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Leveraged loan returns: Loans gain 0.01% today; YTD return is 1.28%

Loans gained 0.01% today after remaining unchanged 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, gained 0.02% today.

In the year to date, loans overall have gained 1.28%.

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

LCD Daily Loan Index – February 27, 2013

TOTAL RETURNS

All

Perf. Loans

L100

BB

B

CCC

For 2/28/13      0.01%      0.01%      0.02%

  0.01%

 0.02%

   -0.02%

For 2/27/13      0.00%      0.00%     -0.01%

 0.01%

 0.00%

   -0.04%

           
Month-To-Date 2/28/13

 0.21%

    0.22%

0.09%

0.08%

0.19%

   1.01%

12/31/12 – 2/28/13

1.28%

    1.35%

1.30%

0.85%

1.59%

 2.18%

12/31/11 – 2/28/12

2.90%

    2.94%

3.54%

2.16%

4.01%

   0.61%

Source: S&P/LSTA Leveraged Loan Index.

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Twinkie Bankruptcy: Hostess bread brands, save Beefsteak, reportedly see no rival bids; final price for brands and assets could exceed $1B

Flowers Foods’ $360 million stalking-horse bid for the majority of the bread brands and assets of Hostess Brandsfailed to draw any competing qualified bids at yesterday’s auction for the assets, according to reports from numerous publications.

The brands included in the deal are Butternut, Home Pride, Merita, Nature’s Pride, and Wonder, and the purchased assets feature, among other things, 20 bakeries and 38 depots.

Flowers’ $30 million bid for the Beefsteak brand, however, looks like it may face competition. Citing unnamed sources, several outlets, including Bloomberg and the Associated Press, reported that Groupo Bimbo had submitted a competing bid for the brand. An auction is slated for today.

Hostess has so far generated roughly $856.4 million in stalking-horse bids for its various bread and snack cake brands and related assets, including in addition to the Flowers’ bids, a $410 million joint bid for its snacks cake business from Apollo Management and Metropoulos & Co.; McKee Foods’ $27.5 million bid for the Drake’s brand snack cake business, which includes Yodels, Devil Dogs and Yankee Doodles; and United States Bakery’s $28.85 million bid for the company’s so-called “Northwest bakeries business assets,” which includes the Sweetheart, Eddy’s, Standish Farms, and Grandma Emilie’s bread brands and facilities in Alaska, Montana, Utah, and Washington, along with depots in Idaho, Montana, North Dakota, Utah, and Washington.

Auctions for those brands and assets are scheduled for March 13 (snacks cake business) and March 15 (Drake’s and Northwest bread assets).

Hostess has speculated that the final prices for its brands and assets, including about $100 million of remaining assets for which the company has not obtained stalking-horse bids, could exceed a total of $1 billion.

In particular, Hostess has high hopes for its snacks cake business, which includes the iconic Twinkies brand. In announcing the Apollo/Metropoulos staking-horse bid for the business, CEO Greg Rayburn told CNBC, “[i]nterest in these iconic brands has been intense and competitive and we expect that to continue through a robust, court-authorized auction process,” adding that he expected the “auction on the cake side – the Twinkie side – to be wild and wooly.” – Alan Zimmerman

 

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Leveraged loan returns: Loans remain unchanged today; YTD return is 1.26%

Loans remained unchanged today after remaining unchanged 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 0.01% today.

In the year to date, loans overall have gained 1.26%.

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

LCD Daily Loan Index – February 27, 2013

TOTAL RETURNS

All

Perf. Loans

L100

BB

B

CCC

For 2/27/13      0.00%      0.00%     -0.01%

  0.01%

 0.00%

   -0.04%

For 2/26/13      0.00%      0.00%     -0.01%

 0.01%

 0.01%

   -0.14%

           
Month-To-Date 2/27/13

 0.20%

    0.20%

0.07%

0.06%

0.17%

   1.03%

12/31/12 – 2/27/13

1.26%

    1.34%

1.29%

0.84%

1.57%

 2.20%

12/31/11 – 2/27/12

2.79%

    2.83%

3.39%

2.11%

3.91%

   0.09%

Source: S&P/LSTA Leveraged Loan Index.

 

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American Capital prices $414M CLO via Deutsche Bank

Deutsche Bank today priced a $414.3 million CLO for American Capital Leveraged Finance Management, according to sources.

