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In hot loan market, LIBOR floors persist thanks to low rates

Over the past several months, strong technical conditions have given issuers the upper hand in the new-issue market. As a result, new-issue clearing yields have tightened, covenant-lite structures have proliferated, and leverage has climbed. But with short-term rates still at microscopic levels – three-month LIBOR stood at 0.31% on Oct. 26 – LIBOR floors have remained a fixture in the market. Indeed, all of the first-lien institutional loans brought to market from Oct. 1-26 have included a floor, versus a recent range of 94-100%. Likewise, October’s average floor of 1.25% is little changed from earlier in the year.

 

This chart is part of an LCD News analysis available to subscribers.

Other charts in that analysis:

  • Outstanding loans with LIBOR floors
  • Forward curve and average LIBOR floor
  • Discounted spread of outstanding loans

 

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American Airlines sees ‘good progress’ in talks with pilots, deal by Nov. 1

 American Airlines said “good progress” has been made in negotiations with its pilots union, and that it “hopes” the union’s board would approve a new tentative labor agreement on Wednesday.

The statement came in an Oct. 26 letter from American senior vice president Denise Lynn to the company’s pilots, in which Lynn said of the negotiations with the union, Allied Pilots Association, “I believe good progress has been made and we are approaching a deal that we hope the APA board of directors will soon agree to put out for a ratification vote.”

Lynn’s letter was republished on the aviation blog of the Dallas-Ft. Worth Star-Telegram, Sky Talk.

The union, meanwhile, announced it would convene a special board of directors meeting to begin on Oct. 29 and run through Nov. 2, but did not provide an agenda.

If the union’s board approves the tentative agreement, it would then go out to union members for a ratification vote. As reported, the APA board had approved an earlier offer from the company, but members voted it down (see “In split decision, American pilots nix, TWU OKs, new labor pacts,” LCD, Aug. 8, 2012). – Alan Zimmerman

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Heckmann add-on notes price at 100.25 to yield 9.81%; terms

Heckmann today completed a $150 million add-on to its 9.875% notes due 2018 via bookrunners Jefferies, Wells Fargo, and Credit Suisse, according to sources. Pricing came at the midpoint of talk, and the additional notes bring the total issue size to $400 million. The provider of water and wastewater services made its high-yield debut with placement of the original $250 million issue in April. Issuance comes via Rough Rider Escrow under Rule 144A, but the new notes will be fungible upon registration. Proceeds from the deal will be used to fund Heckmann’s acquisition of Power Fuels for approximately $381 million. Terms:

Issuer Rough Rider Escrow / Heckmann Corp.
Ratings B/B3
Amount $150 million
Issue add-on senior notes (144A)
Coupon 9.875%
Price 100.25
Yield 9.812%
Spread n/a
FRN eq. n/a
Maturity April 15, 2018
Call nc2.5
Trade Oct. 26, 2012
Settle Nov. 5, 2012 (T+6)
Joint Bookrunners Jeff/WF/CS
Co-leads
Co’s. RBS,Roth
Px talk 100-100.5
Notes w/ 35% equity clawback @ 109.875 until 4/15/15; carries T+50 make-whole call; w/ change-of-control put @ 101; issue size now $400 million.
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Berkshire Hathaway makes winning $1.5B bid for ResCap loan portfolio

Berkshire Hathaway won an auction for Residential Capital’s home-loan portfolio this afternoon with a bid of $1.5 billion, according to a person familiar with the proceedings.

Berkshire served as the auction’s stalking-horse bidder with an opening offer of $1.45 billion. The auction began this morning at the Sheraton New York Hotel & Towers, following two days of bidding for ResCap’s loan-servicing platform that ended yesterday with a top bid of $3 billion. (See, “Ocwen makes winning $3B bid for ResCap’s mortgage platform,” LCD News, Oct. 24, 2012).

