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Leveraged Loan Market Commentary 07/30/2010

Overnight, Asia was flat and the weakness continued in Europe after German retail sales fell more than expected and UK consumer confidence fell to its lowest since August 2009. Moody’s also made headlines saying that they are likely to downgrade Spain, but that really is a non-event, S&P downgraded them a year and a half ago. However, they called out the U.S. saying that we need to have a “clear plan” to address our deficits. Also in Europe, people are taking off positions and going on vacation, as August is vacation month in the EU. Futures in the US pointed to a lower open after the GDP number came in less than expected. However, at 9:45 am the Chicago PMI numbers came in much better than expected showing that business activity picked up. Also, the University of Michigan consumer sentiment came in higher than expected moving equities back toward unchanged at the end of the day.
In the loan market we opened up slightly weaker and flow names came out an eight to a quarter lower. The LCDX 14 was first seen at 96 ¼ - 96 ½ (-1/4). It seems that some people have been lightening up on some older vintage paper to get involved in the calendar. Also, profit taking has continued is some of the higher dollar paper. Today we saw Savvis and NTELOS new term loans break for trading. But, weak earnings out of Calpine came as a surprise and their term loan traded down. Also, Warner Chilcott’s term loan was weaker after announcing an amendment to allow for a $2.15 billion special dividend. But, today wasn’t all bad LVS firmed up after launching an amendment that will allow for the company to paydown $750 million in debt, and will give existing holders a 75bps bump in coupon. Overall the market was mixed with names trading up or down a quarter point. The LCDX 14 finished the day where it started. Have a great weekend.
  • European shares fall for 3rd day; focus on US GDP
  • Spain may lose its Aaa credit rating à caused a stir, but S&P shed Spain’s AAA rating over a year and a half ago
  • Moody’s says U.S. needs a “clear plan” to address deficits
  • Imports slow US Q2 GDP growthà Can discount these number as manufacturing data paints a different picture
  • Wall St pares losses, recovery stays anemic
  • China overtakes Japan as No.2 economy
  • Freescale Said to Plan Filing for Public Offering by Year-End à BBerg was 9 days late on breaking this story…..old news
  • Calpine Corp posted a surprise quarterly loss of $115 million, down from $78 million a year ago, on lower commodity margins. However, the company slightly raised the lower end of its prior full-year adjusted EBITDA view to $1.65 billion to $1.73 billion. It had earlier forecast $1.63 billion to $1.73 billion. Their loan declined about 50bp to 94.5-95. Regal Entertainment Group posted a lower second-quarter profit. The company reported 2Q net income of $4.8 million, or 3 cents a share, compared with $40.5 million, or 26 cents a share a year earlier. The company said adjusted earnings excluding the loss on extinguishing debt came to 12 cents per share.
On the Break
  • Savvis Inc's new $550 million term loan is trading 98.25-98.75 after breaking this morning. Pricing on the six-year term loan was flexed up to LIB+500 from LIB+475 and the OID firmed at 97 from talk of 97-98. A 1.75% Libor floor remained unchanged. There is also 101 soft call protection. Bank of America Merrill Lynch, Morgan Stanley, Credit Suisse and SunTrust leads the $625 million refinancing loan, which also includes a $75 million revolving credit facility due 2014. The corporate family and facility ratings are B1. Proceeds, along with cash on hand, will be used to refinance its $345 million, 3% convertible notes due 2012 and amounts under its existing $150 million revolver.
  • NTELOS $125 million incremental term loan broke for trading this afternoon, trading up 37.5bp on the bid side. The loan is currently quoted 100.125-100.625. It was sold at 99.75. JP Morgan is leading the deal. Pricing remains at LIB+375 with a 2% floor, in line with the existing deal.
  • Warner Chilcott said it intends to enter into $2.25 billion in new debt to fund a special dividend of $2.15 billion to the company's shareholders. The new debt will consist of senior secured term loans and unsecured debt, the company said in a release. The dividend recapitalization is conditioned on the amendment of the company's existing senior secured credit to allow for the additional debt. Their term loan eased a half a point on the news to 99.25/100.
