Landry's breaks for trading; Harrah's down following draw; LCDX slides with stocks

By Sara Rosenberg

New York, Feb. 17 - Landry's Restaurants Inc.'s credit facility freed up for trading on Tuesday with levels on the term loan quoted right around the original issue discount price.

In other trading news, Harrah's Operating Company Inc. softened on its draw down news, LCDX 10 headed lower in sympathy with equities, and the overall cash market was unchanged to slightly weaker.

Landry's frees to trade

Landry's saw its credit facility hit the secondary market on Tuesday, with the term loan quoted basically on top of the discount price at which it was sold to investors, according to a market source.

Specifically, the $165.6 million term loan was quoted at 95 bid, 95½ offered from the break on, the source said.

Pricing on the term loan is Libor plus 600 basis points with a 3.5% Libor floor, and the paper was issued at a discount price of 95.

During syndication, the original issue discount firmed at the wide end of recent guidance that was in the 95 to 96 context.

In addition, the syndication process did result in changes to the term loan size. At first, the tranche was marketed as a $160 million loan, then it was increased to $165 million and then it finalized at $165.6 million. The overall $5.6 million increase was done primarily to account for the original issue discount.

Landry's already funded

Landry's amended and restated credit facility closed and funded this past Friday, and was used to help refinance an interim credit facility as well as the company's 9½% senior notes and 7½% senior notes.

The new $215.6 million facility includes a $50 million revolver in addition to the term loan. Pricing on the revolver is Libor plus 600 bps with a 3.5% Libor floor as well.

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

The term loan and revolver were syndicated through a quiet marketing period. There was never actually a formal bank meeting held to launch the transaction and there is no intention to do a follow-up bank meeting after the close being that syndication has been completed.

Landry's interim facility that was refinanced was obtained in December and consisted of a $31 million term loan and a $50 million revolver. Both tranches were priced at Libor plus 600 bps with a 3.5% Libor floor, and that term loan was issued at roughly 961/2.

Other funds for the refinancing came from $295.5 million of 14% senior secured notes that priced at 88 to yield 20.346%. The sale generated $260.04 million of proceeds.

Landry's is a Houston-based restaurant company.

Harrah's weakens as revolver is drawn

Harrah's saw its term loan post some losses on Tuesday on the back of the company's announcement that it is drawing down the remaining amount under its revolving credit facility, according to traders.

The term loan was quoted by one trader at 55 bid, 57 offered, down from Friday's levels of 55¾ bid, 57¾ offered. A second trader said that he saw the paper bid at 56¼ early on in the day, and that levels he saw on Friday were 59 bid, 60½ offered.

After the close Friday, Harrah's revealed that it submitted borrowing requests for $740 million in revolver funds on Feb. 9 and Feb. 10, which is the remaining amount available under the facility.

The company said that the borrowing requests were made as a result of the continuing uncertainty in the credit market and general economic conditions.

Proceeds will be used for general corporate purposes, including capital expenditures.

Harrah's downgraded

Late in the day Tuesday, Standard & Poor's came out and announced that it lowered Harrah's corporate credit rating to CCC from B- and the rating outlook is negative.

The downgrade reflects S&P's concern that the draw requests signal that management's outlook for 2009 and the company's ability to service its current capital structure over the next several quarters have deteriorated in recent weeks, the rating agency explained.

The CCC corporate credit rating incorporates Harrah's weak credit metrics, limited liquidity and S&P's expectation for continued negative trends in net revenues and EBITDA.

"Given the weakened condition of the gaming sector and our expectation that EBITDA will decline in the low- to mid-teens percentage area in 2009, we believe the company is unlikely to be able to service its existing capital structure and remain in compliance with its bank covenant throughout 2009," said Ben Bubeck, S&P credit analyst, in the rating release.

Harrah's is a Las Vegas-based casino company.

LCDX slips lower

LCDX 10 lost some ground during Tuesday's trading session as the stock market fell off, according to a trader.

The index was quoted around 72.50 bid, 72.80 offered, down from Friday's levels of around 73.40 bid, 73.60 offered, the trader said.

Nasdaq closed down 63.70 points, or 4.15%, NYSE closed down 267.65 points, or 5.14%, S&P 500 closed down 37.67 points, or 4.56%, and Dow Jones Industrial Average closed down 297.81 points, or 3.79%.

As for the general cash loan market, it was pretty much unchanged to maybe a little bit weaker on the day, the trader added.

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