A hearing to approve both sales is scheduled for Nov. 19 before U.S. Bankruptcy Judge Martin Glenn in Manhattan. – John Bringardner

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Clear Channel debt mixed after $2B loan-for-bond swap settles; terms

Debt backing Clear Channel Communications is mixed today as the loan-for-bond swap settles and the new fixed-coupon guaranteed priority notes start trading after distribution under Rule 144A. The new paper – a $2 billion issue of 9% secured notes due 2019 with 2.5-years of call protection – is pegged at 92.5/93 in the secondary market, versus quotes earlier today at 93.5/93.75 in the Street, and a par-for-par swap for various term debt, the bulk of which had been trading in the low 80s prior to news of the transaction, sources said.

In the loan market, the TLB due 2016 (L+365) is quoted at 83.75/84.5 this morning, which off highs touched on the news of the exchange and the amendment, but up from 82.625/83.125 prior to launch of the exchange.

The company’s 9% secured notes due 2021, meanwhile, are trading one point higher, at 91, trade data show. This paper is pari passu to the exchange notes, dates to 2011 issuance as 10-year (non-call five) structure, and thus now carries 3.5 years of call protection.

As reported earlier this week, Clear Channel lenders approved the broadcaster’s loan-amendment request, which allows the company to exchange up to $5 billion of its loans for bonds, among other provisions that provide it with flexibility to address its capital structure. The company said that it received over $8 billion of commitments for the loan-for-bond exchange.

As noted earlier, accounts that participate in the exchange will be allocated positions in the bonds on a pro rata basis. The exchange notes include MFN protection against future issues of exchange notes that come on more attractive terms, sources noted.

Citigroup, Morgan Stanley, and Goldman Sachs arranged the amendment, while Morgan Stanley was left lead on the loan-for-bond exchange, with Citi and Goldman, sources added. The amendment allows for up to $5 billion of loan-for-bond exchanges, inclusive of the $2 billion deal that launched on Oct. 12.

Other elements of the amendment are as follows, according the SEC filings and market sources:

  • Provide the company with the ability to repurchase its term debt at sub-par prices via a Dutch auction process once it refinances its TLA or extends the maturity of the facility beyond the January 2016 maturity of its other term loans.
  • Allow the company to repay the TLA on a non-pro-rata basis with its term loans maturing in 2016.
  • Combine its TLB and delayed-draw term loans into one tranche.
  • Allow for the repurchase of junior debt maturing inside of 2016 with up to $200 million of cash on hand.
  • Preserve revolver capacity in the instance the company repays all revolver borrowings.
  • Conform the debt-incurrence covenant at Clear Channel Outdoor to match that of the 7.625% subordinated notes.

Clear Channel had about $11.29 billion of term debt outstanding as of June 30, of which $1.07 billion was under the TLA, which matures in July 2014. The remainder of the term debt matures in January 2016.

There was no fee on offer to approve the amendment, which required majority consent. As the amendment launched to market, Clear Channel outlined that it already has roughly 46% on board via holdings of sponsors Bain Capital and Thomas H. Lee Partners, as well as accounts managed by Angelo Gordon, Apollo Global Management, Canyon Capital Advisors, and Oaktree Capital Management.

Clear Channel is a global media and entertainment company specializing in radio, digital, outdoor, mobile, live events, and on-demand entertainment and information services for local communities and providing opportunities for advertisers. Corporate ratings are CCC+/Caa2. Terms on the new exchange-notes follow: – Matt Fuller/Kerry Kantin

Issuer Clear Channel Communications
Ratings CCC+/Caa1
Amount $2 billion
Issue priority guaranteed (secured) notes (144A)
Coupon 9%
Price 100
Yield 9%
Spread T+780
FRN eq. L+770
Maturity Dec. 15, 2019
Call nc2.5 @ par+50% coupon
Trade Oct. 19, 2012
Settle Oct. 25, 2012 (t+4)
Books MS/CITI/GS
Px talk n/a
Notes w/ 2.5-year equity clawback for up to 40% of issue @109.

 

 

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Onex prices $521M CLO via Morgan Stanley; complete structure, details

Morgan Stanley earlier this week priced a $521.38 million CLO for Onex Credit Partners, according to sources.

The transaction is structured as follows:

With deals pricing this week for Onex, Oak Hill Advisors, and 3i Debt Management U.S., CLO issuance in the year-to-date rises to $37.04 billion, while month-to-date issuance is $6.36 billion, excluding static transactions, according to LCD. – Kerry Kantin

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Leveraged loan returns: Loans lose 0.03% today; YTD return is 8.59%

Loans lost 0.03% today after losing 0.04% yesterday, according to the LCD Daily Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, lost 0.06% today.