  • Energy Future Holdings (TXU) today announced the early results of its bond exchange offers. $4.47 billion of old notes, were tendered (99.51%). The requsite consents have also been received.
  • Following this week's bankruptcy filing by American Safety Razor, S&P's year-to-date 2010 global corporate default tally rose to 46, the rating agency said today.
New Issue
  • NTELOS is expected to allocate today its $125 million incremental term loan after reducing the discount to 99.75 from 99.5. JP Morgan is leading the deal. Pricing remains at LIB+375 with a 2% floor, in line with the existing deal. The company plans to finance its $170 million acquisition of MountainTelecommunications, One Communications Corp's FiberNet business, with the incremental term loan. The takeover will also be funded with revolver borrowings and cash on hand. Closing of the term loan is expected during the third quarter of the year. The pay down piece applies only to those who extend 2.5 years. Approximately $900 million of the amount outstanding would not be extended.
  • Las Vegas Sands today launched an amendment to its $5 billion credit facility seeking to pay down $750 million of the outstanding $3.9 billion, and extend approximately $2.25 billion for 2.5-years. Lenders who extend would receive a 75bp bump in coupon to LIB+250bp. Consenting lenders would also receive a 10bp amendment fee. The amendment requires 50% approval from lenders to pass. Following the completion of the transaction, a one notch upgrade is likely from Moody's.
  • Nielsen Holdings' lenders agreed to extend an additional $1.5 billion of the company's term loan due 2013 by three years to May 2016, the company said in an SEC filing. In exchange for the extension, pricing on the extended loan will rise by 150bp to LIB+375. Pricing, however, can decrease by up to 50bp, depending on leverage and ratings, according to the filing. The extension is expected to close in early August.
  • Fitch Ratings upgraded Tenneco Inc's Issuer Default Rating to BB- from B+.
  • Moody's Investors Service affirmed the ratings of Warner Chilcott Company LLC, Warner Chilcott Corporation, and WC Luxco S.a r.l. (subsidiaries of Warner Chilcott plc, collectively referred to as "Warner Chilcott"). The affirmed ratings include the B1 Corporate Family Rating, the B1 rating on the company's senior secured credit facilities and the SGL-1 speculative grade liquidity rating. Following this rating action, the outlook remains stable. The rating affirmation follows Warner Chilcott's announcement of a special $2.15 billion shareholder dividend, to be funded with $2.25 billion of new debt. The new debt may include both senior secured bank debt and unsecured debt. Completion of the transaction may occur by September 30, 2010, and is subject to waivers on existing bank debt.
  • Moody's Investors Service assigned a B3 rating to Vertis' proposed $425 million senior secured first-out term loan and a Caa2 rating to its proposed $150 million senior secured last-out term loan, both due 2015. Based on the proposed revised debt structure, these new term loans will be issued in place of the previously proposed Senior Secured Bank Credit Facility and Senior Secured Regular Bond/Debenture, which each had been rated B3 in April 2010, and the ratings for which have now been withdrawn. All other ratings remain unchanged and the rating outlook remains stable, as outlined below.
  • Moody's Investors Service has placed all ratings of Pierre Foods Inc (Pierre), including the B2 corporate family rating, on review for possible downgrade. The ratings actions respond tothe announcement that the Boards of Directors of Pierre, Advance Food Company, Inc. and Advance Brands, LLC (not rated by Moody's) have approved and entered into a definitive merger agreement. Terms of the merger agreement have not been disclosed. The transaction is subject to customary closing conditions and is expected to close in the third calendar quarter. Conclusion of this review is expected to coincide with the closing of the merger.
High Yield
  • Mylan Inc (NASDAQ:MYL) USD300m 144A add-on to its 7.875% sr notes due 07/15/20. MWC T+50bp until 07/15/15, then at 103.938, 102.625, 100. Equity claw: 35% at 107.875 until 07/15/13. B1/BB- (positive/stable). Via GS. Priced at 105.50. 7.089% yield. Del 08/13 (T+10) w/AI from 05/19/10. 144A