LCDX, cash loans strengthen; Freescale rallies on asset-sale news; cash flows into bank loan funds

By Paul A. Harris

St. Louis, April 9 - Bank loans and synthetics were better on Thursday, market sources said.

The LCDX bank loan index closed the day at 75.50 bid, 75.85 offered, up 70 basis points, a trader said.

Cash loans were also higher, according to a trader.

Freescale Semiconductor, Inc.'s loan paper traded higher on news that a subsidiary of China's Cosun has acquired Freescale's cell phone chip business, the trader added.

Meanwhile the bank debt of General Motors Corp. strengthened late in the pre-Easter week, as bankruptcy looms and the company's unsecured creditors appear poised to take a greater-than-expected haircut, the trader said.

In the primary market CVC Capital Partners Group's limited partnership, Blue Sparkle LP, will receive $3.1 billion of debt financing from Barclays to fund Blue Sparkle's proposed acquisition of Barclays' iShares business.

Part of that debt could be syndicated, given present favorable market conditions, according to a bank loan fund manager.

And cash flows to the bank loan asset class remain positive, according to AMG Data Services which reported $76 million of inflows to the bank loan mutual funds for the week to Wednesday.

Freescale gaps up on sale news

Loans were up across the board, according to a bank loan trader, who added that volumes were light ahead of the three-day Easter holiday weekend.

Freescale's loan paper was up as much as 8 points at one stage the session, but faded somewhat as the day wore on.

It was trading in the low to mid 40s late Thursday, the trader reckoned.

That strength came on news that China's Qiao Xing Mobile Communication, a subsidiary of Cosun, has agreed to acquire Freescale's cell phone chip business, the trader said.

iShares debt financing

CVC Capital Partners Group's limited partnership, Blue Sparkle LP, will receive $3.1 billion of debt financing from Barclays to fund Blue Sparkle's proposed acquisition of Barclays' iShares business, according to a press release.

The financing will consist of an approximately $850 million six-year senior secured term loan facility, a seven-year senior unsecured loan facility with a bullet repayment of about $850 million and an approximately $1.4 billion 10-year pay-in-kind vendor loan.

Interest will be Libor plus 400 bps for the term loan, Libor plus 550 bps for the bullet loan and 7% for the vendor loan.

Barclays has agreed to hold at least 51% of each facility for the first five years and may syndicate the remaining 49% after the first year. The company is allowed to modify some of the financing terms, including pricing of the term loan, at the time of syndication.

The financing will be used to fund Blue Sparkle's proposed acquisition of Barclays' iShares business, which provides exchange-traded funds, for $4.4 billion.

The remaining financing needed to complete the acquisition will consist of equity provided by Blue Sparkle.

Some of the debt financing is likely to be syndicated, according to a bank loan investor who spoke Thursday on background.

"I would think that they would try to get something done," the investor said.

The investor predicates this expectation on recent strength in the bank loan market.

"It's a lot of paper to take, but it seems like a stable business," the investor commented, adding that the bank loan market was definitely up on Thursday, with synthetics up by 60 bps.

The week ahead

In the post-Easter week the market could learn the fate of General Motors, according to a trader, who added that a bankruptcy filing from the automaker could be imminent.

GM's term loan strengthened as the week wore on, the trader said. He marked it at 44 bid, 49 offered just after Thursday's close, up ½ point on the session.

The trader cited news stories reporting that the U.S. Department of Treasury is taking a harder than anticipated line with GM's unsecured lenders - with the expectation that they will be converted into equity, with neither cash nor new debt anticipated in the restructuring.

"That makes it seem more and more likely that the company will file for bankruptcy," the trader added.

Meanwhile TNS Inc.'s $250 million incremental term loan is expected to allocate next week, an asset manager said.

The term loan, due March 28, 2014, is priced at Libor plus 600 bps with a 3.5% Libor floor and 101 soft call protection for one year.

Investors were offered the loan at an original issue discount of 90.

TNS will use the proceeds to help fund the acquisition of VeriSign Inc.'s communication services group for $230 million in cash.

$76 million inflow

Bank loan mutual funds saw $76 million of inflows for the week that ended Wednesday, according to AMG Data Services, a market source said, adding that the latest inflow is the fourth consecutive positive flow.

It trails the previous week's $118 million inflow.

Year to date the bank loan funds have seen positive flows totaling approximately $730 million, the market source added.

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