NTL deal joins calendar; 101 still the "new par"; secondary quiet amid meetings

By Paul A. Harris

St. Louis, April 13 - NTL Cable was seen heading into the leveraged loan market on Tuesday with a dollar-denominated deal.

Meanwhile traders told Prospect News that in the wake of Monday's session - which had seen a purposeful advance in the existing debt of Goodyear Tire & Rubber Co. on news that its restatement of earnings was less dire than some had anticipated - no movement of consequence took place in the secondary market on Tuesday.

NTL Cable, which successfully sold £811 million of junk bonds on April 2, was heard Tuesday to be coming with a $300 million credit facility to be arranged by Credit Suisse First Boston, Deutsche Bank, Goldman Sachs & Co. and Morgan Stanley.

The bank meeting is expected to take place on Wednesday or Thursday.

The expected pricing is Libor plus 300 basis points.

In what was reported to be a soft junk bond market on Tuesday, i.e. one that tracked falling equity prices, NTL's new dollar-denominated 8¾% notes firmed, according to one bond trader, who spotted them at 103.75 bid, 104.25 offered.

Also a new deal is heard to be in the works as part of the financing that will support Apax Partners and Spectrum Equity Investors acquisition of NEP Broadcasting LLC, a Pittsburgh-based provider of outsourced media services, from Wachovia Capital Partners.

The size is expected to be in the $200-$300 million ranges, divided among a revolver and first and second lien term loans.

Wachovia Securities will be the lead arranger.

Meters pinned to the red

A buy-side source who spoke to Prospect News on Tuesday drew from the hi-fi jargon of days gone by for a metaphor to describe the present pricing circumstances in the leveraged loan market.

The source explained that before audio amplifiers were outfitted with LED displays that render a visual measure of a system's sound output, amps were equipped with VU meters with waving indicator needles that moved left-to-right as they measured the intensity in sound.

As the decibels increased, the investor said, the indicator needle drifted ever further into the red-colored right-hand extremes of the meter.

In the present leveraged loan market, the buy-sider continued, the meters are "pinned to the red."

"I sort of feel that bank loan meters have been pinned for months," the investor added. "Perhaps over the last month or so it has been easing off just a tiny bit. But there is really no reason for it to back off.

"There has been a fair amount of deal flow - consistent multiple deals. I think that helps to ease things a bit.

"But you keep hearing that 101 is the 'new par,' or that 101.5 is the 'new par.' Those feelings will probably continue to exist."

Prospect News followed by asking this investor what market circumstances could serve as a catalyst of change.

"A huge flow could change that," the source responded. "It's possible that if high yield bonds get up to higher yields and credit outlooks look pretty good" then structuring collateralized debt obligations with bonds might look more appealing than using loans.

"The whole world went to CDOs, and went to CLOs. And the equity returns went down and down. Now it's practically impossible to construct a CLO with a decent equity return, because everything is at 101.5.

"At some point that yin is going to yang the other way and people will start constructing more CDOs out of high yield bonds. And with CLOs representing what probably amounts to over one third of the [bank loan] market demand, if you start chipping away on that demand side you have a chance of rationalizing prices a bit."

Slow session in secondary

Bank loan traders who spoke with Prospect News on Tuesday characterized the session as slow and quiet.

One trader said that in the wake of Monday afternoon's firming in the loan paper of Goodyear, nothing of consequence was seen.

"There were a lot of bank meetings today and a lot of people were concentrating on that," said the trader. "There was not much else going on."

One source spotted the Goodyear second lien loan at 100.25 bid, 100.625 offered from last week's 99.75 bid, 100 offered. The first lien loan, meanwhile, was 101.25 bid, 101.75 offered. And the revolver was quoted at 98.875 bid, 99.375 offered.

These levels, the source said, were unchanged from late Monday trading.

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