Las Vegas Sands, Calpine trade higher; Ntelos allocations expected to be tight; LCDX up 0.20

By Paul A. Harris

St. Louis, July 31 - Loan market sources saw a strong finish to a strong week, on Friday.

"The market opened stronger, then weakened a bit, but remained firm in general," one trader said shortly after the simultaneous close of the day, the week and the month of July.

The LCDX 12 index finished the Friday session at 93.30 bid, 93.60 offered, up 0.20, another trader said.

In the secondary market, investors have some lower quality loans - those trading in the 70s and 80s - in their gunsights, a trader remarked.

One such loan, the Las Vegas Sands strip, rallied notably on the week. Despite a negative outlook from Moody's, on Friday, a bank loan portfolio manager suggested that Las Vegas Sands in particular, and gaming in general, might be a place to be in a "rebound" scenario.

Meanwhile in the primary market, allocations are apt to be tight on the new Ntelos Holdings Corp. term loan. Earlier in the week the company whacked 50 basis points off the discount it is offering to investors who play, moving it to 99.00 from 98.50.

Rebounding in Vegas

Despite Moody's putting the Las Vegas Sands B3 corporate family ratings on review for possible downgrade, on Friday, the Las Vegas Sands strip enjoyed a notable week, according to a bank loan mutual fund manager.

The strip was at 78½ bid, 79½ offered on Friday afternoon, the investor said, up from 76½ bid, 77½ offered in the middle of the week, and from 74½ bid, 75½ offered a week ago.

Las Vegas saw a lot of improvement since the fourth quarter of 2008 and the first quarter of 2009, the manager explained.

"If you're going to play the rebound, the gaming sector is not necessarily the worst place to play it," the source suggested.

To be certain, the Vegas scenario is a "good news-bad news" one, the investor conceded, adding that the entertainment and lodging companies are attracting people by cutting room rates. So although occupancy rates look good, room rates are down, the source said.

"The economy is drifting up a little," the manager said.

"Gas prices don't seem high enough to prevent California people from driving into Vegas.

"Gaming in Vegas and Atlantic City isn't the worst place to be. And gaming outside of Vegas and Atlantic City is holding up even better."

Market-cap comfort

With respect to Las Vegas Sands, in particular, its capital structure is fairly highly leveraged in terms of going through a trough like the present one, the buy-sider said.

"But the bank loan paper has been trading very well for quite a while, and so has their stock."

Imparting the caveat that stock prices are not very useful as metrics for bank loan investors, the manager spotted the Las Vegas Sands share price at $9.27 Friday afternoon, after peaking at $10.88 last week. Las Vegas Sands bottomed out at $1.77 on March 6, the investor said.

The Friday share price gives the company a market cap of over $6 billion, the manager said.

"People like that picture, although it could be slightly misleading.

"A lot of that market cap might come from the potential value of the Asian operations. Yet the loans are in the U.S. operations."

Later in the day a trader tracked a similar trajectory for the Las Vegas Sands strip: 78¼ bid, 79½ offered on Friday the afternoon, up 3 points on the offered side from 75½ bid, 76½ offered at the beginning of the week.

"Most stuff is up, particularly the lower quality names, the trader said.

"Anything in the 70s and 80s is going up."

Meanwhile another trader spotted the Las Vegas Sands term loan stronger on the day, up 1/8 point at 94½ bid, 96½ offered.

A pop for Calpine

Elsewhere in the Friday secondary market, Calpine Corp. loan paper got "a pop," according to a trader, who added that Calpine is seeking an amendment to pay down debt.

Calpine closed at 91¾ offered, Friday afternoon, up a point on the offered side from 90 bid, 90¾ offered on Friday morning.

"The market is stronger," the trader commented.

"This week everything has been up ½ point per day."

Quiet in the primary

This trader said there is nothing very exciting happening in the bank loan primary market.

"It's quiet," the source remarked.

"People are only expecting small deals during the run-up to Labor Day.

"There is nothing substantial coming down the pipeline."

One deal already in the market generated news throughout the final week of July: the Ntelos $635 million Libor plus 375 bps six-year term loan.

Mid-week the company decreased the original issue discount it is offering to investors for participating by 50 bps, to 99 from 98.5.

JP Morgan is leading the $670 million credit facility, which also includes a $35 million revolver.

A bank loan investor looks for Ntelos allocations to be tight.

"They're only giving people what they already have, which leads you to believe that there is a lot of demand," the investor said, explaining that the amount you hold of the old Ntelos loan will dictate how much of the new one will be allocated to you.

"They're not guaranteeing you will get that much," the investor said.

"They're just saying that you won't get more."

"Tight" is the watchword for the bank loan market presently, the investor said, adding that paper is hard to come by.

However the improvement in secondary prices makes a new issue calendar much more possible, the source added.

"When bank loans were trading in the 70s, the new issue market was tough because no one wanted to buy new issues when secondary prices were so cheap.

"Now that a big part of the loan market is trading in the 90s it should not be so hard to bring new issues.

"Ntelos is doing it. They are a well-known, high-quality issuer.

"That kind of issuer can bring a new deal without having to grant a major discount."

UPC plans add-on

Finally on Friday, UPC Holdings BV set talk on a quick-to-market $300 million add-on to its Libor plus 350 basis points term loan T at the 96 area.

That talk is cheap to the 96¾ bid, 98¾ offered levels of the existing paper, a market source said.

Books were expected to close before the end of the day.

JP Morgan is leading the deal.

The $500 million term loan T matures in December 2016.

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