JANUARY 16, 2006 VOL. II, NO. 2 COLLINS & AIKMAN BONDS TUMBLE ON SPECULATION OF J.V. BREAK-UP Georgia/Koch Deal Collins & Aikman bonds fell seven points on fears that the proposed joint venture between Launches Lear Corp. and WL Ross & Co., which would combine Lear Corp.’s European interiors The Georgia-Pacific/Koch Deal, which came to market last Tuesday, contains business with Collins & Aikman’s European business, would fall apart. Collins & Aikman’s the largest term loan “B” and second- 10.75% ’06 bonds fell to 39.75. lien tranche ever. Investors’ concerns that Lear would pull out of the joint venture were sparked by an 8K See story, page 3 the company filed with the Securities and Exchange Commission in which it said it would take an additional $342 million impairment charge in the fourth quarter of 2005 for its interior products division (see story, page 6). Primary Market UAL Exit Financing Comes To Mart 3 During an investors’ meeting at the Detroit Automotive Conference in Dearborn, Mich., Deluxe Reworked 3 (continued on page 11) People & Firms Take Two Leveraged Finance Vets Launch Lending Co. 4 SOCIÉTÉ GÉNÉRALE RELAUNCHES U.S. LEVERAGED Barclays Increases Structured FINANCE BIZ Products Team 5 Société Générale is ramping up a leveraged loan effort in the U.S. after more than a four- Trading year absence and is looking to assemble a team of about 10 in the next two or three months. Hallmark Breaks Above Par 5 One of those hires is expected to be an established managing director from the U.S. Visteon, Lear Trade Down 6 leveraged loan market, according to Rene de Laigue, global head of leveraged finance. The bank is looking to build a franchise in the middle market, focusing on the private Investment Strategy equity relationships the European business has developed. Guillaume Dovillers, director in Manager Backs Off New Issue Corps. 6 leveraged finance, was brought over from London to lead the effort. He had been working in the U.K. and helped launch the business in the Italian markets. Additionally, Marco Structured Credit (continued on page 12) BMA Anticipates Increase In CDOs 7 Charts I-GRADE CDS CATCHING FIRE AFTER Secondary Marketplace 7 Weekly Credit Advancers/Decliners 9 S&P CHANGES MODEL Yield Curves 9 Banks are hustling to ramp up portfolios of investment-grade credit-default swaps after a Search Directory 10 change in Standard & Poor’s methodology injected value into higher-rated tranches of collateralized debt obligations. The alteration by S&P means dealers can pay higher returns COPYRIGHT NOTICE: No part of this publication may be copied, photocopied or duplicated in any form or by on senior tranches, with one arranger noting a jump to 100 basis points from 40-50 bps in any means without Institutional Investor’s prior written December. “Higher rated portfolios now require less subordination so they can pay more consent. Copying of this publication is in violation of the Federal Copyright Law (17 USC 101 et seq.). Violators spread,” a structurer told Derivatives Week, a CIN sister publication. may be subject to criminal penalties as well as liability for substantial monetary damages, including statutory S&P has decreased the assumed probability of default on investment-grade names, and damages up to $100,000 per infringement, costs and a report by analysts at The Royal Bank of Scotland say they expect a surge in the number attorney’s fees. Copyright 2006 Institutional Investor, Inc. All rights reserved. ISSN# 717-5030 of investment-grade CDS portfolios as a result. In conjunction, the agency increased the For information regarding subscription rates (continued on page 11) and electronic licenses, please contact Dan Lalor at (212) 224-3045. For breaking news throughout the week, head to www.creditinvestmentnews.com—free for subscribers Credit Investment News www.creditinvestmentnews.com January 16, 2006 At Press Time White Birch Receives Funding EDITORIAL PUBLISHING Credit Suisse First Boston launched syndication of $130 million financing for TOM LAMONT ELAYNE GLICK Editor Publisher White Birch Paper Co. to partially back the acquisition of the Quebec company, (212) 224-3069 STEVE MURRAY Papier Masson Ltée. The financing consists of a seven-year, $89 million term Deputy Editor DAVID HOM Associate Marketing Manager loan “B” priced at LIBOR plus 3 1/4% and a eight-year, $41 million second-lien KRISTEN HAUNSS (212) 224-3896 Managing Editor term loan