The transaction is structured as follows:

The non-call period runs to April 2015 and the reinvestment period runs to April 2017. The legal final maturity is April 2025.

With American Capital’s deal, CLO issuance in the year to date rises to about $15.11 billion, according to LCD. Issuance in February stands at $6.08 billion. – Kerry Kantin

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Bankruptcy: Indianapolis Downs completes asset sale to Centaur

Centaur Holdings completed its acquisition of the assets of Indianapolis Downs, Centaur announced last week.

The bankruptcy court overseeing Indianapolis Downs’ Chapter 11 approved the $500 million asset sale on Oct. 31, 2012, but closing was delayed until the transaction received necessary regulatory clearances – a time lag that is typical for asset sales involving gaming companies.

The closing of the deal sets the stage for the sale proceeds to be distributed in accordance with the company’s proposed liquidation plan. Under that plan, after payment of administrative and priority claims estimated in the disclosure statement at roughly $30 million, and DIP claims of roughly $101 million, the company’s third-lien lenders would receive the first $14.5 million of the remaining proceeds, with second-lien claims receiving the remainder.

Fortress Investment Group holds about 90% of the third-lien debt, according to court filings. Fortress would have preferred to see the company reorganize according to a reorganization plan rather than an asset sale, but effectively agreed that it would accept an asset sale of at least $500 million, provided it received the first $14.5 million (see “Indianapolis Downs pursues Centaur sale despite Fortress concerns,” LCD, Sept. 21, 2012).

Based on court filings, second-lien claims total about $497 million, comprised of principal of $375 million, pre-petition interest of $39 million and post-petition interest of $82 million, less adequate protection-sweep payments of about $19 million received by holders during the bankruptcy, leaving a balance of $478 million. Third-lien claims are estimated at $108 million.

Assuming second-lien holders recover a total of $354.5 million from the sale proceeds (after payment of administrative claims, DIP claims, and the third-lien payment), together with the adequate assurance payments received by holders it would translate into a total recovery of about 75.2 cents on the dollar. The $14.5 million payment to third-lien holders, which did not receive any adequate assurance payments, equates to a recovery of about 13.4 cents on the dollar.

The company filed for Chapter 11 in Wilmington, Del., on April 7, 2011. The bankruptcy court approved the company’s disclosure statement on June 21, 2012, and confirmed the company’s reorganization plan on Jan. 31, 2013. – Alan Zimmerman

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FoxCo eyes $237M leveraged loan backing dividend to sponsor Oak Hill

Deutsche Bank has scheduled a lender call for 11:00 a.m. EST on Thursday, Feb. 28 to launch a $237 million covenant-lite add-on term loan for FoxCo Acquisition, according to sources.

Proceeds from the fungible add-on would be used to fund a dividend to sponsor Oak Hill Capital Partners.

Concurrently, the TV broadcaster is approaching its existing lenders for an amendment, which would allow for the debt-financed dividend and provide the company with a $125 million incremental loan, which would be subject to a 5.5x net secured leverage test.

Lenders are offered a 10 bps consent fee, sources said, adding that the issuer is offering to reset the spread and LIBOR floor on the existing loan to the clearing level of the incremental debt. The existing loan is currently priced at L+450, with a 1% floor.

Commitments are due on Wednesday, March 6.

FoxCo, which is rated B+/B2, last tapped the loan market in September, when Deutsche Bank and UBS syndicated the term loan, originally $765 million, and a $20 million revolver. Proceeds from the September financing were used to fund a dividend and refinance bond and bank debt, shifting the company to an all-senior structure. – Kerry Kantin

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Corporate debt: Philip Morris shops benchmark bond sale as maturities loom

Facing an imminent debt maturity, Philip Morris International is in the market with a public benchmark offering of two-year, floating-rate notes, along with 10- and 30-year fixed-rate tranches, sources said. Active bookrunners for the issue, which has an expected A2/A profile, are Goldman Sachs, HSBC, and Societe Generale, along with passive bookrunners Barclays and Citi.

Proceeds will be used to meet working-capital requirements, to repurchase common stock, to refinance debt, or for general corporate purposes, filings show.

The company has $500 million of its 3.25% notes coming due on March 13, followed by $2 billion of 4.875% notes due May 16.

