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Loan Market Commentary 06/18/2010

Last night the Lipper FMI numbers showed that cash poured out of money market funds, which had an outflow of $37.866 billion, and went back into equities and high yield, which recently had outflows. Even emerging-market equity and bond funds received inflows this week, showing concern over the EU debt issues are easing. European leaders pledged to publish stress tests in efforts to boost transparency which the markets are taking a liking too as well. However, in typical summer Friday fashion, the markets were quiet in response. Equities opened strong and have chopped around a bit, but remain positive. In the loan market, things were painfully slow and not much paper traded. However, we maintained our positive bias after loan funds showed an inflow of $76.74 million for the week ended June 16th. Advancers outpaced decliners by 1.5:1. Flow names were seen higher by a quarter to a half point but outside of that the market was mostly flat. The market will remain quiet but we keep your eyes open, hard to tell what is going to shock the market next. Have a great weekend.
 
News
  • The year-to-date 2010 tally of global corporate defaults stands at 39, said Standard & Poor's today.
  • Bank loan mutual funds saw $76.74 million in inflows the week ended June 16, according to Lipper FMI. Last week, loan funds saw $95.3 million in inflows. high yield bond mutual funds reversed a six-week outflow cycle, recording $270.77 million of inflows for the week end June 16. Last week, $309.7 million flowed out of bond funds, compared to $759.2 million in outflows the week ended June 2.
  • Chemtura Corp today announced that it and 26 of its U.S. affiliates have filed a Joint Plan of Reorganization and Disclosure Statement in U.S. bankruptcy court. The plan is supported by the company's official committee of unsecured creditors and the ad hoc committee of the company's bondholders, Chemtura said.
  • American Media Operations Inc deferred interest payments on one of its subordinated notes this week.
  • Toys"R"Us Inc will hold its 1Q Lender Conference Call Tuesday, June 22. The call is limited to lenders under Toys"R"Us -- Delaware, Inc's term loans dated July and December 2006 and to investors in Toys"R"Us Property Company I, LLC's 10.75% Senior Notes due 2017 and Toys"R"Us Property Company II, LLC's 8.50% Senior Secured Notes due 2017.
  • Yesterday Standard & Poor's Ratings Services withdrew its unsolicited ratings on Citadel Broadcasting Corp, including the unsolicited 'D' corporate credit rating. The ratings withdrawal follows Citadel's recent emergence from Chapter 11. All previously rated debt was extinguished.
 
New Issue
  • Pricing on AL Gulf Coast Terminals' $305 million, six-year term loan has been increased to LIB+500 from LIB+375-400. The OID is at 98, which is at the wider end of talk. And the Libor floor has been boosted to 1.75% from 1.5%. The deal now has 101 soft call protection. There is 75% excess cash flow sweep for years one and two and 100% thereafter. Proceeds are to refinance debt and pay a dividend to the sponsor, Arclight Capital Partners. Barclays Capital leads the deal. The facility is rated Ba2/BBB-. Al Gulf Coast Terminals, through its subsidiary, provides crude and residual fuel oil storage services.
 
Ratings
  • Standard & Poor's Ratings Services said today that it raised its long-term corporate credit rating on Germany-based VAC Holding GmbH (NYSE:VAC) to 'B-' from 'CC'. At the same time, the short-term rating was raised to 'B' from 'C'. The outlook is stable. We also raised to 'B+' from 'CCC' the issue rating on the €173 million (about €110 million currently outstanding) senior bank facilities issued by VAC KG and guaranteed by VAC. In addition, we raised the issue ratings on the €55 million (€135 million originally issued) subordinated notes issued by VAC Finanzierung GmbH and guaranteed by VAC to 'B-' from 'CC'.
  • Moody's Investors Service today assigned a B3 Corporate Family Rating, a B3 Probability of Default Rating, and a stable ratings outlook to the Gun Lake Tribal Gaming Authority ("Gun Lake"). A B3 rating was also assigned to Gun Lake's proposed $160 million senior secured 1st lien term loan due 2015. Gun Lake is an unincorporated instrumentality and political subdivision of the Match-E-Be-Nash-She-WishBand of Pottawatomi Indians of Michigan ("Tribe"). Proceeds from the new term loan will be used to finance the remaining costs associated with the construction and opening of the Gun Lake Casino in Bradley, Michigan, repay a portion of existing outstanding debt, and pay transaction fees and expenses. The Gun Lake Casino is scheduled to open in early 2011. The casino will be managed and operated by MPM Enterprises, LLC ("MPM") pursuant to a formal management agreement that has been approved by the National Indian Gaming Commission. MPM is owned by SC Michigan, LLC, a wholly-owned subsidiary of Station Casinos, Inc., and individual investors from Michigan.
 
Amendments
  • RBC Capital Markets launched yesterday an amendment to Precision Drilling Corp's existing term loan B lenders to reprice the TLB-1 and TLB-2. The drawn spread is being reduced to LIB+500 and the Libor floor is being reduced to 1.75% on both term loans. Consenting TLB lenders will get a 50bp fee. Consents are due next Friday. The existing spread on the TLB-1 is LIB+600 with a 3.25% Libor floor and on the TLB-2 is LIB+800 with a 3.25% Libor floor. Precision Drilling entered into a $400 million TLB-1 and $75 million TLB-2 in December of 2008 at the height of the financial crisis.