MGM plans $6 billion loan; new loans trade higher on strong demand

By Paul A. Harris

St. Louis, Oct. 1 - The leveraged loan market looked up on Friday to see MGM Mirage coming with a $6 billion credit facility that includes a $1.5 billion term loan.

Elsewhere in the market traders said that most of the recent issues are getting a healthy bid in the secondary.

However apart from fat bids on new issues, the holders of Atkins Nutritionals' first- and second-lien loans found themselves tightening their belts on Friday, following a Thursday lender call in which the company announced disappointing numbers and told investors it had dipped into its revolving credit facility.

MGM Mirage $6 billion

MGM Mirage is expected to hold a bank meeting during the week of Oct. 4 for a $6 billion credit facility, according to a market source.

Bank of America and The Royal Bank of Scotland are leading the deal, the components of which will be a $4.5 billion revolver, as well as a $1.5 billion five-year term loan A which is expected to be non-callable.

The market source, specifying that the deal is expected to come with credit ratings in the double-B range, said it will be a low margin play, with pricing expected to come around Libor plus 175 basis points.

The Las Vegas-based gaming company will use the proceeds to fund the acquisition of Mandalay Resorts Group, which is expected to close by the end of the first quarter of next year.

The Mandalay acquisition figures to make MGM Mirage less dependent upon its high end Bellagio property, a market source said, adding that MGM Mirage will also pick up more vacant land in Las Vegas just as the market for property on the strip is booming.

"Back when I thought gaming was pretty solid and safe, you could get MGM and Caesars at 350 or 400 off," one buy-sider quipped, mulling the expected pricing of MGM Mirage's institutional tranche.

"Now we're talking 175!"

Wastequip taking $155 million plunge

Elsewhere Friday, Cleveland-based manufacturer of equipment for the waste management industry Wastequip Inc. was heard to be in the market with a $155 million credit facility, via Key Bank.

The facility will be comprised of a $100 million term loan that is expected to price at Libor plus 375 basis points and a $55 million revolver.

Proceeds will be used to help fund the purchase of assets from McClain Industries Inc.

Sterling Heights, Mich.-based McClain manufactures baling equipment, transfer trailers, sludge and detachable roll-off containers, compactors, and bodies for garbage and recycling trucks.

New paper still trading up

Citing the recent loans from Graham Packaging Co. and Jostens IH Corp., traders told Prospect News on Friday that there has been a tendency for new paper to tick up purposefully in the aftermarket.

"The institutional buyers out there are realizing that they are coming to the end of the year and there is not an enormous amount of new issue flow," one trader said. "They're starting up new funds, with no way to fill them.

"At the same time they're getting their contractual paydowns and are looking to put that money to work."

For example, the trader said, the Jostens IH Corp. institutional paper is trading in a 101 bid, 101.5 context.

The $870 million tranche, led by Credit Suisse First Boston as sole lead arranger with Deutsche Bank and Bank of America as co-syndication agents, was priced at Libor plus 250 basis points.

The facility also includes a $250 million five-year revolver at Libor plus 250 basis points with a 50 basis points commitment fee and a $150 million six-year term A at Libor plus 250 basis points.

Elsewhere the new Graham Packaging Co. LP $350 million second-lien term C priced at Libor plus 425 basis points was seen at 102 bid, 103 offered.

Meanwhile the $1.45 billion term B was at 101 bid, 101.5 offered.

"There is definitely a better bid out there," one trader commented.

"Even the stuff with the small coupons - 225, 250 - they're all trading up above 101, even with no call protection.

"It's pretty solid."

Meanwhile a buy-side source told Prospect News that the current levels of strength among new issues is a more recent phenomenon.

"In general the secondary market has been surprisingly strong for the last five days," the investor continued. "A lot of deals are breaking at pretty good prices.

"For a couple of weeks at the end of August things were breaking par-and-a-quarter, par-and-a-half. But over the past five days everything seems to have been breaking at 101 or better."

Atkins drops in secondary

Meantime Atkins Nutritionals, which has met with resistance from schools where it has been proposing to help kids cut the carbs and has also been facing increased competition, posted disappointing numbers in an investor call Thursday, according to one trader, who added that the company also disclosed that it had dipped into its revolver.

The trader saw the company's first-lien tranche at 75 bid, which is down from 85 within the past week, the trader said.

Meanwhile the trader saw the second-lien loan at 56 bid Friday, after having been as high as 77 during the past week.

Another trader had the Atkins first lien at 74 bid, 76 offered and the second lien 55 bid, 60 offered, both "down 10 points or so."

The Atkins move, traders added, represented the most dramatic movement in Friday's market.

Pushback on Mediacom

Elsewhere Friday a buy-sider reported that the Mediacom LLC 500 million 81/2-year term B succumbing to pricing pressure on the heels of Standard & Poor's Thursday move to cut the company's corporate credit rating to BB- from BB.

S&P cited concerns about the Middletown, N.Y. cable TV company's loss of subscribers and competition from satellite television companies.

"Mediacom has been out there for a while doing their deal, which is a refinancing and repricing at the same time," the investor explained.

"Mediacom has been slammed by satellite for a while now. They came and tried to push the pricing down to 200 from 250, on a simplified structure, and the market pushed back.

"It's starting to fell more like 225 at this point. That's lower than 250, but I think it says something about the strength of the market."

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