Michael Foods readies deal for next week; LCDX 12 trades 85 bps higher; GM term loan soars

By Paul A. Harris

St. Louis, April 16 - The LCDX 12 index rose 85 basis points to close Thursday at 80.60 bid, 80.85 offered, according to a trader.

The afternoon was quiet, with market participants out watching the Cleveland Indians count coup upon the New York Yankees, who lost 10-2, the source said.

Michael Foods Inc. was heard to be readying a deal with which it will attempt to raise up to $550 million of proceeds in a credit facility that will formally launch next week.

Meanwhile General Motors Corp.'s term loan soared 10 points from the low 50s into the 60s as word spread that the ailing automaker will attempt to trade the bondholders into stock - a move that could enhance the value of the loans.

"The tones in both the loan market and the bond market have been positive," a bank loan syndicate source said Thursday afternoon.

As loans trade closer to par, CLOs are beginning to get something of a cushion with respect to their collateralization tests, the official said, adding that a lot of the lower triple-B rated credits are lately trading up 10 or 15 points.

"They were trading around 50. Now they're trading around 60 or 65."

Michael Foods next week

Michael Foods will attempt to raise $525 million to $550 million of proceeds with a credit facility that will formally launch next week, according to a market source.

Bank of America is lead arranger for the deal, which is believed to have been the subject of some pre-marketing activity, the source added.

The deal is comprised of a revolver and a term loan A, both expected to come at Libor plus 400 basis points, and a term loan B expected at Libor plus 450 bps.

All three tranches are expected to have a 2% Libor floor.

The issuer is a Minnetonka, Minn.-based food processor and distributor.

Characterizing the Michael Foods deal as more of a "middle-of-the-fairway" play than the market has seen in a while, a banker asserted that its execution will provide a good data point.

"A lot of the existing lenders are going to participate in the financing, the banker added.

"I think it's a good credit, and will go well."

GM sharply higher

News reports that GM proposes to swap out $27.5 billion of bond debt for equity by the end of the month sent the automaker's term loan paper sharply higher on Thursday, a trader said.

The GM term loan ended the day 58 bid, 60 offered, up from 51 bid, 53 offered on Wednesday.

"It jumped up a lot," the trader said.

The more bond debt that the company can exchange into stock, the better it is for the term loan holders, the trader said.

The GM term loan traded as high as 60 bid, 62 offered during the Thursday session, another source said.

Levels on GM's bonds seem to bear out the trader's contention.

GM's 8 3/8 notes due 2033 closed at 8 bid, 9 offered, unchanged on the day, according to a hedge fund manager.

TNS firms in trading

Meanwhile TNS, Inc.'s downsized $230 million term loan, which allocated on Wednesday and broke to 91 bid, 92 offered, was seen at 93 bid late Thursday, according to a loan syndicate source.

The deal, which was two- to 2.5-times oversubscribed, had traded as high as 93 bid, 94 offered in Wednesday trading, according to a market source.

The company used cash on hand to supplant the $20 million downsizing of the loan to limit its exposure to the OID.

Las Vegas Sands active

Elsewhere in the secondary, Las Vegas Sands' term loan was active on news that the company received approval for a term loan buyback.

A trader marked the paper 56 bid, 57½ offered, stronger on the day.

Another source had the paper at 54.93 bid, 56.57 offered, up 0.09 on the day.

News that AbitibiBowater Inc. filed for Chapter 11 bankruptcy protection saw its term loan B due 2009 trade down ¾ point to 69 bid, 713/4, according to a market source.

However news that General Growth Properties filed for bankruptcy on Thursday and secured $375 million of DIP financing sent its term loan A due 2010 higher by 3 points to 21½ bid, 23½ offered.

Finally Spectrum Brands Inc.'s term loan B1 due 2013 was up 0.15 to 75.95 bid, 77.70 offered, as news spread that the company has received approval for the disclosure statement in its plan of reorganization.

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