ISP launches $1.15 billion deal; Select Medical, LifeCare loans hemorrhage; NRG term loan flexed down

By Paul A. Harris

St. Louis, Jan. 20 - With the stock market trading off sharply and crude oil prices spiking to four-month highs, the leveraged loan market remained fairly quiet as the Jan. 16 week came to a close.

Fairly quiet, that is, except in the healthcare sector: the term loan paper of Select Medical Corp. traded sharply lower and then bounced back, and the loan paper of LifeCare Holdings Inc. was said to have moved in sympathy.

In the primary market ISP Chemco Inc. launched a $1.15 billion debt refinancing and general corporate purposes deal. And NRG Energy Inc. flexed down pricing of its $3.2 billion term loan B by 25 basis points.

One market source, speaking shortly after mid-day, told Prospect News that Friday morning had been "pretty quiet.

"We're in between deal flow right now," said the source.

"There was a little bit of a flurry at the beginning of the month. Now stuff is launched and people are working it. There has not been a second wave of new deals yet."

The source added that trading throughout the Jan. 16 week had been active.

"Prices are rising across the board a little more than people expected, both for new issues and in the secondary," the source commented.

"There is a huge, deep forward calendar, so you would think there would be some discipline. But there are some CLOs that are ramping up and some accounts that had a little bit of cash over year-end to put to work - not a lot but a little."

ISP uncorks $1.15 billion refi

A bank meeting took place Friday for ISP Chemco Inc.'s $1.15 billion senior secured credit facility (Ba3), led by JP Morgan.

The facility, which the company is raising in order to take out some high coupon bond debt and to fund general corporate purposes, is comprised of a $950 million term loan B talked at Libor plus 200 basis points and a $200 million revolver.

The issuer is a subsidiary of International Specialty Products Inc., a specialty chemicals company based in New York City.

NRG cuts term B spread

Elsewhere, in a $5.2 billion deal that throughout the week has been variously characterized as a "riot" and a "blowout," NRG Energy Inc. flexed down the pricing of its $3.2 billion seven-year term loan B to Libor plus 200 basis points from 225 basis points on Friday.

The Princeton, N.J., energy company's acquisition financing and debt refinancing loan (Ba2/BB-/BB) via Morgan Stanley and Citigroup also contains a $1 billion five-year revolver talked at Libor plus 200 basis points, with a 50 basis points commitment fee and a $1 billion five-year synthetic letter-of-credit facility talked at Libor plus 225 basis points.

In other primary market news a source close to the deal said that Ameritrade Holding Corp.'s acquisition financing mega-loan could break for trading on Monday.

The source added that pricing on the $1.65 billion seven-year term B could be flexed down to Libor plus 150 basis points from 175 basis points.

The overall $2.2 billion credit facility (Ba1/BB/BB), led by Citigroup, also contains a $250 million six-year term A talked at Libor plus 150 basis points and a $300 million five-year revolver talked at Libor plus 150 basis points.

2006 issuance up 55% on 2005

Sources reported no deals breaking for trading during the Friday session.

Meanwhile 2006 year-to-date issuance at Friday's close stood at $43.4 billion in 44 dollar-denominated credit facilities, compared to the $19.5 billion in 45 deals seen by the close on Jan. 20, 2005.

Anecdotally sources have told Prospect News that with the forward calendar rife with billion dollar-plus mega-deals January 2006 figures to be a record month for issuance in the leveraged loan market.

Bleeding in Select Medical, LifeCare

In an otherwise quiet secondary session traders said that the existing term loan paper of Select Medical went for a wild ride as word circulated that Centers for Medicare & Medicaid Services had proposed rule changes that would reduce some government reimbursements to the long-term care hospital industry by as much as 11%.

Although Select Medical's bonds cascaded down throughout the session - heard six points down in the late morning, eight points in mid-afternoon and finally down 10 points just ahead of the close - loan traders said that the Mechanicsburg, Pa., acute care company's loans fell precipitously early in the session, but were plowing their way back near the close.

One trader, speaking shortly before mid-day, said that Select Medical's term loan had been off two points earlier, but then came back to 99 bid, 99.50 offered, less than a point lower than the Thursday close.

Another trader, later in the afternoon, concurred that Select Medical's bank debt had been off two points early Friday but had then "slowly crept back up."

This source had the term loan at 98.50 bid, 99.50 offered, down from Thursday's 100 bid, 100.50 offered, but specified that it had been seen early Friday as low as 98 bid.

"Aside from that it was a slow day in the secondary," the trader commented.

Meanwhile the trader who spoke at mid-day said that LifeCare's term loan had moved down in sympathy. The trader mentioned seeing the paper as low as 89.50 bid in the morning, down almost five points, but added that by mid-day it had improved and was perhaps just two points lower on the session.

The trader added that the company was already facing difficulties because of an investigation by the Louisiana attorney general involving allegations that during the darkest hours of Hurricane Katrina, last fall, LifeCare staff at Memorial Medical Center in New Orleans had discussed euthanizing critically ill patients on life support.

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