LandSource first-lien slide progresses; LCDX, cash trade down; Dana OID still fluid

By Sara Rosenberg

New York, Feb. 5 - LandSource Communities Development LLC's first-lien term loan B continued to come under pressure on Tuesday as a result of the land appraisal issue, and LCDX 9 and cash were both noticeably weaker.

In other news, Dana Corp. is hoping to allocate its credit facility within the next few days, but the original issue discount will need to firm up first since orders are coming in at various levels.

LandSource Communities' first-lien term loan B headed lower once again as investors continued to react to a lender-only call that was held during the previous session to discuss a new land appraisal, according to traders.

One trader said that the loan was being offered at 71, compared to offers on Monday in the high-70 context. "Kind of like everything else today, there was no bid!" the trader added.

However, according to a second trader, the first-lien term loan B was quoted at 60 bid, 70 offered, down from Monday's closing levels of 68 bid, 75 offered.

Recently, LandSource Communities did a new appraisal on their land that showed deterioration in the underlying value of that land.

As a result, there's potential that the company is in default under its credit facility since the collateral is worth less than it was when it was first appraised, meaning complying with the borrowing base covenant could be a problem.

When the appraisal news came out last week, speculation was that the sponsors would put in more equity, which caused the first-lien loan to rise to the 79 bid, 81 offered context and remain there through Friday.

But then on Monday, the company held a private call to discuss the equity sponsors stance and potential action to be taken by senior lenders, and following that call, the first-lien loan started to tumble.

"It's not that the sponsors are debating whether or not to put in equity, it's the amount that they are willing to put in that will cause further distress. Definitely a lower amount [of equity] than expected," one trader remarked.

"No additional company news [today] although the lender list was posted, so maybe that stirred it up," the trader said regarding the term loan's weakening. "List of first-lien lenders on Intralinks - tends to get other dealers involved as the full lender list means open season for all to come in, make markets and contact current holders."

LandSource is a joint venture between Lennar Corp., LNR Property Corp. and MW Housing Partners. Its primary investment is Newhall Land and Farming Co., which owns 15,000 acres in Santa Clarita Valley, Calif.

LCDX, cash dip lower

LCDX 9 and the cash market in general both experienced softening on Tuesday as equities fell following the release of disappointing service-sector data, according to traders.

The index went out around 92.40 bid, 92.50 offered, down from around 92.60 bid, 92.80 offered on Monday, traders said. It hit a low of 92.15 bid, 92.30 offered during trading hours.

Meanwhile, cash was hit much harder as things seemed to be down about a point or more, one trader added.

For example, Georgia-Pacific Corp., an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B quoted at 89 bid, 90 offered, down from 90½ bid, 91½ offered, the trader said.

Texas Competitive Electric Holdings Co. LLC (TXU), a Dallas-based energy company, saw its term loan B-2 and B-3 quoted at 90 bid, 91 offered, down from 91 bid, 92 offered. The debt hit a low of 89¾ bid, 90½ offered during the session.

Alltel Communications Inc., a Little Rock, Ark., provider of wireless voice and data communications services, saw its term loan B-3 quoted at 89½ bid, 90¼ offered, down from 90¼ bid, 91 offered, the trader continued.

Ford Motor Co., a Dearborn, Mich.-based automaker, saw its term loan quoted at 85 bid, 86 offered, down from 86½ bid, 87¼ offered.

And, Freescale Semiconductor Inc., an Austin, Texas, designer and manufacturer of embedded semiconductors, saw its term loan quoted at 82 bid, 84 offered, down from 83¼ bid, 85¼ offered, the trader added.

On Tuesday morning, the Institute for Supply Management put out weak results saying that its non-manufacturing index fell to 41.9% in January from 54.4% in December.

Stocks fell on the news, with Nasdaq down 73.28 points, or 3.08%, Dow Jones Industrial Average down 370.03 points, or 2.93%, S&P 500 down 44.18 points, or 3.20%, and NYSE down 327.61 points, or 3.56%.

Dana discount still in flux

Moving to the primary market, Dana is still working on filling the books on its $1.35 billion seven-year term loan B (Ba3/BB) as orders are coming in at different discount levels, according to a market source, who said that the hope is to firm up the OID and allocate the deal by the end of this week.

The source said that commitments are currently being placed in the 90 to 92 original issue discount context, and based on where the loan fills out, that's where the discount will end up. Late last week, the discount on the term loan B was increased to 92 from the initially proposed 97 area.

The term loan B is priced at Libor plus 375 bps, with a 3% Libor floor for two years, and carries hard call protection of 102 in year one and 101 in year two. The only time the call premiums don't apply is when it relates to cash flow sweep.

Last week, pricing on the term loan B was flexed up from original talk at launch of Libor plus 350 bps, and the Libor floor and call premiums were added.

Dana's $2 billion exit financing credit facility also includes a $650 million five-year asset-based revolver (Ba3/BB+) that is priced at Libor plus 200 bps, with a commitment fee of 37.5 bps.

Upfront fees on the asset-based revolver were 25 bps for $25 million, 50 bps for $50 million and 75 bps for $75 million.

Syndication on the revolver has gone well, making changes to this tranche unnecessary.

Citigroup, Lehman Brothers and Barclays are the lead banks on the deal.

The credit facility funded last week when the company emerged from Chapter 11. Proceeds are being used to repay the company's debtor-in-possession credit facility, to make other payments required upon its exit from bankruptcy and to provide liquidity to fund working capital and other general corporate purposes.

Dana is a Toledo, Ohio-based supplier of components, modules and systems to vehicle manufacturers and related aftermarkets.

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