LCDX closes lower; Mobilitie downsizes bank deal; Paetec add-on eases in secondary

By Paul A. Harris

St. Louis, Jan. 25 - Volatility held sway in the leveraged loan market on Friday with the LCDX index closing lower on the day at 94.30 bid, 94.45 offered after a morning rally which saw the index streak 40 basis points higher from Thursday's close, peaking at 95.10 bid, 95.30 offered.

Cash loans moved higher by as much as a point during Friday morning's rally, sources said. However at the end of the day an investment banker commented that while the "market was on fire" in the morning it cooled significantly toward the close.

"The loan market has been lagging the rally in the rest of the capital markets a little," a syndicate official said late Friday afternoon.

"Right now there are a bunch of banks on the sidelines that just don't want to do anything.

"Until the [LBO-related] overhang is sorted out things are going to remain volatile."

Mobilitie downsizes

The primary market produced very little news on Friday.

Mobilitie Investments II, LLC, downsized to $425 million from $600 million its six-year credit facility, and revised the pricing.

The delayed draw term loan was cut to $375 million from $500 million. Meanwhile the revolver was reduced to $50 million from $100 million.

Pricing was revised to Libor plus 275 bps from 225 bps. The unused fee was increased to 100 basis points from 50 bps.

The deal is expected to close during the Jan. 28 week.

GE Capital and TD Securities are the lead arrangers.

Elsewhere a money manager told Prospect News that the Harrah's Entertainment Inc. $3 billion Libor plus 300 bps term loan tranche, which is being offered at a discount of 96.50, remains in the market but there has been no news on the deal for the past couple of days.

"They're out on the road talking to people," said the money manager, who has seen the offering.

"There's a lot to like about the company, but the market is tough right now."

The money manager added that early on high yield bond accounts took an interest in the loan. However, the source added, there were far fewer of these than would be required to get the deal done.

Other sources told Prospect News on Friday afternoon that the Quebecor World Inc. $600 million term loan via Credit Suisse and Morgan Stanley is going well and is oversubscribed.

The term loan, which is talked at Libor plus 375 bps, is part of an overall $1 billion 18-month debtor-in-possession financing. It also includes a $400 million revolver talked at Libor plus 225 bps.

Paetec add-on eases

Sources said that on Thursday and well into the Friday session bank loans rallied.

However the last market source to speak to Prospect News on Friday evening commented that the market faded at the end of the day.

"The cash market was on fire in the morning, but it cooled down," said the source.

"A lot of stuff was quoted up, but not a lot of trades actually happened.

"There was definitely an improvement in the marks, but not a lot of action behind that."

The Paetec Holding Corp. $100 million add-on to its Libor plus 250 basis points incremental term loan B, which priced at 94.50 on Thursday, via Merrill Lynch and Deutsche Bank, seemed to be holding in through the morning, but it also faded as the final day of the final full week of January 2008 wound down.

The deal, which came at a deeper discount than the 96.00 to 96.50 price talk had envisioned, was seen at 94.50 bid, around noon.

The source who gave that spot added that "somebody tried to show a market 93.50 bid, 94.50 offered on Thursday, but I don't think anything happened."

At the close a source spotted the Paetec loan at 94 bid, 95 offered.

Overdone

A money manager told Prospect News on Friday that the "disaster in the financial markets" headlines are being way overplayed.

"I saw a Merrill Lynch strategy piece with a headline that read 'Nuclear Winter,' the institutional investor complained.

"This seems like a normal slowdown-slash-recession to me.

"If this is nuclear winter I pity us when something really bad happens."

The money manager added that the U.S. economy has been so good for so long that people are simply over-reacting, in part due to fear of the unknown.

"It seems like fears of a major economic meltdown, due to monolines, or whatever the fear-of-the-day is, are just all wet," the source said.

This investor went so far as to imply that the Federal Reserve Bank may have gotten caught up in the drama.

The source recounted a story that coursed through the markets throughout the week-that the Fed made its dramatic 75 basis points cut to the Fed Funds rate in response to mega-sell offs in the world stock markets following news that a futures trader at France's Societe Generale made over $7 billion in fraudulent trades.

"I would be surprised if that story is completely wrong, given how far it has traveled," the money manager said, adding: "Strategists have started to cut their expectations for a rate cut at next week's FOMC meeting to 25 basis points from 50 basis points, based solely on this rumor.

"So there must be something there."

This money manager went on to assert that such a scenario is far from implausible, given that stock investors are "overassuming that price means something.

"That's a major change in the world over the past few years," the investor bristled.

"There are a lot more people who look at price and, assuming that markets are efficient, conclude that the price is telling them something.

"They're not necessarily doing their own work.

"When more and more of the market behaves that way it starts to look like a self-fulfilling prophecy.

"If Soc Gen started dumping equities, and all the people who just look at price and react saw that, you get the kind of action that you saw on Monday.

"And maybe the Fed saw the way stock markets around the world were reacting and concluded it had to restore order around the world."

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