In the year to date, loans overall have gained 8.59%.

A full xls of the Daily Index is available to LCD Comps subscribers.

 

 

LCD Daily Loan Index – October 24, 2012

TOTAL RETURNS

All

Perf. Loans

L100

BB

B

CCC

For 10/24/12    -0.03%    -0.03%    -0.06%

0.01%

-0.01%

   -0.34%

For 10/23/12    -0.04%     -0.05%    -0.06%

-0.01%

-0.03%

   -0.41%

             
Month-To-Date 10/24/12

0.43%

    0.47%

 0.27%

0.40%

0.42%

   1.07%

12/31/11 – 10/24/12

8.59%

    8.78%

9.49%

6.09%

9.80%

16.88%

12/31/10 – 10/24/11

0.37%

    0.34%

-0.24%

1.51%

0.52%

   -5.01%

 

 

 

Source: S&P/LSTA Leveraged Loan Index.

 

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Bankruptcy claims trading led by MF Global as Lehman loses top spot

MF Global edged out Lehman Brothers as the most traded name in the market for bankruptcy claims this September, with 308 claims at a total face value of $873 million changing hands, according to the latest report from SecondMarket. The claims were purchased by 25 different buyers, primarily investment banks and hedge funds, SecondMarket said.

The total number and value of claims traded in September was significantly less than in August, however, as trades in Lehman – which have largely dominated the market since 2008 – fell to 92 claims with a face value of about $854.5 million for Lehman Brothers Holdings Inc. and three claims with a face value of about $39 million for Lehman Brothers Inc. In August, LBHI alone saw trades in 511 claims valued at $5 billion (see “Bankruptcy claims-trading up in August on big Lehman trades,” LCD News, Sept. 20, 2012).

Overall, September saw 766 claims traded in all major bankruptcy cases watched by SecondMarket, with a total face value of about $2 billion.

September saw what SecondMarket characterized as seven notable bankruptcy filings, with more than $1.2 billion in pre-petition liabilities – the lowest amount of any month so far in 2012. New filings include Journal Register, which listed more than $268 million in liabilities, and Southern Air Holdings, which listed $486 million in liabilities.

Patriot Coal, which filed for Chapter 11 protection on July 9, saw its first claim traded on Sept. 25. Overall in September, 16 claims in Patriot valued at about $50,000 were traded, but as LCD has reported, the case is still in its early stages as the company awaits a decision from Judge Shelley Chapman on a proposed venue transfer from Manhattan to Charleston, W. Va. – John Bringardner

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Chesapeake eyes $2.8B term loan paydown by month-end as co. sells assets

Chesapeake Energy said it expects to repay about $2.8 billion of its $4 billion term loan by the end of the month with the cash it received from the sale of its assets in the Permian Basin, which closed yesterday. The company also reiterated plans to fully repay the loan by the end of the year.

The company last month said it planned to fully repay the loan in the fourth quarter as it announced asset sales totaling some $6.9 billion. In the secondary market, the unsecured loan was quoted at 100/100.25 following the news, little changed from 100.125/100.5 earlier, sources said.

The company sold its southern Delaware Basin assets in the Permian Basin to SWEPI LP, a subsidiary of Royal Dutch Shell; its northern Delaware Basin portion of the Permian Basin to Chevron U.S.A. Inc., a subsidiary of Chevron; and its producing assets in the Midland Basin portion of the Permian Basin to affiliates of Houston-based EnerVest.

Total net proceeds from the three transactions are about $3.3 billion. Chesapeake said it received about $2.8 billion of cash at closing, while payment of the remaining proceeds will be subject to certain title, environmental, and other standard contingencies.

The $4 billion loan was syndicated earlier this year via Goldman Sachs and Jefferies, proceeds of which were used to repay revolver borrowings and for general corporate purposes. Pricing on the loan opened at L+700, with a 1.5% LIBOR floor; it was issued at 97. – Kerry Kantin