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Loan Market Commentary 06/04/2010
Well this morning we did not get the numbers we were hoping for. The jobs numbers was less than expected; with the headline number showing a gain of 431k jobs in May well below the expected 513k and not even close to the 600k many anticipated because of census workers. Of the 431k jobs added last month, 411k were temporary hires by the US Census Bureau which did not make anyone happy. In the private sector we showed a gain of 41k jobs, down from a gain of 218k in April. The numbers were a big disappointment and confidence in the recovery was diminished. Combine that with fears that Hungary could be the new Greece set the market up for another disappointing day. Futures were down around 2% and European equities sold off. In loan land flow names were off by around a quarter point and decliners outpaced advancer by 4 to 1 in early morning trade. The LCDX 14 was out the door down a quarter at 94 5/8 – 95. The market has been and will remain very quiet as everyone has moved to sidelines. We are seeing some de-risking ahead of the weekend but nothing crazy. Flow names have been the most active today with names like TXU, FDC, CHS dominating trading. Harrah’s has been active and better bid after news broke that Paulson, Apollo, and TPG have traded in debt for a piece of the company. Names will remain heavy today, the LCDX 14 was last seen at 94 ½ - 94 7/8 (-3/8). It is not likely that we will see much action in the afternoon as most of the market is going to sit and wait for Monday to make any moves.
Let’s Go Hawks.
Harrah's Entertainment Inc's loan rose almost two points this morning after the company said late yesterday Paulson & Co, Apollo Management and TPG Capital have agreed to exchange debt for a stake in the company. The issuer's TLB-2 rose to 85.25-856 this morning, up from an 83.5-84 market yesterday. The TLB-1 is currently quoted 85.125-85.625, the TLB-3 is 84.75-85.5 and the TLB-4 is 100.75-101.5. The company said the funds agreed to exchange $1.1 billion in debt for about 15.6% of the common equity of the company. The transaction will infuse $557 million of cash into the company, which it will use for general corporate purposes. Upon closing of the transaction, Harrah's will have approximately $3 billion in available liquidity, including $1.5 billion in cash on hand and amounts undrawn under its revolver.
Kitchenware manufacturer World Kitchen's $220 million, five-year credit is two times oversubscribed. The terms of the deal may be tweaked. BMO Capital Markets leads the deal. Proceeds are for refinancing and capital expenditure. The deal consists of a $90 million revolving credit facility, a $60 million term loan, a C$20 million term loan, and a $50 million delay draw term loan. Pricing is LIB+425 with a 1.5% Libor floor. The upfront fee is 75bp.
Fitch Ratings has placed the ratings of Nielsen Company B.V. and its subsidiaries on Rating Watch Positive following Nielsen's filing this week for an IPO of up to $1.75 billion, indicating proceeds are for debt reduction.