LCDX climbs more than a point; Chester Downs price talk heard; BRSP swoops, then recovers

By Paul A. Harris

St. Louis, July 15 - The LCDX index finished the Wednesday session at 88.50 bid, 88.75 offered, up 1.10 points on the day, according to an investor.

Cash loans finished the day ¼ point higher, a trader said.

Chester Downs price talk circulated the market.

And news was heard on the Nuveen Investments Inc. deal.

Chester Downs talk

Chester Downs set price talk for its $230 million Libor plus 900 bps seven-year secured term loan (B3/B) at the 14% area, according to a market source.

The loan will be offered to investors at an original issue discount which remains to be determined.

It features a Libor floor of 3%.

Citigroup, Bank of America, JPMorgan and Jefferies are the joint leads on the deal, with Citi the left lead.

The loan includes an incurrence-based high-yield covenant package.

Amortization is based on the company's total leverage ratio. If leverage is 3.25 to 1.00, then amortization is 7.5% per annum. If leverage is less than or equal to 3.25 to 1.00 and greater than 2.50 to 1.00, then amortization is 3.5% per annum. And, if leverage is less than or equal to 2.50 to 1.00, then amortization is 1.0% per annum.

Security is substantially all of the assets of the company.

Proceeds will be used to refinance existing debt and purchase partnership interests.

Too soon in cycle

A buy-side source who took a look at the Chester Downs deal said that as tempting as all that yield might be, the deal comes too soon in the present business cycle.

The loan does not have a cross-default with Harrah's operating company, the investor remarked, but added that Chester Downs does not seem any more bankruptcy-remote because of the absence of a cross-default.

"That bank book appeared to have been hastily put together, and looked more like advertising copy than a bank book, which was a turn off to me," the source commented.

Nuveen extends deadline

Amendment changes to Nuveen Investments Inc.'s $350 million six-year second-lien term loan moved the commitment deadline back to 2 p.m. ET Thursday, according to an informed source.

The former deadline was Wednesday.

Investors rejected an amendment that would have allowed the company to peg the deal to one-month Libor or two-month Libor. It will remain set to three-month Libor.

Investors also rejected an amendment that would have allowed the company to execute a subpar buyback of the first-lien loan.

In addition, all net proceeds above $222 million will be used to repay Nuveen's first-lien loan. The $222 million amount will be escrowed in an account earmarked for the purpose of taking out the company's 5% notes due 2010.

The official deal size remains at $350 million, however it has the potential to grow, the official said.

Earlier in the week several market sources told Prospect News that the deal was upsized to $500 million.

Deutsche Bank is leading the deal with bookrunners Bank of America, Wells Fargo and Morgan Stanley.

The indicative coupon on the second-lien term loan is a fixed rate of 12.5% with an original issue discount of 90, which puts it a spot over a 15% all-in yield, officials remarked.

The second-lien loan is non-callable for two years, then at 106 in year three and 103 in year four. There is also a 101 put in the event of a change of control.

Lenders will be paid a 50 basis point amendment fee.

Nuveen is a Chicago-based seller of investment products.

Structured to please

The buy-side source said that the Nuveen deal is going very well.

Despite the official line that the deal remains sized at $350 million, this investor also expressed the belief - as have other sources throughout the week - that it will upsize to $500 million.

Nuveen's first-lien is trading up in the wake of the second-lien deal doing very well, the investor commented.

The loan will render a junk bond-like yield, but will be positioned higher in the capital structure than the company's existing bonds.

It is apt to appeal to bank loan managers who want to reach for price and yield and high-yield managers who want to move up in quality without giving up much yield, the investor remarked.

BRSP and CIT

The existing term loan of BRSP LLC received the shock treatment on Wednesday when Standard & Poor's lowered the rating on the company's $290 million senior-secured term loan due 2014 to CCC+ from BB-.

The deal, which priced at 94.00 in June, and subsequently traded to 98.00, fell all the way back to 94.00 in early Wednesday trading, according to an investment banker.

The reason, said the trader, is that BRSP is not ringfenced from its parent, troubled commercial lender CIT Group. Hence BRSP's ratings can't be higher than CIT's.

Later in the Wednesday session, however, loan investors appeared to be taking a different view, as the BRSP loan recovered to 96½ bid.

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