Rexnord pricing emerges, Allied Waste slips, Nextel Partners rises

By Paul A. Harris

St. Louis, Mo., Oct. 30 - Pricing emerged on bank deals from Rexnord Corp. and Bell ActiMedia during Wednesday's "quiet" session in the leveraged loan market and Oncor Electric Delivery Co. announced it had obtained a commitment for $1 billion credit facility.

Meanwhile in the secondary market the paper of Allied Waste was heard trading down while Nextel Partners was up, and Charter Communications was "sideways."

With both pieces of the Dex Media East $975 million junk bond deal having priced in the high-yield primary market on Wednesday, one loan market source pointed to the recently transacted bank piece and said it contains evidence that investors are presently doing the driving in the loan market.

Pricing had flexed up on the $1.49 billion facility (Ba3/BB-), led by JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities, the source said, adding that the facility also has call protection of 102 for the first year and 101 for the second year.

The call protection, the source said, is a pretty good indication that buyers have the initiative.

One investor who spoke with Prospect News on Wednesday also professed the belief that at present the momentum is with the buyers. This source compared the present circumstances in the loan market to ones that have prevailed for well over three months in junk bonds.

"The bank loan market isn't exactly like the bond market because they don't put a book together to come to a price," the source pointed out. "They go out with pricing and either flex up or down.

"Now we are seeing a little bit of flexing up."

Also pointing to the Dex Media East deal the source said: "Loan managers played a pretty influential role in the pricing of that."

Where the loan market truly seems to be paralleling the junk bond market, the investor added, is in the comparative attractiveness of the secondary market versus the primary market.

"There are some deals out there," the manager said. "But there is so much going on in the secondary market - so much trading at a discount - that the bank loan market is becoming a little more like the high-yield market. The high yield managers say that the new issue market is dead because there is so much of the secondary.

"I'm just not interested in a par loan at Libor plus whatever when people are saying they have a liquidating fund and they're looking for a home for XYZ loan and it's going to come at a huge discount. Why wouldn't I work on that instead?

"What we're seeing is syndication desks putting deals on hold," the investor added. "We haven't seen any deals launched and then pulled, but we are seeing desks taking their time, and maybe trying to put off launching until the New Year."

One example of flexing up that the source cited was Merrill Lynch's recent Otis Spunkmeyer Cookies deal. "They launched that at Libor plus 350, and it ended up going out at Libor plus 425 with 200 basis points up front," the source said.

"More recently Scientific Games went out with Libor plus 325, with a $75 million green shoe," the investor added. "I think they'll take Libor plus 350 to 375, and they'll either take the green shoe out, or they'll add language specifying that if they add a tranche to the credit facility in the future they have to reprice the entire facility rather than adding one tranche at existing or better pricings. So we're having a little more influence in the structure, too."

The language spelling out add-on structure may have come into play in what Prospect News heard was investor disenchantment over the recent Terex Corp. add-on which trailed the original facility by a couple of months. The add-on pricing was more favorable which meant that the original paper traded down.

Meanwhile during what was characterized as a quiet day in Wednesday's primary market Oncor Electric Delivery Co., a wholly owned TXU subsidiary, obtained a commitment for $1 billion 364-day senior secured credit facility. Interest on the loan is set at the market yield on its 6 3/8% first mortgage bonds due 2012 swapped to a spread over Libor with a floor of Libor plus 300 basis points (see related story in this issue).

Also on Wednesday pricing was heard on Rexnord Corp.'s $435 million credit facility which is set to launch Thursday, via Deutsche Bank and Credit Suisse First Boston. Pricing on the $75 million six-year revolver is Libor plus 350 basis points, while pricing on the $360 million seven-year term loan B is Libor plus 450 basis points.

And with Dex Media apparently winning over enough high yield investors to cause the book on the junk bond deal to be two times oversubscribed, pricing was heard on the BCE directories bank deal.

The Bell ActiMedia C$1.54 billion credit facility (B1 expected), to fund the acquisition of BCE Inc.'s directories business by Kohlberg Kravis Roberts and the Ontario Teachers' Pension Plan, launched Tuesday via Scotia Capital, CIBC World Markets and Credit Suisse First Boston. Pricing is Libor plus 300 basis points on the C$100 million revolver, Libor plus 300 basis points on the C$400 million term loan A and Libor plus 350 basis points on the C$1.14 billion term loan B.

And one source advised Prospect News that the deal to fund the acquisition of the Sprint directories business by R.H. Donnelly Corp. for a reported $2.23 billion is also heard to be heading into the market.

"The loan should be coming shortly," a source said adding that the financing is expected to involve a credit facility of approximately $1.5-$1.6 billion, and $700-$800 million of bonds.

During Wednesday's session in the secondary market a trader told Prospect News that the paper of Allied Waste was seen trading down on technicals. Citing levels of 95-96 the trader said that the company was expected to release numbers following Wednesday's close.

Meanwhile the Nextel Partners paper was firmer, the source said, citing levels of 88-89.

And Charter Communications was "sideways," the trader added.

© 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.