Ocwen keeps falling in secondary; Walter Investment affected; Ortho-Clinical weakens

By Sara Rosenberg

New York, Oct. 22 – Ocwen Financial Corp.’s term loan B continued its downfall in trading on Wednesday in reaction to recent allegations of backdating letters to mortgage borrowers, and, as a result of the current negativity towards the mortgage sector, Walter Investment Management Corp. saw its term loan soften.

Also in the secondary, Ortho-Clinical Diagnostics Inc.’s term loan was touch lower with the release of earnings.

Switching to the primary market, Styrolution (Styrolution Group GmbH and Styrolution US Holding LLC) raised pricing on its term loan and modified the original issue discount.

Ocwen down again

Ocwen’s term loan B weakened in the secondary on Wednesday to 93½ bid, 94½ offered from 95½ bid, 96½ offered as investors continued to react to news that the company is being investigated by the New York Department of Financial Services for backdating borrower correspondence, according to a trader.

On Tuesday, the Department of Financial Services sent a letter to Ocwen saying that potentially hundreds of thousands of letters to borrowers may have been incorrectly dated, which likely caused those borrowers great harm.

Ocwen’s response was to claim that software errors in its correspondence systems inadvertently caused improperly dated letters to be sent to some borrowers and that it plans to fully cooperate with the Department of Financial Services to address their concerns.

Early this week, prior to the backdating reports, Ocwen’s term loan had been trading in the 98½ bid, 99 offered context.

Ocwen is an Atlanta-based servicer and originator of mortgage loans.

Walter Investment slides

Walter Investment’s term loan was lower in trading, basically in sympathy with Ocwen as the two companies operate in the same sector, a trader remarked.

The term loan was quoted at 93½ bid, 94½ offered, versus prior levels of 94 bid, 95 offered, the trader said.

Walter Investment is a Tampa, Fla.-based asset manager, mortgage servicer and mortgage portfolio.

Ortho-Clinical dips

Ortho-Clinical Diagnostics’ term loan retreated to 98 3/8 bid, 98 7/8 offered from 98 5/8 bid, 99 1/8 offered as the company came out with earnings to investors, according to a trader.

The earnings were privately released, a source added.

Ortho-Clinical Diagnostics is a Raritan, N.J.-based provider of services for screening, diagnosing, monitoring and confirming diseases.

Styrolution reworks loan

Moving to the primary, Styrolution lifted pricing on its €1.05 billion equivalent U.S. and euro five-year covenant-light term loan B (B2/B) to Libor/Euribor plus 550 basis points from talk of Libor/Euribor plus 450 bps to 475 bps and revised the original issue discount to 98 from 99, while keeping the 1% floor and 101 soft call protection for one year intact, a market source said.

A lender call will be held at 10 a.m. ET on Thursday to discuss the revised structure and terms of the debt financing and a trading update, recommitments are due at 1 p.m. ET on Oct. 29 and allocations are expected on Oct. 30, the source continued.

Barclays and J.P. Morgan Securities LLC are the joint global coordinators, with Barclays the left lead on the U.S. tranche and JPMorgan the left lead on the euro tranche.

Styrolution cuts junior debt

Along with the changes to the term loan B pricing, Styrolution reduced its junior debt to a €200 million from €400 million, the source remarked.

The junior debt is a second-lien PIK toggle loan priced at 9½% cash/10¼% PIK with a mandatory PIK feature if net total leverage is more than 3.25 times.

Proceeds from the term loan B and PIK loan will be used to help fund Ineos’ acquisition of BASF SE’s 50% share in Styrolution so that it becomes a wholly owned standalone company within Ineos, and to redeem Styrolution’s existing 7 5/8% senior secured notes due 2016.

The PIK loan is fully subscribed by Ineos Group Holdings.

Also, the €200 million of funds lost through the junior debt downsizing is being compensated for with equity contributed by Ineos AG, the source added.

Styrolution is a Frankfurt-based styrenics supplier.

Magnum Hunter closes

In other news, Magnum Hunter Resources Corp. completed its $390 million credit facility that consists of a $50 million four-year senior secured first-lien reserve-based revolver and a $340 million five-year second-lien term loan (B1/B), a news release said.

Pricing on the term loan is Libor plus 750 bps with a 1% Libor floor, and it was sold at an original issue discount of 97. The debt is callable at par for 18 months, then at 101 for a year and at 102 for another year.

During syndication, pricing on the term loan was increased from Libor plus 500 bps, the discount firmed at the tight end of revised talk of 96 to 97 but wide of initial talk of 98 ½, and the call protection was changed from at par for 18 months, then at 102 for one year and at 101 for the following year.

Credit Suisse Securities (USA) LLC and BMO Capital Markets led the deal that was used to refinance existing debt and for general corporate purposes.

Magnum is a Houston-based oil and gas exploration and development company.

North American wraps

North American Bancard completed syndication of its fungible $25 million tack-on first-lien term loan due May 20, 2021 in line with talk of Libor plus 375 bps with a 1% Libor floor and an original issue discount of 99, according to a market source. The debt has 101 soft call protection through May 2015.

Spread, floor and call protection on the tack-on matches the existing term loan.

Credit Suisse Securities (USA) LLC is leading the deal that will be used to fund the purchase of Electronic Payment Exchange.

North American Bancard is a Troy, Mich.-based merchant acquirer for payment processing.

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