In June 2012, the company announced an $18 billion share-repurchase program, and as of Dec. 31, Philip Morris had bought back $2.9 billion of common stock under that authorization. The company had a share-buyback target of $6 billion for 2012, which included purchases under both the June authorization as well as the previous $12 billion share-buyback program.

Philip Morris was last in the bond market in August, when it placed a $2.25 billion, three-part offering split evenly across 1.125% notes due 2017 at T+60, or 1.348%, 2.5% notes due 2022 at T+90, or 2.629%, and 3.875% notes due 2042 at T+120, or 4.014%. Of note, the 2017 issue traded yesterday at 1.2% and at a G-spread of 54 bps, and the 2022 notes traded this morning at 2.58% and at a G-spread of 80 bps. The 2042 issue traded yesterday at 4.15% and at a G-spread of 98 bps, according to MarketAxess.

Earlier this month, the company obtained a $2 billion, one-year senior unsecured revolver for general corporate purposes.

New York-based Philip Morris manufactures and sells cigarettes and other tobacco products internationally.

“Our view of PMI’s ‘modest’ financial risk profile incorporates the highly cash-generative nature of the business. We anticipate that share buyback activity will absorb the vast majority of discretionary cash flows over the medium term,” Standard & Poor’s said in a ratings rationale published in November. The agency maintains a stable outlook on its rating. “Ratings upside is currently constrained by PMI’s commitment to the return of cash to shareholders on an ongoing basis,” S&P added at the time. – Gayatri Iyer

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Europe: Babson seeks $250M for new distressed debt fund

Babson Capital is raising a distressed debt fund, named the Babson Capital Global Distressed Credit Fund, according to sources. The fund plans to raise $250 million by the end of September.

The firm plans to invest the bulk of the capital raised for the fund – 80% – into European distressed opportunities, reflecting the view that the reluctance of banks to provide financing to over-indebted companies will prompt a flow of distressed opportunities. However, Babson is not expecting this flow to be huge, and as such it is targeting a relatively small fundraising, sources said. The fund will target an annual return of 15% net of fees.

Distressed-debt investing is not new to Babson, as the firm has invested in other loan vehicles across its global platform. However the new fund – co-managed by Stuart Mathieson, head of European distressed debt – will be Babson’s first separate distressed debt fund. – Staff reports

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Leveraged loan returns: Loans gain 0.03% today; YTD return is 1.26%

Loans gained 0.03% today after losing 0.01% on Friday, 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, gained 0.04% today.

In the year to date, loans overall have gained 1.26%.

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

LCD Daily Loan Index – February 25, 2013

TOTAL RETURNS

All

Perf. Loans

L100

BB

B

CCC

For 2/25/13      0.03%      0.03%      0.04%

  0.01%

  0.01%

    0.24%

For 2/22/13     -0.01%     -0.01%     -0.02%

 0.01%

 -0.01%

   -0.07%

           
Month-To-Date 2/25/13

 0.20%

    0.20%

0.09%

0.04%

0.16%

   1.21%

12/31/12 – 2/25/13

1.26%

    1.34%

1.31%

0.82%

1.56%

 2.38%

12/31/11 – 2/25/12

2.73%

    2.78%

3.32%

2.09%

3.87%

  -0.13%

Source: S&P/LSTA Leveraged Loan Index.

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Corporate earnings growth continues to slow in 4Q, to post-recession low

Earnings growth among leveraged loan issuers is slowing.

In the fourth quarter, year-over-year EBITDA growth among publicly filing S&P/LSTA Leveraged Loan Index issuers eased to post-recession low of 7%, on average, from 9% in the third quarter, according to data from S&P Capital IQ.

Of course, the recent deceleration in EBITDA growth was widely anticipated. For one thing, after three straight years of double-digit growth from 2010-2012, the comps are clearly more challenging. For another, issuers have already improved the efficiency of operations in recent years, leaving less room for significant cost-cutting. Finally, economic growth has not exactly been tremendous in recent years.

In 2012, the U.S. economy grew by an estimated 2.2%, up slightly from 1.8% in 2011 but below the long-term average of 3.1%.

This excerpt is part of an LCD News analysis available to subscribers. Other charts in that analysis:

  • Annual EBITDA growth
  • Sharpe ratios
  • Increase in operating income of S&P 500 companies
  • Default rate and annual EBITDA growth
  • Leveraged loan default rate and imputed default rate


– Steve Miller