Secondary sees 80-type names moving higher; Landry's still fine tuning term loan discount price

By Sara Rosenberg

New York, Feb. 9 - The secondary market on Monday continued to see bank debt that trades in the 80s region, such as Community Health Systems Inc. and Biomet Inc., inch its way up as investors are finding these higher quality investments to be attractive.

In other news, Landry's Restaurants Inc. is still in the process of pinpointing the original issue discount on its term loan, although now the final price looks like it may be at the wider end of the currently contemplated context.

Flight to quality pushes some names up

The general story in the secondary market on Monday continued to be that better quality bank debt is in demand, which is pushing those types of names to stronger levels, while the lesser quality stuff is being pushed lower, according to traders.

"Overall theme of the market is haves moving up and have nots moving down. Things that are in the 80s are moving toward the 90s," one trader said.

For example, Community Health Systems, a Brentwood, Tenn.-based operator of general acute care hospitals, saw its bank debt quoted at 86¼ bid, 86¾ offered, up from around 86 last week, the trader remarked.

And, Biomet, a Warsaw, Ind., designer and manufacturer of musculoskeletal medical products, saw its loan quoted at 90 bid, 91 offered, up from 89½ bid, 90½ offered, the trader continued.

"CLOs threshold for buying is around 80 so people think if something hits 80 it will fly up," a second trader remarked.

"The good names that are decently priced, guys are going to buy them if they can, but no one wants to sell them, so bids keep creeping up. Bad names, no one wants to buy so bids keep creeping down," the second trader added.

Landry's clearing price may be 95

Switching to primary happenings, Landry's Restaurants now looks like it may be pricing its term loan at an original issue discount of 95, the expected maximum price, as opposed to the previously targeted price of 96, according to a market source.

However, the source went on to say that the price is still be working on and nothing is set in stone as of yet.

The $165 million term loan carries a spread of Libor plus 600 basis points with a 3.5% Libor floor.

Most recently, the term loan was sized at $160 million, but it was increased by $5 million primarily to account for the original issue discount.

Landry's $215 million amended and restated credit facility also includes a $50 million revolver that is priced at Libor plus 600 bps with a 3.5% Libor floor as well.

Wells Fargo Foothill and Jefferies are the lead banks on the credit facility.

Landry's on track to close soon

Landry's Restaurants' credit facility, although in the process of finalizing original issue discount, is still expected to close and fund on Friday, the source said.

The deal is well-subscribed after a quiet marketing period. No formal launch was ever held for the facility.

Proceeds from the loan, along with new notes, will be used to help refinance an interim credit facility, and the company's 9.5% senior notes and 7.5% senior notes.

The $295.5 million 14% senior secured notes offering priced last week at 88 to yield 20.346%. The sale generated $260.04 million of proceeds.

At first, the company was planning to get $210 million of notes and a $210 million term loan, but the notes were upsized and the term loan was downsized before marketing even started.

The interim facility that is being refinanced was obtained in December and consists of a $31 million term loan and a $50 million revolver, with both tranches priced at Libor plus 600 bps with a 3.5% Libor floor, and that term loan was issued at roughly 961/2.

Landry's is a Houston-based restaurant company.

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