Search results for

Graphic Packaging, a Golden Colo.-based manufacturer of food cartons, switched its lead bank from Bank of America to Credit Suisse First Boston and Morgan Stanley for a refinancing of its credit line. Graphic gave B of A an opportunity to bid on the $425 million credit, but Morgan Stanley and CSFB provided better terms, explained Luis Leon, cfo of Graphic. The company is taking advantage of current strong investor appetite in the high-yield markets to refinance all of its debt by putting in place new notes and bank debt, he added, declining further comment on the politics of the switch in lenders. The credit refinances a $325 million, five-year term loan and a $400 million revolver.

U.S. and European hedge funds, both start-ups and established, are starting to make forays into the European high-yield and distressed-debt markets, according to London-based salesmen. "Hedge funds have been monitoring the market for the past four years and are now beginning to step in," says a salesman at Deutsche Bank. "The equity arb desk here has passed me at least 10 new [accounts]. There is undoubtedly a significant increase in interest in European high-yield," adds a salesman at Credit Suisse First Boston. Some are established hedge funds entering the distressed market for the first time and others are start-ups, he says.

High-yield media analysts say investors should not jump to add exposure to television and cable broadcasters following last week's decision by a U.S. Appeals court, which is widely expected to encourage industry consolidation. Steve Schutzman, Salomon Smith Barney media analyst and anInstitutional Investor 2001 All-America Fixed-Income Team second-teamer, suggests investors take gains on Young Broadcasting 10% notes of '11 (B3/B-) and the Sinclair Broadcast Group 9% notes of '07 (B2/B). The Young paper was bid at 97.5 last Wednesday, while Sinclair's bonds were bid at 103. Both companies are candidates for consolidation, but Schutzman says that asset sales do not always benefit bondholders. Young, for example, will use only a fraction of the proceeds from a recent asset sale to reduce leverage. Shutzman says that while junk broadcasters continue to benefit from defensiveness on the part of portfolio managers, current bond prices are higher than huge debt levels and high fixed costs would seem to justify. He declines comment on how low the bonds may trade.

Trading started slow last Tuesday after the holiday, but volume was normal by mid-week. It was a soft week overall, though energy, healthcare, gaming and supermarkets were well bid. Here was other action.

Invesco is working withLehman Brothers on a $300 million collateralized loan obligation comprising roughly half European loan collateral and half U.S.-based collateral as larger leveraged buyouts drive bigger bank deals in the European new issue market. Invesco is still in the process of ramping up the deal and will be looking to close the transaction by the end of next month. "We are beginning to see the European [loan market] maturing. It doesn't have the size or liquidity of the U.S. market, but it has the same type of investment advantage," said Brian Mitchell, product manager at Invesco, explaining why the firm is buying up European collateral.

J.P. Morgan has created a debt capital markets banking position to concentrate solely on the U.K. market and has hired Nick Denman, previously a debt banker at Goldman Sachs, to fill the slot. John Mayne, J.P. Morgan's London-based co-head of DCM Europe and to whom Denman will report, says the position was created to increase the firm's coverage and to respond to the enormous opportunities for sterling-, dollar- and euro-denominated bond issuance in the U.K. market. Mayne says he is not planning any additional hires at the moment, but will continue to monitor the markets closely and respond to growth areas. Calls to a Goldman spokeswoman seeking the name of Denman's replacement were not returned.

Kmart's bank debt climbed last week from a high of 68 two weeks ago to the 70-71 range by last Wednesday withDeutsche Bank rumored to have participated in a $15 million trade on Tuesday. After a strong week, the name dipped slightly to 68 1/2 last Thursday with a $5 million piece trading. Buyers and sellers on Thursday's trade could not be determined by press time.

Lamar Media has drawn down $200 million from an incremental facility instead of its $350 million revolver to take advantage of the option while it was still available. The provision for the incremental facility, written into an original $1.4 billion credit facility, affords the company access to a total of $400 million at the discretion of the bank group. The company wanted to secure $200 million of the incremental facility now because it could not be guaranteed access to the funds later, explained Keith Istre, cfo of Lamar. He declined to be specific about why the line may not be available to the company in the future. The company will use the $200 million to support current and future acquisitions.

Royal London Asset Management, which manages £7 billion in fixed-income assets, will launch a high-yield fund in the second half, specializing exclusively in European credits. Andrew Carter, cio, says the launch is a response to market demand as investors are expressing an interest in venturing down the credit rating spectrum. Jonathan Platt, head of fixed-interest investment management, will run the new fund. Currently, the firm manages only an undisclosed "small amount" of high-yield assets and the size of the new fund should be about £25 million. The fund will invest in sub-investment grade credits, illiquid debentures, crossover credits and some investment-grade debt. Separately, the firm is looking to hire a fixed-income portfolio manager to replace Paul Doran, who has moved over to head the quantitative team concentrating on equities.

ABN Amro is not trading European high yield since the members of its approximately 10-strong London-based high-yield team have either left the firm or joined other departments, says one its former analysts. The group was integrated into the firm's leveraged finance unit last month (BW, 1/28). Vincent Keith, head of high-yield trading, and Ray Stotlemeyer, head of high-yield research, have both resigned, the analyst says. Members of the team were given the option of a severance package or reassignment. "[ABN is] not trading high yield," he says, adding that eventually high-yield sales and trading will be migrated to other fixed-income desks. Alex Evans, an ABN spokesman, denied the firm had suspended trading high yield--even temporarily, however other market players say the firm's absence is hardly noticeable.

Fitch Ratings has downgraded AES' senior unsecured debt to BB from BB+ due to a limited liquidity schedule in the face of high leverage. The company will need to reconcile the near-term maturities on $300 million in bonds, an $850 million revolving credit facility, and a $425 million bank loan in the next 12 to 18 months, said Mona Yee, Fitch analyst. Fitch supports the company's plans to sell some of its assets in 2002, noting such a move would improve its situation. "Unless they can sell the assets, they will be working with a very tight rope," said Yee.

Jason Kravitt, partner with Chicago-based law firm Mayer Brown & Platt, and one of the three founding members of the recently formed American Securitization Forum, says his association is likely to appoint an executive committee next week, during its last organizational-stage meeting. The number of future members and its classification by trades between issuers, underwriters or other groups, such as rating agencies, is still subject to change, according to Vernon Wright, acting chairman for the forum and senior vice-chairman with MBNA America. He says the committee currently comprises 27 professionals, with 11 issuers, eight investors, five investment bankers and three rating agency analysts. George Miller, senior v.p and deputy general counsel with the Bond Market Association, the group that initiated the creation of the new securitization forum, did not return calls. Founding member Greg Medcraft, managing director and head of securitization for Société Générale, was travelling and unavailable for comment.