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Leveraged Loan Market Commentary 07/13/2010

Alcoa knocked their earnings out of the park and their forward guidance really helped set the pace for today. Greece’s note auction was another positive headline that helped boost sentiment. Greece sold 6-month bills at a yield of 4.65%, below the 5.0% they are paying the EU, at a solid bid-to-cover of 3.64, to refinance upcoming maturities. At the open equities shot up a point and volumes spiked. The market chopped a bit bight to close higher for the 6th day in a row. The Dow closed at 10,363 (+1.44%) and the S&P closed at 1095 (+1.54%).
The loan market was firm again today. Most on-the-run paper was up around a quarter point. The LCDX 14 push another half point higher to close at 96 3/8 – 96 5/8. The renewed optimism in the market is very refreshing and is helping the forward calendar fill up again. But, secondary trading is still pretty light. Some buyers were spotted in the market but volumes are still depressed. High yield activity was pretty robust so its not that people are still sitting on there hands, it just seems that people in the loan market are more interested in the forward calendar than buying second hand credits. The market is going to remain earnings focused. So, after Intel’s record earnings beat this afternoon, it sounds like we have set ourselves up for a nice morning rally.
I am off until the 20th, but will make sure that the Lipper numbers get out to everyone.
  • Biomet Inc's loan moved up slightly after the company reported fourth quarter and fiscal year 2010 earnings today, sources said. The loan is quoted today at 96 1/4-96 3/4, up about 3/8th. The company said net sales increased 10% worldwide during the fourth quarter to $703 million. Fiscal year 2010 net sales increased 8% worldwide to $2.7 billion. Adjusted EBITDA increased 8% during fiscal year 2010 to $1 billion, or 37.1% of net sales.
  • Private equity firm Blackstone Group's GSO Capital Partners credit unit has raised $3.25 billion for a fund to help finance mid-market businesses facing distress. Investors in the fund include large California pension funds California Public Employees' Retirement System, or CalPERS, and California State Teachers' Retirement System, or CalSTRS, and sovereign wealth fund Korea Investment Corp. The fund is a global one, but is primarily focused on the United States and Western Europe. It will focus on investing in companies that need liquidity because they are at risk of covenant violations, face pending debt maturities or are battling a downturn in their businesses. So far, it has invested $600 million in seven companies.
  • Bookstore chain Borders Group Inc said on Tuesday that it would sell a British-based retailer of stationery, cards and gifts to a private equity firm for about $31 million to lower its debt load.
Bank Meeting
  • JP Morgan will launch with a bank meeting Thursday at 10:30 a.m. a bank loan for EnergySolutions. In a press release today, the company said it intends to refinance its existing credit facilities with a new senior secured credit facility and the proceeds of senior notes. The new senior secured facility will include a term loan and a revolving credit facility. A portion of the proceeds from the term loan will be held in a restricted cash account to provide for cash-collateralized letters of credit. In addition, EnergySolutions announced it has entered into an amendment on its existing credit facilities to remain in compliance with its financial covenants. The amendment waives a requirement not to exceed a maximum first-lien leverage ratio for the quarter ended June 30, 2010. EnergySolutions incurred fees of approximately $2.2 million, which will be amortized over the expected remaining life of the facilities.
New Issue – Loans
  • Macquarie is launching Thursday a $314 million deal for Centerplate. The deal includes a $70 million revolving credit facility, a $50 million term loan A and a $194 million term loan B. Proceeds are to refinance debt and to pay a $50 million dividend. The company has $68 million of EBITDA. Stamford, Conn.-based Centerplate is a provider of food and related services including concessions, catering and merchandise services in more than 130 sports facilities, convention centers and other entertainment venues throughout the U.S. and Canada.
  • Goldman Sachs is launching Thursday at 1:00 p.m. a $550 million, five-year add-on term loan backing Altegrity's acquisition of Kroll Inc from Marsh & McLennan Cos. Early price guidance is LIB+625-650 with a 1.75% Libor floor and a high 90s OID. Leverage is said to be north of 5.5 times. The term loan is rated B+. The corporate credit rating was raised by S&P on July 12 to B from B-. According to S&P, the company's existing debt includes a $1.475 billion senior secured credit, $290 million in senior unsecured notes and $150 million in senior subordinated notes. The company will also raise $210 million in senior unsecured notes. Altegrity is owned by Providence Equity Partners. The transaction, which is expected to close by late September, is subject to regulatory approvals and other customary closing conditions. Altegrity is an international screening and security solutions company.
  • Futures exchange group IntercontinentalExchange Inc is offering an opening pricing of LIB+200 on its new $220 million, three-year senior unsecured term loan. Banks are invited to join at an upfront fee of 30bp for commitments of $25 million or more, and 25bp for less than $25 million. Pricing is based on a total leverage ratio grid. The loan amortizes in quarterly equal installments of 7.5% through year 2, followed by 10% installments through the last year. The facility can be increased by up to $180 million.
Amendment to Extend
  • GE Capital is in market with an amend/extend for Blount International. The issuer is looking to extend $75 million of its revolving credit facility to August 2015 at LIB+350, and $75 million of its delayed-draw term loan and $275 million of its term loan B to August 2016 at LIB+350. The TLB and delayed-draw term loan come with a 99 OID and a 1.5% Libor floor. There is no Libor floor on the revolver. In a press release, the company said it intends to use a portion of the borrowings under the senior credit facility to redeem the $175 million outstanding of its senior subordinated notes due in August 2012. Blount is a manufacturer of saw chain and related accessories.
New Issue – High Yield
  • Price talk of 9.75% area yield is out on NXP BV/NXP Funding LLC USD600m 144A sr sec notes due 2018 (8y). NC4 (MWC T+50bp). Equity call: 3y 40%. Via CS sole books, GS, KKR as co-managers. No reg rights. Books close at 2.30pm, pricing this afternoon.
What to Watch Tomorrow
  • Retail sales, June (Census Bureau) 8:30 a.m. ET
  • Business inventories, May (Census Bureau) 10 a.m. ET
  • Treasury to auction $13 billion 30-year bonds
  • Treasury to auction $25 billion 56-day cash management bills
16th Annual Thomson Reuters LPC Loan Conference
Wednesday September 22, 2010
Marriott Marquis, New York City
Now in its 16th year, the Thomson Reuters LPC Loan Conference has become one of the industry's premiere annual events. Join investors, lenders, financial sponsors and treasurers as they discuss the outlook for a continually evolving loan market.
Click Here to view our detailed agenda and to access registration information.