and offered to buy their interiors and electronics divisions for $1.25 billion cash. Visteon’s term loan firmed to 107-108 on the news. We are seeing some signs of strains though; the pricing on RCN’s term loan flexed up today amid the volatile market conditions.
 
The LCDX 14 opened up the day at 93 3/8 – 93 7/8, (-3/8) but followed equities higher and was sitting at 94 ¼ - 94 5/8 by halftime. In the afternoon, like the loan market, the LCDX was flat despite the decline in equities.
 
The trend of high volatility will remain high in the US after the financial reform bill passed last night by a vote of 59 to 39. The final touches still need to be ironed out in Washington. Keep an eye on the “skin in the game” provisions as that directly impact the loan market. As it is written, the House bill would “require any creditor that makes a loan to retain an economic interest in a material portion of the credit risk of any such loan that the creditor transfers, sells, or conveys to a third party, including for the purpose of including such loan in a pool of loans backing as issuance of asset backed securities.” If the above provision does get passed expect to see a panic similar to the one we saw this week after Germany imposed a short selling ban. Keep your eyes open.
 
Go Hawks!
 
News
  • Books on Renal Advantage's $245 million, six-year term loan B is expected to close Tuesday following the May 14 launch. The corporate family rating is B2/B, while the facility rating is Ba3/B.
  • Tribune Co will have to wait another week before its reorganization plan is sent to creditors for a vote and must include letters that will likely warn approving the plan will spark protracted legal battles. Holders of both senior and junior claims made it clear at Thursday's bankruptcy court hearing that the owner of the Los Angeles Times, Chicago Tribune and New York's WPIX television station faces a legal slog before it exits Chapter 11.
  • Johnson Controls Inc (NYSE:JCI) has expressed interest in acquiring bankrupt Visteon Corp's (NYSE:VC) interiors and electronics business for $1.25 billion in cash. No other terms or details of the proposed transaction have been disclosed.
  • Bank loan mutual funds saw 112.4 million in inflows the week ended May 19. High yield bond funds saw outflows of 378.4 million.
  • Standard & Poor's investment-grade composite spread tightened 8bp yesterday to 184bp, while its speculative-grade counterpart remained flat at 628bp. By rating, the 'AA' spread tightened 9bp to 129bp and 'A' and 'BBB' compressed 8bp each to 162bp and 220bp, respectively. The 'BB' spread tightened 2bp to 468bp, 'B' expanded 2bp to 662bp, and 'CCC' widened one basis point to 914bp.
  • One global corporate issuer defaulted this week, raising the year-to-date 2010 tally of global corporate defaults to 33, said Standard & Poor's.
  • Affinion Group Holdings Inc (NYSE:AFI) filed for an initial public offering for up to $400 million on Friday, according to a regulatory filing with the U.S. Securities and Exchange Commission. The Stamford, Connecticut-based company, which helps firms market their products, posted net revenue of $1.38 billion in 2009, down 2.3 percent from $1.41 billion a year earlier. It posted a net loss of 66.4 million, which was narrower than the year-ago period.
  • Bank of America Merrill Lynch and Goldman Sachs have provided committed financing to back GS Capital Partners' $1.7 billion buyout of Michael Foods from THL Partners.
On the break
  • Sedgwick Claims Management Services' $400 million first-lien term loan broke for trading in the 99.5-100 range this afternoon. Pricing on the facility firmed at LIB+400 with a 1.5% Libor floor and a 99 OID. Earlier, the first-lien term loan was talked at LIB+375-400. The corporate family rating is B2/B+. The first-lien facility ratings are B1/B+ and the second-lien facility ratings are B3/B-.
  • BWAY Holding Co's (BWY) new $490 million term loan B broke for trading this afternoon in a 99.75-100.25 market. The OID firmed at 99.5, the tighter end of 99-99.5 talk. Pricing is LIB+375 with a 1.75% Libor floor.
 
