GM revolver firms on earnings news; Texas Petrochemical, CMP Susquehanna talk loans

By Paul A. Harris

St. Louis, April 20 - The focus was on General Motors Corp. in leveraged loans and throughout most of the capital markets during Thursday's session.

In spite of the fact that the troubled Detroit auto maker suffered its sixth successive quarterly loss, its revenue rose during the first quarter of 2006 and traders saw GM's revolver firm on the news.

Elsewhere the companion deals from CMP Susquehanna and Stick LLC launched at a bank meeting and price talk was heard on the Texas Petrochemicals LP loan.

Meanwhile on Thursday morning sources were reporting lackluster trading.

Two sources, an investor and a trader, said that the softness that has pervaded the leveraged loan market though the post-Easter week is likely attributable to investors' apprehensions over a market environment that seems to encourage issuers to reprice their paper.

However late in the session another trader said that the market had firmed during the day, marking it an eighth of a point better on good two-way flow.

GM revolver firms on earnings

Pressed for news on Thursday, traders invariably talked about General Motors - the news being that the company's earnings report seemed to beat Wall Street's expectations.

Although it suffered its sixth successive quarterly loss, $323 million, or $0.57 per share, the first quarter of 2006 was actually an improvement from the 2005 first quarter when the company lost $1.3 billion, or $2.22 per share.

And the auto maker reported that its revenue rose 14.1% to a record $52.2 billion in the first quarter of 2006.

An investor said Thursday morning that GM bonds and bank loans had traded up 1 to 1½ points in Europe, and ½ to ¾ point in the United States and added that the initial reaction seemed to be that the earnings report was slightly better than expected.

This source said that GM's revolver had traded in the context of 94.50 bid, 95.50 offered, and reported seeing a 94.75 bid late morning.

Not long after, a trader said that GM's revolver was trading in a 94.50 bid, 95 offered context, 3/8 to ½ point better than Wednesday's 94 bid, 95 offered.

Later in the day a trader reported seeing the paper trade in a 94.50 bid, 95.50 context throughout the session.

Price talk on Susquehanna, Texas Petrochemicals

In the primary, CMP Susquehanna's and Stick LLC's combined $848 million in credit facilities launched at a bank meeting.

CMP Susquehanna's $750 million facility (B1/B-), comprised of a $650 million term loan B and a $100 million revolver, is talked at Libor plus 225 basis points.

Meanwhile Stick's $98 million facility (Caa1/CCC+), comprised of $72 million term loan B and a $26 million revolver, is talked at Libor plus 400 basis points.

Deutsche Bank and Merrill Lynch are the bookrunners, with Deutsche Bank serving as left lead.

Proceeds will be used to help fund the acquisition of the radio broadcasting business of Susquehanna Pfaltzgraff Co.

Elsewhere Texas Petrochemicals issued price talk on its $280 million seven-year covenant-light term loan B of Libor plus 225 to 250 basis points.

The $395 million credit facility also includes a $115 million asset-base revolver.

Deutsche Bank and Credit Suisse are leading the deal, with Deutsche as left lead.

Proceeds will be used to help fund the acquisition of Huntsman Corp.'s U.S. butadiene and related MTBE operations.

In the wake of Allied Waste

On Thursday morning a trader said that the post-Easter week had been "kind of a dud," and added that a lot of players remained out on extended holiday.

"There has not been a lot of activity in the secondary market, which has been a little softer," the trader said, adding that even if people had been in the office the market is presently in "something of a repricing environment."

This trader recounted how in late March Scottsdale, Ariz.-based Allied Waste Industries Inc. sought to reprice its term loan B to Libor plus 150 basis points from Libor plus 200 bps, and ended up getting a 25 basis points accommodation from its lenders, repricing the loan at 175 basis points

The trader, referring to Allied Waste as a "three-B name" (B1/BB), asserted that in the wake of its repricing "everything else that is four-B, and priced at 175 basis points or more has come off because the feeling is that Allied Waste has traded well, post-repricing, so the four-B paper will be repriced next.

The trader said that Hertz Corp.'s term loan (Ba2/BB) is priced at Libor plus 225 basis points, 50 basis points higher than Allied Waste, implying that those who consider investing in that paper must weigh the play against the backdrop of the Allied Waste repricing.

And, the trader added, Avis Group Holdings Inc. recently priced its term loan (Ba2/BBB-/BBB-) at Libor plus 125, so the price of poker is definitely going up.

"This has generated the feeling that more repricings are ahead of us," the trader asserted.

"So you're not going to reach for a name if you think that there is a possibility that it might get repriced."

Everything's for sale

Shortly afterward Prospect News put this trader's thesis - that loan paper in the post-Easter market has eased on repricing fears - to a bank loan investor, who seemed hard put to refute it.

After all, the investor reasoned, nothing appears to be fundamentally wrong with the economy, except maybe oil prices.

"There have probably been a lot of people over the past three months who paid 101.50 or 101.75 for something and then watched it get repriced down 25 or 50 basis points, which causes it to trade down to 100.50 or 100.75," the investor said.

"People are not going to be inclined to take that. You can do better holding cash than having stuff reprice down a point in couple of months."

And this investor certainly agreed that the market is off of its recent highs, adding that not a lot of 102-type numbers are showing up at present.

Prospect News countered by asking how issuers can acquire consents from lenders in sufficient numbers to affect such repricings in the first place.

The investor said that those who decline to sign on to the repricing amendments run the risk of being taken out of their paper at par because bank loan paper is callable at any time.

"In a world where everyone is desperate for paper the idea of having your paper taken away from you is worse than undergoing a repricing from 175 to 150.

"Everybody pretty much rolls on these deals."

However this investor pointed out that there is a bright side to the story. If repricing causes loan paper to ease by a point then "everything's for sale," the source said.

"The challenge is finding the price point."

Scientific Games closes $150 million add on

Scientific Games Corp. said it completed a $150 million addition to its credit facility (Ba2/BB).

The new debt is comprised of a $50 million add-on to the company's revolver priced at Libor plus 175 basis points and a $100 million add-on to the company's term loan priced at Libor plus 125 bps.

Proceeds were used to fund the acquisition of Essnet AB's online lottery assets for about $60 million and the purchase of The Global Draw Ltd. for £183 million.

Scientific Games is a New York-based provider of services, systems and products to both the instant ticket lottery industry and the pari-mutuel wagering industry.

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