Wynn unveils $1.65 billion loan; Jostens firm in trading; liquid conditions continue

By Paul A. Harris

St. Louis, Oct. 8 - The bank loan market stayed relatively quiet during the abbreviated Friday session that took place in the run-up to the extended Columbus Day weekend.

Wynn Las Vegas LLC was heard to be in the market with a new $1.650 billion deal, but there was little other news regarding loan deals in the pipeline.

Meanwhile Prospect News heard that the Peabody Energy Corp. deal is playing to remarkably high demand.

And Jostens loan paper was seen firm in the secondary market.

A very liquid market

Meanwhile an investor told Prospect News on Friday that cash put to work by banks and institutional investors is rendering the leveraged loan market notably attractive to issuers.

"In a certain sense a lot of this issuance is coming to the bank market because it is so liquid," the investor said. "If not for that liquidity you might think of other markets of execution."

As an example the investor pointed to MGM Mirage's $6 billion credit facility.

The deal, via Bank of America and Royal Bank of Scotland, is comprised of a $4.5 billion revolver and a $1.5 billion five-year term loan A (a bullet) both talked at Libor plus 175 basis points.

"The bank market is so liquid that MGM is reported to have raised more than $8 billion for their $6 billion requirement, almost exclusively from traditional banks," said the investor.

"That's a huge number!

"It's essentially a $6 billion unsecured revolving credit, for the most part," the source continued.

"I think it's technically secured, but only because there is a secured bond outstanding. And I believe that it's the company's intention to take that bond out very shortly. And the bank credit agreement says basically that once that bond is taken out the loan becomes unsecured.

"That's unbelievable."

Spreads down, leverage up

The buy-sider went on to say that the present liquidity of the loan market is apparent not only from the lines forming at the dealrunners' doors but also in the way deals are pricing and the standards to which some borrowers are being held.

"There has been a creeping of total leverage into the high-fours and low-fives," noted the investor. "You're seeing that more routinely.

"At the same time coupons are coming down," the source added.

"It's almost the perfect storm for investors. And issuers are just eating it up.

"It depends where you are on the credit spectrum. The investment-grade guys are taking advantage of it. They're terming out and going into longer-term facilities. Rather than doing 365 days they're now doing three or five or seven years while the market will let them, and locking in some of these unbelievably low spreads.

"The LBO houses and equity houses are getting this extra amount of leverage out of the market, which is allowing them to get better returns on their equity or pay themselves a dividend. There are lots of things you can do with increased leverage.

"And against that backdrop you have coupons compressing.

"It gets wild."

Wynn to borrow $1.650 billion

In terms of the new paper pipeline on Friday, Steve Wynn held the dice.

The launch is set for the week of Oct. 18 for Wynn Las Vegas LLC/Wynn Resorts Ltd.'s new $1.650 billion credit facility, via Deutsche Bank, Bank of America, Bear Stearns & Co. and JP Morgan.

The facility will be comprised of a $1 billion five-year revolver at Libor plus 250 basis points and a $650 million term loan B at Libor plus 300 basis points.

The company is also expected to sell $800 million of eight-year second mortgage notes in the junk bond market.

Proceeds will be used to refinance outstanding debt and fund construction of the La Reve property.

Quiet day in the secondary

"There's just a little activity here and there," a trader reported late in Friday's abbreviated session.

"There are still a lot of people out in Arizona," the source added, referring to the Deutsche Bank Global High Yield Conference that took place last week in Scottsdale, Ariz.

The trader said that the only paper moving was that of Jostens IH Corp., the Minneapolis-based specialty printing and marketing services company.

"It's a little strong, with no news out there," the trader said, spotting the Jostens term B at 101.375 bid, 101.75 offered.

Peabody a blowout

The trader went on to give color on the $1.35 billion Peabody Energy Corp. credit facility (Ba1/BB+), via Wachovia Securities and Bank of America.

"Peabody coal, a $1.35 billion deal between a revolver and a term loan A, banks-only at 125 over, has got about $2.4 billion of commitments," the trader exclaimed.

"It's a complete blowout.

"Given the fees, which are relatively thin, that says that the banks are back in full force."

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