Bids not receiving offers, offers not receiving bids in secondary trading Tuesday

By Sara Rosenberg

New York, April 30 - Buyers and sellers can't seem to come together in the secondary bank loan market. Investors are placing bids on attractive assets, which mainly includes paper from new issuances. However, they are having a very hard time finding anyone who will offer them the paper, according to market professionals. Meanwhile, companies that have seen a recent drop in price, are being offered, but are not being bought.

"There are a lot of bids but, you can't get anybody offering," a market researcher said. He explained that people are desperate for assets and are looking for any paper with good spreads. For example, some paper that was well bid on Tuesday, according to the researcher, was Flowserve Corp., an Irving, Tex. manufacturer and aftermarket service provider of flow control systems, and Masonite International Corp., a Mississauga, Ont. manufacturer and merchandiser of doors.

"It's hard to get guys to offer the new issue stuff like DaVita (Inc.) and Stoneridge (Inc.)," a trader said. "There are plenty of offers but no bids for the on-the-run names like Nextel (Communications Inc.) and Adelphia (Communications Corp.)."

According to the trader, Hilton Head Communications LP, a subsidiary of Adelphia, traded slightly lower at 86 on Tuesday as a result of the trouble Adelphia has been experiencing recently. Otherwise, it was fairly quiet in secondary trading, the trader added.

Coming up in primary activity, Shoppers Drug Mart Corp. is scheduled to hold a bank meeting later this week for its new US$435 million term loan B (Ba1), according to a syndicate source. CIBC is the lead bank on the deal. Closing on the loan is expected to occur around the end of May.

The North York, Ont. drugstore chain's new term loan will expire in approximately 6.75 years and has an interest rate of Libor plus 225 basis points, the syndicate source said. Proceeds will be used to refinance existing debt. Basically all assets will be used to secure the loan.

Several tickets from investors have already been received, the syndicate source said.

Also, Dollar General Corp., a Goodlettsville, Tenn. discount retailer of general merchandise, is scheduled to hold a bank meeting on Thursday regarding its $450 million revolving credit facility, which will be used to refinance existing debt. Sun Trust is the lead arranger for the deal.

The deal consists of a $350 million three-year revolver with a current facility fee of 37.5 basis points and a $150 million 364-day tranche with a current facility fee of 32.5 basis points and an all-in draw rate of Libor plus 237.5 basis points, according to a syndicate source. Interest rates are determined through a pricing grid based on the company's credit ratings.

In other news, market talk is that Trinity Industries Inc. is coming to market with a $400 million refinancing credit facility via JPMorgan Chase. The Dallas, Texas diversified industrial company's deal is said to consist of a $250 million five-year revolver with an interest rate of Libor plus 175 basis points and a $150 million seven-year term loan B with an interest rate of Libor plus 275 basis points. Both the syndicate and the company were not immediately available to confirm this information.

The company's existing $450 million revolver is secured by accounts receivable and inventory, according to a filing with the Securities and Exchange Commission. At Dec. 31, 2001, there was $95.4 million available under the revolver.

Trinity warned that there was a possibility of default under certain financial covenants of the credit facility in the SEC filing. In addition, the company stated that the replacement or renegotiation of its credit facility is a strong possibility.

"Continued worsening of the railcar market, declines in other businesses, the need to invest in additions to the railcar lease fleet or other factors could result in exceeding certain ratios in our debt covenants in the second half of the year," the SEC filing said. "The debt covenant ratios that could be exceeded are the ratios of debt to EBITDA and EBITDA to interest expense. Based on discussion with our lead banks, we expect to renegotiate or replace existing debt agreements including changes to debt covenants and, if necessary, to take other actions designed to prevent exceeding debt covenant limitations."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.