Cash, LCDX gain ground; Swift dips on FBI raid rumors; Solutia reaches agreement on exit financing

By Sara Rosenberg

New York, Feb. 25 - The secondary loan market saw a nice pop on Monday with cash stronger anywhere from a half a point to a point pretty much across all sectors and loan types, and LCDX 9 better as well.

Also in trading, Swift Transportation Co. Inc.'s term loan B inched its way lower after rumors of an FBI raid spooked some investors, although late in the day it came out that the company was not the target of the investigation.

In other news, Solutia Inc. reached an agreement with its banks, under which the underwriters have agreed to fund the deal at the revised tranche structure that was announced earlier this month, but with higher pricing.

The cash market in general rallied during the trading session as there seemed to be more interested buyers in the market and people viewed Standard & Poor's various monoline rating actions as somewhat positive, according to traders.

For example, in the cash market, Texas Competitive Electric Holdings Co. LLC (TXU), a Dallas-based energy company, saw its term loan B-2 quoted at 92 bid, 93 offered, up from 91¾ bid, 92¾ offered, and its term loan B-3 quoted at 91¾ bid, 92¾ offered, up from 91½ bid, 92½ offered, one trader said.

Recently, Texas Competitive's term loan Bs have been under some increased scrutiny on rumors that the lock-up on the company's unsyndicated $3.45 billion term loan B-3 will end on Feb. 28, making it possible that the underwriters will then try to sell down some of that paper in the secondary market.

Also moving up on Monday was Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals Georgia-Pacific Corp. The company's term loan B was quoted at 92¾ bid, 93¾ offered, up from 91¾ bid, 92¾ offered, the trader remarked.

Univision Communications Inc., a Los Angeles-based Spanish-language media company, was yet another noticeable mover, as its term loan B was quoted at 83¼ bid, 84¼ offered, up from 82¼ bid, 83¼ offered, the trader continued.

Austin, Texas-based Freescale Semiconductor Inc., a designer and manufacturer of embedded semiconductors, saw its term loan rise up to 86 bid, 87 offered from 85¼ bid, 86¼ offered.

Chrysler Financial Services LLC, a provider of financial services for vehicles in the NAFTA region, saw its first-lien term loan quoted at 87¼ bid, 88 offered, up from 86¼ bid, 87¼ offered.

And, First Data Corp., a Greenwood Village, Colo., provider of electronic commerce and payment services, saw its term loan B-2 and B-3 quoted at 91 bid, 92 offered, up from 90½ bid, 91½ offered, the trader said.

"There's more comfort with the market; definitely got a boost with the ratings on monoline. On relatively light volume, things are moving up," the trader explained.

On Monday, S&P took rating actions on several monoline bond insurers following additional stress tests with respect to their domestic nonprime mortgage exposure.

MBIA Insurance Corp. had its AAA financial strength rating removed from CreditWatch, but a negative outlook was assigned.

S&P said that the removal from CreditWatch reflects MBIA's success in accessing $2.6 billion of additional claims-paying resources, which is a strong statement of management's ability to address the concerns relating to the capital adequacy of the company.

In addition, Ambac Assurance Corp. had its AAA financial strength rating affirmed, but the rating remains on CreditWatch with negative implications.

S&P said that the affirmation of Ambac's ratings reflects the company's capital-raising plans and the ability to implement those plans. The ratings were left on CreditWatch with negative implications to reflect uncertainty surrounding the risk profile and capitalization plans for the reported new corporate structure being contemplated by the holding company.

Also, CIFG Guaranty, CIFG Europe and CIFG Assurance North America Inc. had their AAA financial strength ratings affirmed, while the negative outlook was retained.

S&P said that CIFG's ratings were affirmed to reflect the contribution of $1.5 billion in capital resources to by Banque Federale des Banques Populaires and Caisse Nationale des Caisses d'Epargne to support CIFG's claims-paying resources.

Financial Guaranty Insurance Co. had its financial strength rating lowered to A from AA, and the rating remains on CreditWatch with developing implications.

S&P said that the downgrade on FGIC reflects the rating agency's current assessment of potential losses, which is higher than previous estimates.

And, lastly, S&P lowered XL Capital Assurance Inc.'s and XL Financial Assurance Ltd.'s financial strength ratings to A- from AAA, with these ratings remaining on CreditWatch with negative implications.

S&P said that the downgrades on XL reflect the assessment that the company's evolving capital plan has meaningful execution and timing risk.

LCDX strengthens

LCDX 9 also traded higher on Monday, spurred on by cash's performance, the monoline news, equities rallying and investors' willingness to buy into the index, according to traders.

The index went out around 92.95 bid, 93.15 offered, up from Friday's levels of 92 bid, 92.10 offered, traders said.

During the session, the index traded as high as 93.10, one trader added.

According to this trader, guys wanting to get involved in the loan think the index is cheap compared to getting involved in specific loans, which is helping to give levels a boost.

