Sabre, Burlington nosedive; GM, Ford still underperforming; Cash continues to tumble; LCDX dips

By Sara Rosenberg

New York, Nov. 18 - Sabre Holdings Corp. and Burlington Coat Factory Warehouse Corp. both posted sizeable losses in trading on Wednesday as the overall consumer sector was beaten down on negative economic sentiment.

Also in the secondary, General Motors Corp. and Ford Motor Co. were once again some of the bigger losers of the day as people worried about the chances of a government bailout, and the cash market in general and LCDX 10 softened as well.

In other news, Precision Drilling Trust's term loan B has been attracting some commitments now that the original issue discount guidance has been made public.

Sabre, Burlington take big hit

Sabre Holdings and Burlington Coat Factory were some of the biggest losers in the consumer sector on Wednesday, although the sector as a whole was a big underperformer, according to a trader.

Sabre, a Southlake, Texas-based retailer of travel products, who saw its term loan drop at least six points to 37½ bid, 42½ offered, the trader remarked.

Burlington Coat Factory, a Burlington, N.J.-based retailer of branded apparel, saw its term loan fall around six points to 40 bid, 45 offered, the trader continued.

"Global macroeconomic news - nothing is positive. Everything is negative to the consumer," the trader said in explanation of why the sector came under pressure.

One such example of bad economic news was the consumer price index results that were announced on Wednesday. According to the U.S. Department of Labor, the consumer price index for all urban consumers decreased 1% in October, before seasonal adjustment.

Michaels, Neiman also hurt

Other names in the consumer sector that were down on Wednesday included Michaels Stores and Neiman Marcus Inc., but they at least fared a little better than Sabre and Burlington.

Michaels, an Irving, Texas, specialty retailer of arts, crafts, framing, floral, wall decor and seasonal merchandise for the hobbyist and do-it-yourself home decorator, saw its term loan drop about 3 ½ points to 52½ bid, 55½ offered.

And, Neiman Marcus, a Dallas-based high-end specialty retailer, saw its term loan fall around three points to 64½ bid, 67½ offered, the trader added.

GM, Ford plummet

Autos was another sector that seemed to be hit harder than the rest of the cash market as chatter that a government bailout for the auto companies, like General Motors and Ford Motor, is facing a lot of opposition, according to traders.

One trader said that General Motors, a Detroit-based automaker, saw its term loan quoted at 36½ bid, 38½ offered, down from 40½ bid, 41½ offered. A second trader put the loan at 37 bid, 39 offered, down from 39½ bid, 42½ offered.

Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted by one trader at 35¾ bid, 36¾ offered, down from 38 bid, 41 offered. Meanwhile, a second trader quoted it at 35 bid, 37 offered, also down from 38 bid, 41 offered.

"Autos always tend to take it on the chin," the second trader added.

Cash hurt by sellers

Autos wasn't the only sector to slide in trading on Wednesday. In fact, the whole market was softer, with levels in general down another one to two points, according to one trader, and 1½ to three points, according to a second trader, as sellers kept coming into the secondary, according to a trader.

For example, First Data Corp., a Greenwood Village, Colo.-based provider of electronic commerce and payment services, saw its term loan B-2 quoted at 69 bid, 69½ offered, down from 70½ bid, 71½ offered, the first trader said. At the start of this week, the B-2 loan was quoted around 72 bid, 73 offered.

Aramark Corp., a Philadelphia-based professional services company, saw its term loan B quoted at 81½ bid, 82½ offered, down from 83 bid, 84 offered.

NRG Energy Inc., a Princeton, N.J.-based owner and operator of power generation portfolios, saw its strip of term loan and letter-of-credit facility debt quoted at 84 5/8 bid, 85 5/8 offered, down from 86¾ bid, 87¾ offered, the first trader continued.

And, Texas Competitive Electric Holdings, a Dallas-based energy company, saw its term loan debt quoted at 68 bid, 69 offered, down from 70 bid, 71 offered, the first trader added.

Liquidation causing problems

One trader told Prospect News that the weakness in the secondary market is most likely attributable to liquidation by investors, such as hedge funds selling down and large Bids-Wanted-In-Competition emerging, as year-end is fast approaching.

