Downsized TNS term loan allocates; LCDX up 5/8; loan investor sees increased appetite for risk

By Paul A. Harris

St. Louis, April 15 - TNS, Inc.'s downsized $230 million term loan allocated on Wednesday and traded as high as 93 bid, 94 offered, according to an informed source.

The recently minted LCDX 12 index gained 0.625 point to close at 80 bid, said a loan trader, who added that trading during the session was muted, and was almost entirely driven by technicals.

"There is a lot of cash coming in, and a lot of buyers," the trader said, adding that dealers are very light in terms of supply to satisfy those buyers.

Meanwhile a loan portfolio manager pointed to recent rallying in the term loan of Hawker Beechcraft Corp. as evidence that the bank debt market is now being driven by an appetite for risk, as opposed to credit-specific stories.

Downsized TNS allocates

TNS's downsized $230 million term loan allocated on Wednesday and broke to 91 bid, 92 offered, according to an informed source.

Early in the afternoon the Libor plus 600 basis points loan, which had been offered to investors at 90, traded as high as 93 bid, 94 offered, the source added.

It was at 92½ bid going out, according to a bank loan mutual fund manager. He added that he had heard the deal was two to 2½ times oversubscribed.

The loan was reduced to $230 million from $250 million in size, with the company electing to use cash on hand to make up the difference in the acquisition financing in order to avoid costs related to the original issue discount, an informed source said.

"The trade up was a function of the reduced size coupled with improvement in loan market over last few weeks," the source added.

SunTrust was bookrunner and lead agent.

The deal met with a good reception early on as around 64 institutions were represented in the room at the company's mid-March bank meeting and a number of other investors attended via the phone. Also, the company's existing lenders showed some early interest in the transaction.

Proceeds will be used to help fund the acquisition of VeriSign Inc.'s communication services group.

In connection with the new loan, the company's existing $178.5 million term loan B will be amended to accommodate the new debt and to revise pricing to Libor plus 600 bps with a 3.5% Libor floor from the current rate of Libor plus 200 bps.

TNS is a Reston, Va.-based provider of data communications services for transaction-oriented applications.

High coupon, good portent

The TNS deal was a long time in the market, and was expensive for the issuer, according to a loan mutual fund portfolio manager.

"They accepted a high coupon and a deep discount because they had an acquisition that they liked," the investor said.

"This deal will help to create a functioning primary market," the manager added.

"People are talking more about a new issue market being possible. So when the market is back in the 85 bid to 90 bid context you should be able to start issuing paper in the 90s," the source added.

The only issuers apt to step forward for cash on the terms that TNS found acceptable are those keen on opportunistic acquisitions, the source added.

Renewed appetite for risk

Bank loan investors are presently buying risk, as opposed to credit stories, the loan fund manager said, pointing to the Hawker Beechcraft loan strip, which was quoted at 50 bid, 51½ offered on Wednesday, up from the mid-40s a week ago.

The move higher came despite the fact that Standard & Poor's lowered Hawker Beechcraft's corporate credit rating to B- from B+ and the senior secured and unsecured debt of Hawker Beechcraft Acquisition Co. LLC to B from BB, with a negative outlook, primarily reflecting the sharp downturn in business aviation.

"It got downgraded and not much happened to the price," the investor said.

"That's because risk trades up in markets like this.

"In the 'weak market' environment of a little while ago every downgrade was taken as another reason to trade things down.

"In this case it was just shrugged off."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.