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Loan Market Commentary 05/24/2010

|Includes: ALGT, CBB, FUN, LNY, ODSY, PTV, SPB, Smurfit-Stone Container Corporation (SSCC), VC
This morning the market opened up weaker as fears over the European debt crisis continue to impact investor sentiment. Overnight Asian Equities were mixed and in the early morning Europe was lower and US Equity futures pointed to a lower open. The LCDX14 followed suit and started the day down a quarter at 93 ½ - 94. On the run names came out the gate about an eighth to a quarter better and continued to firm through out the day on some buy interest after getting beaten up pretty bad last week.
In the later half of the morning and into the afternoon the LCDX 14 and high beta names beat to their own drum and continues to firm despite a weak equity market. The LCDX 14 was seen as high as 94 1/8 – 94 3/8. Some investors view the market as cheap and are able to source paper, giving them the opportunity to invest. A lot of the high beta paper has become of interest; TXU, HCA, and CHS term loans were all a quarter point firmer, FDC was up half a point and TRB’s TLB was up close to a point in the afternoon, albeit in very light volume. LPL Financials new term loan broke for trading and quickly traded up into the 99 1/8 - 99 5/8 context after being issues at 96 ¾. Most of the less liquid issues did not have the same luck and were down around a quarter point and decliners continue to outpace advancers at a rate of 3.5 to 1. In the late afternoon the LCDX 14 weakened with equities and was last seen at 93 ¾ - 94 1/8, (unch’d).
Going into the holiday weekend volumes are going to be very light and the market is expected to remain heavy. But, the capital markets are still open for business and we will continue to see new deals get done. Keep an eye on the automotive sector, as part manufacturers are becoming very attractive to some well known investors and hedge funds. The industry is ripe for consolidation after two years of cost-cutting measures, streamlined operations and increasing sales. Johnson Controls Inc.’s $1.25 billion offer for Visteon’s electronics and interior business has put the spotlight on the sector and will attract some people to the party.
Volatility remains, so sleep with one eye open.
  • Smurfit Stone Container Corp (NYSE:SSCC) has reached an agreement under which holders of prebankruptcy preferred shares will receive 2.25% of the stock in the reorganized company and holders of its old common stock will also receive 2.25%. The deal clears the way for the packaging maker to exit bankruptcy.
  • Landry's Restaurants Inc (LNY) announced today it has amended the merger agreement previously signed with a company wholly-owned by Tilman J. Fertitta. Pursuant to the amendment, the Fertitta Company has agreed to acquire all of the company's outstanding common stock not already owned by Mr. Fertitta for $24 per share in cash, totaling approximately $1.4 billion.
  • Visteon Corp's (NASDAQ:VC) lenders say shareholders have made a "potentially constructive" offer for the parts maker, according to published reports from Dow Jones today. Friday, rival Johnson Controls Inc made a $1.25 billion cash bid for the company, which currently supports a bondholder-led Chapter 11 exit plan.
  • Barclays Private Equity (NYSE:PE) is set to spin out of bank ownership this summer ahead of a new fundraising from the mid-market buyout specialist in the autumn. Barclays PE is one of the few remaining buyout firms under bank control, but talks have been going on for over a year between the bank, the private equity division's management and its investors about a possible spin-off.
  • The Texas Rangers baseball team on Monday filed for Chapter 11 bankruptcy protection to ease the sale of the team to a group led by team president and Hall of Fame pitcher Nolan Ryan for about $575 million. The Rangers filed for Chapter 11 protection from creditors with the U.S. bankruptcy court in Fort Worth.
  • Crescent Resources today announced its plan of reorganization has been approved in bankruptcy court, positioning the company to exit bankruptcy in early June. Upon emergence, Crescent will have eliminated over $1 billion of debt through the restructuring process, and has secured $150 million in exit financing from a group of lenders led by UBS and Aladdin Capital.
  • Some of Pactiv Corp's (PTV) bonds could see further weakening if the company is acquired in a leveraged buyout, as much of the debt has few protections against new debt ranking ahead of the existing bonds to fund an acquisition.
  • Moody's Investors Service today assigned a Ba3 rating to New Development Holdings, LLC's (NDH) $1.4 billion of senior secured first lien bank facilities, being offered as a $1.3 billion senior secured term loan and a $100 million senior secured revolver.
