New deals lining up for post-Labor Day despite summer lull

By Paul A. Harris

St. Louis, Mo., Aug. 28 - As was true of Tuesday, market sources employed "D"-words ("dull" and "dead") to describe what they said was a dearth of activity in the pre-Labor Day leveraged loan market. Yet, as was also true of Tuesday, those same sources managed to report activity taking place in both the primary and the secondary.

Veridian Corp. plans to expand the credit facility it closed with its IPO last June. And US Airways appears headed into an approach with its debtor in possession financing.

Both could come during the post-Labor Day week, said one market source.

And one trader reported seeing power paper firm in the secondary, although for all intents and purposes the aftermarket sat becalmed on Wednesday.

Arlington, Va. information and technology firm Veridian will expand the credit facility that it closed concurrent with an IPO in July, according to market and company sources.

The facility will increase to $340 million from $200 million, according to Veridian corporate treasury manager Jody Tran-Le, who added that the refinancing comes as Veridian is acquiring Signal Corp., a privately held information technology, multi-media and engineering and consulting support services provider, for $227 million.

Pricing, maturity and timing remain to be determined, Tran-Le told Prospect News. However one market source said that Veridian could come during the week of Sept. 2.

Wachovia is the lead bank.

The week of Sept. 2 also figures to see the bank meeting for US Airways' $500 million debtor-in-possession credit facility via lead bank Credit Suisse First Boston.

The facility will price at Libor plus 350 basis points and will be split 50-50 between a term loan and a revolver. It will mature Sept. 30, 2003 or upon consummation of a reorganization plan, should that occur earlier.

The Arlington, Va.-based air carrier filed for Chapter 11 bankruptcy protection on Aug. 11.

Meanwhile in the secondary market one trader remarked that a close look revealed a paltry amount of current running through the power sector.

"It's dull as dirt," this source assured Prospect News late in Wednesday's session.

"The only significant trends in the last couple of days are in some of the power names," the source added.

"The AESes and the Calpines have firmed up in terms of bids improving slightly. I think enough time has passed since the original turmoil for the research guys to get their hands on the numbers. People have formed opinions on what these assets are worth.

"That's good news," the trader claimed. "Prior to that there was no bid. So at least the bids are showing up, they're firming up, and they're getting a little deeper.

"A few weeks ago nobody cared. Now a few people care."

On Wednesday when Prospect News requested that sources gaze past the "dead," "dull-as-dirt" Dog Days of late August into the post-Labor Day leveraged loan market, two forecasts emerged: 1) timing could be crucial and 2) pricings are likely to widen.

"There's five deals hangin' out there, if not more, trying to launch during the week after Labor Day," one source said. "Then everybody's going to be trying to stay away from the week of Sept. 11.

"So you probably have three or four or more deals that are going to launch next week. But right now nobody's doing anything."

Another source said that the new paper to come will no doubt face some competition from existing loans in the aftermarket.

"I think people are positioning for a rising rate market in the flow that's coming in the next few weeks," this source said

"I think the spreads of June and earlier are going to be pure history for the rest of the year. I don't think you're going to see double-B names at 275 or 250 for the rest of the year, because people can pick up secondary names cheaper now, and as a result they can get a pretty darn good yield on the names they already know.

"So the new issue has to compete with existing paper that's out there. As a result you're going to have to pry new dollars away from the accounts."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.