Loan New Issue
Price Talk
  • Price talk on Spectrum Brands' (NYSE:SPB) $1 billion term loan is LIB+450 with a 1.5% Libor floor and a 99 OID. Credit Suisse is launching the deal Monday. It backs the company's acquisition of Russell Hobbs' small appliance brands. The corporate family and facility ratings are B2. The company also said projected leverage will be roughly 3.8 times at fiscal 2010 year end.
  • Pricing on Triumph Group Inc's $300 million term loan B has been flexed down by 25bp to LIB+300, with a 1.5% Libor floor and a 99.5 OID. A step-down to LIB+275 has been added when total leverage is less than two times.
  • Price talk on Cedar Fair's (NYSE:FUN) $1.05 billion term loan is LIB+375 with a 1.75% Libor floor. The corporate family rating is Ba3 and the facility rating is Ba2.
  • Aurora Diagnostics LLC (AOG) allocated today its $230 million; six-year term loan B. Pricing is LIB+425 with a 2% Libor floor and a 98.5 OID. Senior secured leverage is 3.5 times, while total leverage is 4.4 times. Corporate family and facility ratings are B1.
  • JP Morgan and Morgan Stanley launched today a $400 million exit term loan for Canwest Global Communications. Price talk is LIB+600 with a 2% Libor floor and a 98 OID. The loan has a 101 call protection for one year.
  • Pricing on RCN Cable's deal has been flexed up to LIB+400 with a 2% Libor floor and a 99 OID. Earlier, price talk on the deal was floated at LIB+375 with a 1.75% Libor floor and a 99 OID. The facility and corporate family ratings on the Cable deal are B1.
Announced
  • Deutsche Bank is launching a $800 million, six-year bank loan to back Bain Capital's $1.63 billion buyout of Dow Chemical's (DOW) Styron plastics business. The sale of the unit, which makes latex, rubber and related plastics, will help the Dow Chemical further bolster its balance sheet following the $15 billion acquisition of Rohm and Haas last year.
  • Deutsche Bank is launching a $940 million, seven-year term loan B backing Madison Dearborn Partners' acquisition of a 51% stake in TransUnion. The Pritzker family business interests will retain approximately 49% ownership of the company.
  • Boston Scientific Corp (NYSE:BSX) has scheduled a bank meeting on May 27 to launch a $3 billion, three-year refinancing. Bank of America Merrill Lynch-led deal consists of a $1 billion term loan and a $2 billion revolving credit facility. Price talk is around LIB+275.
  • Automatic Data Processing is expecting to surface for a refinancing next week with a bank meeting scheduled for May 27. the borrower could be seeking 364-day and three-year tranches.
  • Ensco Plc (NYSE:ESV) has surfaced for a $500 million, four-year revolving credit facility for refinancing, sources said. Ensco would be the third BBB name to tap for a four-year tenor recently, following Owens Corning and Cabot Corp which are both in the market.
  • Private Export Funding Corp is seeking a $1 billion, two-tranche revolving credit facility for refinancing. The JP Morgan-led facility consists of an $880 million, 364-day tranche and a $220 million, three-year tranche. Pricing opens at LIB+125 on both tranches with a 7.5bp and 12.5bp facility fee on the 364-day and three-year tranches.
  • Sprint Nextel (NYSE:S) announced today that it has raised a $2.1 billion, unsecured revolving credit facility. Sources said the revolver was reduced from an original target of $2.25 billion. The 3.5-year revolver is led by JP Morgan and Citi. Banks get an upfront fee of 200bp for commitments of $300 million, 175bp for $150 million or 100bp for $50 million.
High Yield New Issue
Price Talk
  • SSI Investments II Ltd/SSI Co-Issuer LLC (SkillSoft) USD310m 144A sr unsec notes due 06/01/18 (8y). NC4. Caa1/B- (stable/stable). Via MS/Barc/DB joint books. W/reg rights. 11.125% at 99.347 yield 11.25%. +836bp vs 3.875% 05/14/18.
 
What to Watch
  • 9 a.m. ET: Petrohawk Energy Corp. analyst day
  • 10 a.m. ET: Existing home sales, April (National Association of Realtors)
  • Treasury to auction 13-week bills and 26-week bills
  • 2:50 p.m. ET: MDC Partners Inc. at Bank of America Merrill Lynch services conference
  • After market close: Phillips-Van Heusen Corp. Q1 earnings