As for equities, Nasdaq closed up 24.13 points, or 1.05%, Dow Jones Industrial Average closed up 189.20 points, or 1.53%, S&P 500 closed up 18.69 points, or 1.38%, and NYSE closed up 145.25 points, or 1.60%.

Swift slides on FBI investigation chatter

Swift Transportation's term loan B came under some pressure as rumors flew around that the company might be under investigation by the FBI; however, these rumors were later refuted, according to a trader.

The term loan B ended the day at 76 bid, 78 offered, down from 77 bid, 79 offered, the trader said.

Early on in the day, news reports came out saying that Federal and state agencies raided the company's commercial truck-driving school Tennessee, causing some investors to panic.

Then, in the early evening, Swift Transportation put out a press release to clarify the situation, saying that it is not the target of an investigation.

The company explained that the law enforcement agencies were on site at the Swift Transportation commercial truck-driving school near Memphis and executed search warrants as part of an ongoing investigation that involves the issuing of commercial drivers licenses at the company's facility.

"The Federal Bureau of Investigation and other agencies are conducting an investigation concerning the issuance of commercial drivers licenses at our Tennessee facilities. According to the U.S. Attorney's Office in charge of the investigation in Tennessee and the FBI, Swift is not a target of the investigation. We do not expect this investigation to cause any disruption of our business and we intend to fully cooperate with the FBI and any investigating agency," said Dave Berry, spokesman for Swift Transportation, in the news release.

Swift Transportation a Phoenix-based truckload carrier.

Solutia exit financing to fund

In more loan news, Solutia and its banks came to an agreement on its exit financing facility that calls for funding the deal on Thursday, according to a news release.

The credit facility will fund as a $450 million asset-based revolver (Ba1) and a $1.2 billion term loan (B1/B+) priced at Libor plus 500 basis points, with a 3.5% Libor floor for four years.

Originally, the credit facility was committed as a $400 million asset-based revolver and a $1.2 billion term loan. However, while attempting to syndicate the deal, the banks proposed upsizing the revolver by $50 million. They also proposed that term loan pricing be Libor plus 350 bps, with a three-year Libor floor of 3.25% - added during the syndication attempt - and an original issue discount of 91, increased from the 96 area while trying to syndicate.

Citigroup, Goldman Sachs and Deutsche Bank are the lead banks on the credit facility. These banks have also committed to provide the company with a $400 million senior unsecured bridge facility.

Proceeds from the facility, along with bridge loan, will be used to pay creditors under the company's plan of reorganization and to fund ongoing operations after its emergence from Chapter 11.

Solutia and the banks have been arguing over the exit financing for weeks now as the banks claimed that an adverse change occurred in the loan syndication, financial or capital markets since Oct. 25 that, in their reasonable judgment, materially impaired syndication of the facility.

The company was saying that the ongoing conditions in the credit markets began long before Oct. 25 and, therefore, the banks are required to fund their commitments.

As part of the resolution, the banks agreed to waive the market material adverse change provision and Solutia agreed to dismiss the lawsuit, with prejudice, that it filed on Feb. 6 against the banks.

"We are extremely pleased to have reached an agreement on the exit financing package that will result in Solutia's emergence from Chapter 11,"' said Jeffry N. Quinn, chairman, president and chief executive officer, in the release. "Importantly, this agreement enables Solutia to emerge with the plan of reorganization intact, providing significant recoveries for our stakeholders and providing a firm foundation for Solutia's future success."

Solutia is a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products.

Axcan closes

TPG Capital completed its acquisition of Axcan Pharma Inc. for $23.35 per common share, according to a news release.

To help fund the transaction, Axcan got a new $290 million six-year credit facility (Ba2/BB-), consisting of a $175 million term loan A and a $115 million revolver, with both tranches priced at Libor plus 350 bps.

The term loan A was issued at an original issue discount of 96 and carries soft call protection of 102 in year one and 101 in year two.

During syndication, the revolver was downsized from $125 million and the term loan A was upsized from $165 million.

The term loan A was actually added to the credit facility structure earlier on in syndication when the company decided to remove a $385 million seven-year term loan B that was being talked at Libor plus 350 bps, with an original issue discount in the range of 96 to 97 and call protection of 102 in year one and 101 in year two.

To make up for the lost term loan funds, the company increased the size of its bond offering to a $460 million two-tranche deal from a $240 million single-tranche senior unsecured deal.

However, Axcan only ended up pricing $228 million of senior secured notes. It withdrew from market a proposed $235 million tranche of eight-year senior unsecured notes that is going to be provided for through a bridge loan.

Bank of America, HSBC Bank and RBC acted as the lead banks on the deal.

Axcan is a Mont-Saint-Hilaire, Quebec-based pharmaceutical company focused on the treatment of gastrointestinal disorders.

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