  • Standard & Poor's Ratings Services said today it raised its corporate credit rating on Spectrum Brands  (NYSE:SPB)to 'B' from 'B-' and assigned a 'B' issue-level rating to Spectrum's proposed $1 billion senior secured term loan and proposed $500 million notes, and a 'CCC+' rating to its subordinated notes due 2019.
  • S&P said Friday it expects to assign its 'B+' corporate credit rating to auto supplier Cooper-Standard Automotive Inc following the company's emergence from bankruptcy later this month.
  • Moody's Investors Service has downgraded the corporate family rating ("CFR") and probability of default rating (PDR) of Cincinnati Bell Inc (NYSE:CBB), each to B1 from Ba3, reflecting the higher leverage and significantly reduced free cash flow generation as expected due to its pending acquisition of CyrusOne for $525 million in cash.
On the break
  • LPL Financial's amended and extended loan freed to trade this morning in the 96.75-97.75 range. The add-on facility broke for trading at 99.125-99.625. The issuer extended $500 million of its existing term loan to 2015 at an increased 100bp coupon of LIB+275 along with a 1.5% Libor floor. In addition, the company refinanced debt with a new $580 million add-on facility due 2017 at LIB+375 with a 99 OID and a 1.5% Libor floor.
Loan New Issue
Price Talk
  • Cincinnati Bell's (CBB) $760 million institutional term loan is talked at LIB+375 with a 1.5% Libor floor. The OID is expected in the 98-99 range. Total leverage is around 5.1 times, with expected facility ratings of Ba3/BB and corporate family ratings of B1/B+.
  • Cedar Fair (NYSE:FUN) is offering its $1.05 billion term loan at an OID of 99-99.5. price talk on the term loan is LIB+375 with a 1.75% Libor floor. The corporate family rating is Ba3 and the facility rating is Ba2.
  • Gentiva Health Services (NASDAQ:GTIV) will fund its $1 billion acquisition of Odyssey Healthcare Inc (ODSY) with a $125 million revolving credit facility, an $800 million, six-year term loan and $300 million in eight-year senior notes. Leverage will rise to roughly four times. The blended cost of debt is expected to be more than 7%.
  • Styron's $1.04 billion bank loan consists of a $240 million revolving, five-year credit facility, a $675 million, six-year first-lien term loan and a $125 million, 6.5-year second-lien term loan. Price talk on the first-lien tranche is LIB+475 with a 1.75% Libor floor. Price talk on the second-lien loan is LIB+775 with a 1.75% Libor floor. The second-lien facility is callable at 103.
High Yield
  • Allegiant Travel (NASDAQ:ALGT) announced today that due to adverse market conditions, it has elected to discontinue its offering of (ALGT) USD250m 7y NC3 144A sr notes via MS+.
What to Watch Tomorrow
  • 10 a.m. ET: Consumer confidence index (Conference Board)
  • Treasury to auction $42 billion two-year Notes
  • Treasury to auction four-week bills
  • 7:50 a.m. ET: YRC Worldwide Inc. at Wolfe Trahan transportation conference
  • 9 a.m. ET: Phillips-Van Heusen Corp. conference call
  • 9:30 a.m. ET: Moog Inc. at Stephens investment conference
  • 10:30 a.m. ET: Alliance Data Systems Corp. at Bank of America Merrill Lynch services conference
  • Cracker Barrel Old Country Store, Inc. Q3 earnings, conference call 11 a.m. ET
  • 11 a.m. ET: Sonic Automotive, Inc. investor conference
  • 11:30 a.m. ET: Flextronics International Ltd. analyst meeting
  • 11:30 a.m. ET: Group 1 Automotive, Inc. at Stephens investment conference
  • 12:15 p.m. ET: Terremark Worldwide, Inc. at Morgan Stanley cloud computing symposium
  • 1 p.m. ET: Kratos Defense & Security Solutions, Inc. at B. Riley investor conference
  • 1:45 p.m. ET: Rite Aid Corp. at Citigroup food & drug retail conference
  • 2 p.m. ET: OSI Systems, Inc. at Stephens investment conference
  • 3 p.m. ET: Ceradyne, Inc. at Stephens investment conference