"Follow-on of continued depression. You're back down to prices we saw on Oct. 10," the trader continued, explaining that prices were kind of at a low on Oct. 10, rallied a little from there and now have moved back down to those lows.

The trader went on to say that he believes that trading levels will continue to go down from where they are now as end of the year pressure will continue to dominate the market.

LCDX softens

LCDX 10 was also, once again, lower on the day, as the stock market declined heavily, according to a trader.

The index went out around 79.60 bid, 79.80 offered, down from Tuesday's levels of around 82.20 bid, 82.70 offered, the trader said.

As for stocks, Nasdaq closed down 96.85 points, or 6.53%, Dow Jones Industrial Average closed down 427.47 points, or 5.07%, S&P 500 closed down 52.54 points, or 6.12%, and NYSE closed down 353.67 points, or 6.59%.

Precision B loan coming along

Over in the primary market, Precision Drilling Trust's $400 million 53/4-year term loan B is "making progress" in terms of syndication now that the banks have revealed official original issue discount price talk, according to a market source.

As was previously reported, on Tuesday, guidance on the term loan B discount emerged in the 86 area.

The deal was launched on Nov. 4, at which time spread talk of Libor plus 500 basis points was announced on the B loan and it was disclosed that the tranche has a 3.25% Libor floor, but original issue discount guidance was still to be determined.

Currently, the commitment deadline is Friday.

RBC Capital Markets and Deutsche Bank are the joint lead arrangers and bookrunners on the deal, with RBC the administrative agent and left lead, Deutsche the syndication agent, and HSBC and TD Securities the co-documentation agents.

Precision includes $800 million pro rata

In addition to the term loan B, Precision Drilling's $1.2 billion senior secured credit facility (Ba1/BBB-) also contains a $400 million five-year revolver and a $400 million five-year term loan A, with both of these tranches talked at Libor plus 400 bps.

The pro rata was essentially done prior to the retail syndication bank meeting as a result of an early round of syndication to senior managing agents.

According to a previous filing with the Securities and Exchange Commission, amortization on the term loan A is 5% in year one, 10% in years two and three, and 15% in year four, with the balance payable at maturity, and amortization on the term loan B is 1% per year, with the balance payable at maturity.

Financial covenants include a minimum interest coverage ratio of 3.0 to 1.0, a minimum fixed-charge coverage ratio of 1.05 to 1.0 in 2009 and 1.10 to 1.0 thereafter, and a maximum total leverage ratio of 3.0 to 1.0.

The filing also said that the facility has a $150 million accordion feature, a portion of the term loan A and the revolver will be available for borrowings in Canadian dollars, and that up to $100 million of the revolver plus any additional amounts necessary to finance any original issue discount on the term loans may be borrowed on the closing date to finance the acquisition and refinance debt.

Deal funding Grey Wolf purchase

Proceeds from the Precision Drilling credit facility will be used to help fund the acquisition of Grey Wolf Inc. for $9.02 in cash or 0.4225 Precision trust units, subject to proration. The maximum amount of cash to be paid will be about $1.12 billion, and the maximum number of trust units to be issued will be about 42 million.

Other financing for the acquisition will come from$400 of senior unsecured notes, which is backed by a commitment for a $400 million 12-month unsecured bridge loan. The bridge loan will be reduced by the amount of Grey Wolf's convertible securities that are not converted or redeemed at close.

Pro forma for the transaction, senior leverage is 1.2 times and total leverage is 1.7 times. Equity will represent about 65% of the pro forma capital structure. On a pro forma basis for the 12 months ended June 30, combined revenue was $1.8 billion.

Completion of the acquisition is subject to Grey Wolf shareholder and customary regulatory approvals. The transaction is not subject to approval by Precision unitholders or financing.

In September, the Federal Trade Commission granted early termination of the Hart-Scott-Rodino waiting period in the proposed merger and the Grey Wolf special meeting of shareholders is scheduled for Dec. 9.

Precision is a Calgary, Alberta-based provider of high performance energy services to the oil and gas industry. Grey Wolf is a Houston-based provider of turnkey and contract oil and gas land drilling services.

© 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.