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Syndicated Loan Market Commentary 07/06/2010

Overnight Asian and European equities bounced back from recent lows helping U.S. equity futures to trade up around 1%. At the open equities rallied moving up around 2% on strong buy interest. It was noted that long-term investors stepped in buying ‘quality names’ on the cheap as many shares are trading at their cheapest level to earnings since 2009. But the rally was short lived. The ISM non-manufacturing number signaled slowing growth in the services sector, coming in at 53.8 verses the expected 55.0. The market stalled out and fast money jumped to get out of positions while the market was still in positive territory. Most of the mornings’ gains were quickly pared and the bears started growling. The most notable being Robert Prechter, who was out calling for DOW 1,000 as he expects the U.S. economy to slip into a deflationary depression. Also, yesterday Harvard Professor Kenneth Rogoff warned of a Chinese property market collapse that could affect their banking system. Given that statement, it doesn’t seem like the best time but China’s largest lender, AgriBank, announced today that they are trying to raise $19.2 billion through an IPO. Maybe it’s me, but something doesn’t smell right when the largest lender in a country that is speculated to be headed for a correction is trying to pull off, what could be, the largest IPO in history. Anyways, the U.S. equity markets still finished up around half a percent; DOW 9743.62 (+0.59%), S&P 1028.06 (+0.54%).
In the loan world, it was another slow day. A lot of people are still away on holiday and with minimal news flow and account activity, there just isn’t anything out there to drive trading. The only paper that did anything were the high-beta names, which moved with equities, and they were up a quarter to half of a point in early morning trade. The LCDX 14 went out a quarter point firmer at 94.125-94.5. After equities sold off following the ISM number, most names held their ground but a few gave back an eighth and the LCDX 14 returned to unchanged. For the most part the market was flat and volume was extremely light. In the morning the market felt a little better, but in all there was not a bias in either direction as advancers matched decliners. I don’t expect the market to pick up much this week. The conditions remain the same, slow and volatile but we shouldn’t have too much to worry about, most institutional guys have plenty of cash, so we shouldn’t have to worry about redemptions sparking any forced selling. Hopefully after the World Cup ends and as earnings season gets under way, volumes will pick up.
  • Wall St logs modest gains after sell-off         
  • US svc sector grows more slowly, employment weak 
  • China's AgBank prices IPO to be world's largest
  • World stocks rise on value play; euro climbs     
  • Obama admin. sues Arizona over immigration law 
  • Obama, Israel's Netanyahu in fence-mending talks
  • Robert Prechter was out calling for DOW 1,000 as he expects the U.S. economy to slip into a deflationary depression           
  • ECB to hold rates, seek to reassure on recovery
  • Spain sells 6 bln euros of 10-yr bonds, Demand exceeds 13 bln euros, Non-resident demand seen high
New Issue – Syndicated Loans:
  • AES Corp is seeking a refinancing, sources said. Proceeds could replace a $605 million Citi-led revolving credit facility due July 2011. That outstanding facility from 2009 pays LIB+400 based on BB- rating. AES announced plans to redeem $400 million of its outstanding 8.75% second priority senior secured notes due 2013 on a pro rata basis at a redemption price equal to 101.458% of the principal amount to be redeemed.
  • Guardian Healthcare has sealed a $90 million financing backing its buyout by Enhanced Equity Fund. GE Capital is lead. The deal consists of a $15 million, five-year revolving credit facility priced at LIB+475 and a $75 million, five-year term loan priced at LIB+475 with a 1.5% Libor floor and a 98 OID.
  • Exopack is in the market with a $95 million term loan B backing its acquisition by Sun Capital. Price talk is LIB+925 with a 2% Libor floor. Goldman Sachs is lead. Exopack makes packaging products.
Price Flex
  • Hearthside Food Solutions has flexed pricing on its $280 million financing to LIB+600 from LIB+550 and the Libor floor is also increased to 2.25% from 1.75%, sources said. The OID is 98. Allscripts' $720 million acquisition financing is offering LIB+350. The leverage ratio is 2.1 times. The corporate family rating is Ba2/BB+ and the facility rating is Ba2/BBB. the financing backs the acquisition of Consolidated Biscuit Co and the cereal division of Golden Temple. Rabobank is lead left and is joined by GE Capital as co-lead arranger, joint bookrunner and syndication agent. Bank of America Merrill Lynch has also joined as co-lead arranger and co-documentation agent, and Fifth Third Bank is co-documentation agent.
  • ProLogis announced that it has sealed the fourth amendment to its credit facility. Under the amendment, the deal size is reduced to roughly $2.25 billion, the borrowing base covenant is eliminated and replaced with a debt yield covenant, and the leverage ratio is tested at each quarter.
New Issue – High Yield:
  • Fidelity National Information Services Inc (NYSE:FIS) USD1.1bn 144A sr notes two-part. Split between 7y NC3 (3/4 1st call); 10y NC5 (3/4 1st call). Both with MWC T+50bp, and equity claw: 3y 35%. Expected ratings: mid to low double-B. Via BAML/JPM/GS/WFS joint books, BNPP, RBS, STI, USB as lead managers, CA, ING, MUS, Miz, PNC, Scotia, TD as co- managers. With reg rights. Roadshow starts today. Pricing later this week. UOP: along with a USD560m increase in its existing term loan A, USD216m draw on its revolver (also increased by USD141m), and a new USD1.4bn term loan B, to fund leveraged recap plan. FIS will repurchase via a modified Dutch Auction up to USD2.5bn of its cmn stock at a price range of USD29.00-USD31.00 per share; and repay its existing Metavante USD794m term loan. Biz: provides banking and payment technologies. HQ: Jacksonville, FL.
  • Price talk of 11.75% is out on CKE Restaurants (CKR) USD600m 144A sr sec 2nd lien notes due 2018 (8y). NC4. B2/B (stable/stable). Via MS/Citi/RBC joint books. W/reg rights. Books close at 1pm today.
  • Postmedia Network (Canwest) USD 275 mln 8yt NC4 ] Toronto, June 30 (IFR) Postmedia Network (CanWest) has announced a new USD 275 mln 8yr NC4 issue of 144a senior secured 2nd lien notes (with reg rts). Rated B3/B-. Road show starts today, with pricing anticipated July 7. JPM and MS are joint leads/books. Proceeds (along with a USD 300 mln and CAD 100 mln sr. sec loan) will fund the acquisition of CanWest Global Communications" newspaper publishing operations. Canwest Global Communications, which is currently emerging from bankruptcy protection, will sell substantially all the assets of Canwest LP to an ad hoc committee of holders of Canwest LP"s 9.25% sr sub notes for CAD1.1bn (CAD950m in cash).
What to Watch Tomorrow July 7
  • Treasury to auction four-week bills