Cumulus Media flexes down pricing; Revlon loan trades up as bonds fall; market has better tone Friday

By Paul A. Harris

St. Louis, June 2 - The leveraged loan market saw a better tone Friday trailing weakness that lasted through much of the month of May.

Sources saw positive moves in the General Motors Corp. revolver as well as in the Georgia-Pacific Corp. term loan.

And news that Revlon, Inc. will take a powder with regard to its previously planned equity offering and debt refinancing sent its junk bonds tumbling. But the bank loan paper traded higher.

In the primary market, meanwhile, Cumulus Media Inc. flexed the pricing of its $750 million term loan, as the forward calendar continued to take shape.

A market source who spoke well before mid-day New York time said that the bank loan market was soft throughout May and more recently has been moving "more or less sideways."

The source said that names in the Libor plus 150 basis points context and below have tended to trade below par, while those in a Libor plus 175 basis points context, generally speaking, are right around par.

"A lot of the new issue deals are getting priced at the margin," the source said, adding that right now there is quite a bit of cash on the sidelines awaiting clarity on interest rates, as much as anything else.

"The deals getting done in the primary right now are pretty aggressive," the source said, adding that as spreads among existing issues have widened slightly because "in the primary they are squeezing these deals to the point where they are actually being priced very correctly."

Hence, the source said, the new issues traded at par so that investors "who come in on the flip" are not finding any buyers above par.

Nevertheless, the source said, CLO issuance remains strong and economic fundamentals remain healthy.

Cumulus Media flexes

As an example of the current "aggressiveness" in the primary market, the source pointed to Cumulus Media's $750 million term loan (Ba3/B), and said that the pricing had been flexed down by 25 basis points to 200 from 225.

Later another market source confirmed hearing that pricing move.

The deal also has a revolver at Libor plus 225 basis points, the size of which remains to be determined.

Recommitments were due on Friday.

Bank of America and Wachovia are leading the stock repurchase deal from the Atlanta-based radio company.

The source said that the Cumulus price flexing was notable in that it's a "three-B deal," making reference to the credit rating, and added that the company's leverage is eight times.

From bank to bonds

Meanwhile a source from an account active in both bank loans and high-yield bonds agreed that there is considerable cash on the sidelines that might, in other circumstances, be put to work in bank loans.

This source added that there is the sense that some of the money in the bank loan market is going to the bond market "because the bond market has cheapened up quite a bit."

This source, speaking at late morning, said that the tone in the leveraged loan secondary market was definitely better Friday with everything up about one quarter of a point.

Revlon bonds tumble, loan up

During the afternoon a trader said that the focus of the day was Revlon, Inc.

On Friday morning the cosmetics company issued a press release announcing that it was making a downward revision to its 2006 growth projection, reflecting less robust growth from its Vital Radiance and Almay brands due to stepped up competition.

The release also made reference to "less effectiveness from certain of the company's revenue-driving actions."

Revlon now expects adjusted EBITDA will be at or below 2005 levels, with a significant impact on the second quarter of the current year.

The company also announced that it intends to defer its $75 million equity offering to later in 2006 or early 2007 and will defer the previously announced proposed refinancing of its current credit facility, noting that its existing revolver and term loan expire in July 2009 and July 2010, respectively.

The bank loan trader said that while Revlon's junk bonds were falling significantly trailing the news, the bank debt was actually up. The source spotted the loan paper at 102 bid, 103 offered, whereas it had previously "been wrapped around 102 bid."

"When they were going to come with this new bank deal it appeared that they were going to cut pricing a little bit," the trader commented.

"Now the Libor plus 600 [bps] deal will stay out there, at least for the time being.

"When the rest of the market is trading around 200, and you have this B3/B- paper at Libor plus 600, why not clip the coupon?"

This trader said that the loan market was "pretty quiet across the board" on Friday, but added that "things feel a touch better for the first time in roughly a week, albeit on low volumes."

GM, Georgia-Pacific firmer

The trader said that the Georgia-Pacific term loan B, which had been trading at more depressed levels over the past few days, was seen trading up on Friday, and spotted it at 101.125-plus bid, 101.375-plus offered.

Elsewhere a source said that the GM revolver had crept up over 97, and spotted it at 97.25 bid.

Sources said Friday that the market seems to have taken a positive view of GM chief executive officer Richard Wagoner's recent assertions that a strike by the United Auto Workers against GM's former parts subsidiary Delphi Corp. might be avoided, and that the early retirement buyouts offers to GM's hourly workers appear to be going well.

The pipeline

With regard to the new issue pipeline, sources expect to be busy during the first full week of June.

GBGH is scheduled to launch a $144 million credit facility at a bank meeting on Wednesday, via lead arranger Credit Suisse.

The acquisition-funding loan features a $113.5 million seven-year term loan B talked at Libor plus 500 basis points and a $30.5 million 7.5-year second-lien term loan talked at Libor plus 850 basis points, payable in kind.

Elsewhere the market learned that TransDigm Inc.'s new credit facility (B1/B+) will be sized at $800 million and include a $150 million revolver and $600 million term loan B.

Talk on both tranches is Libor plus 200 basis points. The revolver has a 50 basis points commitment fee.

The bank meeting for the Credit Suisse and Bank of America-led debt refinancing deal is scheduled for Wednesday.

Finally, a source said the bank book is expected to materialize early in the week for Level 3 Communications Inc.'s amended and restated credit facility via Merrill Lynch.

Level 3 is seeking to replace its $730 million senior secured credit facility at lower interest rate.

Supervalu completes acquisition

In follow-up news, Supervalu Inc. said it completed the acquisition of most of Albertson's, Inc., a transaction funded in part by a new $4 billion credit facility (NA/NA/BB).

The purchase included the operations of Acme Markets, Bristol Farms, Jewel, Shaw's Supermarkets, Star Markets and Albertsons banner stores in the Intermountain West, Northwest and Southern California regions.

Supervalu also acquired related in-store pharmacies under the Osco Drug and Sav-on banners.

The acquisition, which included more than 1,100 stores, makes Supervalu the third-largest U.S. supermarket chain by revenues.

Royal Bank of Scotland led the credit facility with Bank of America, Citigroup and Rabobank as the syndication agents, CoBank and US Bank as documentation agents and Credit Suisse, Merrill Lynch Capital, Sovereign Bank and UBS as senior managing agents.

The facility included a $2 billion five-year revolver at Libor plus 150 bps and a 40 bps unused fee, a $750 million five-year term loan A at Libor plus 150 bps and a $1.25 billion six-year term loan B at Libor plus 175 bps. Supervalu is an Eden Prairie, Minn., food wholesaler and retailer.

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