priced at LIBOR plus 7 1/2%. A spokesman for the company could (212) 224-3990 VINCENT YESENOSKY Senior Fulfillment Manager not be reached. KIM MOORE Reporter SUBSCRIPTIONS/ Papier Masson is a low cost producer of newsprint with an annual production (212) 224-3277 ELECTRONIC LICENSES capacity of about 234,000 tons on one paper machine. White Birch is one of the SEAN O’LOUGHLIN One year - $2,475 (in Canada add $30 postage, others outside U.S. add $75). largest newsprint producers in North America with an annual capacity of about Associate Reporter (212) 224-3027 DAN LALOR 1,000,000 tons of newsprint and directory paper, according to the company. BMO STANLEY WILSON Director of Sales (212) 224-3045 Nesbitt Burns acted as the financial advisor to Papier Masson and TD Securities and Washington Bureau Chief (202) 393-0728 KEN LERNER CSFB acted as financial advisors to White Birch. JANA BRENNING, KIERON BLACK Account Executive (212) 224-3043 Sketch Artists TOM GANNAGÉ-STEWART Account Executive [London] Parties Sign Up To Cash Settle Calpine PRODUCTION DANY PEÑA (44 -20) 7779-8998 CDS Index Trades Director LYNETTE STOCK, DEBORAH ZAKEN REPRINTS DEWEY PALMIERI Reprint & Permission Manager A total of 323 parties signed up to the Calpine credit default swap protocol Managers (212) 224-3675 email@example.com designed by the International Swaps and Derivatives Association to cash settle MICHELLE TOM, ILIJA MILADINOV, MELISSA ENSMINGER, CDS index trades. Parties had until last Thursday to sign up to the program. An BRIAN STONE, JAMES BAMBARA CORPORATE Associates CHRISTOPHER BROWN auction will be held tomorrow to determine a final settlement price. JENNY LO Chief Executive Officer Web Production & Design Manager The number of adherents was significantly smaller than the 571 that signed up to DAVID E. ANTIN MARIA JODICE Chief Operating Officer the Delphi CDS protocol. A spokeswoman for ISDA said that fewer signed up to the Advertising Production Manager ROBERT TONCHUK (212) 224-3267 protocol because the association allowed investment managers to sign up, rather than Director/Central Operations & Fulfillment Customer Service: PO Box 5016, requiring individual funds within an investment management firm to adhere. The ADVERTISING Brentwood, TN 37024-5016. JONATHAN WRIGHT Tel: 1-800-715-9195. Fax: 1-615-377-0525 spokeswoman said that based on the number of entities within each fund that signed Advertising Director UK: 44 20 7779 8704 up to the Delphi protocol, the truer number of adherents would have been closer to (212) 224-3566 firstname.lastname@example.org Hong Kong: 852 2842 6910 E-mail: email@example.com 500 had the association required individual funds to sign up. PAT BERTUCCI, ADRIENNE BILLS, Editorial Offices: 225 Park Avenue South, PHILIP COX, MAGGIE DIAZ New York, NY 10003. A source familiar with the protocol said that Calpine may also have fewer Associate Publishers Tel: 1-212-224-3990. Email: firstname.lastname@example.org adherents because it is a less liquid name than Delphi. “Calpine was no way as Credit Investment News is a general near as big an event as Delphi,” he said. He added that in comparison to Delphi, circulation newsweekly. No statement in this issue is to be construed as a Calpine is less prevalent in collateralized debt obligations. “Calpine was not as recommendation to buy or sell securities or to provide investment advice. popular in CDOs. The name was not as liquid.” Credit Investment News ©2006 The Calpine protocol also excludes Calpine’s 7.75% ’15 convertible notes – an Institutional Investor, Inc. ISSN# 717-5030 aspect that may have discouraged parties that own these bonds from participating Copying prohibited without the permission of the Publisher. in the protocol, said the source. The protocol explicitly excluded these bonds because they contain unusual provisions that make them subordinate to senior unsecured debt. Tell Us What You Think Questions? Comments? Criticisms? Do you have something to say about a story that appeared in Credit Investment News? Or is there information you’d like to see published? If you have some news to dish our or have a new business strategy or hire you want to crow about, give us a call. Managing Editor Kristen Haunss can be reached at 212-224-3990 or email@example.com. 2 Copying prohibited without the permission of the publisher. January 16, 2006 www.creditinvestmentnews.com Credit Investment News Primary Market Georgia-Pacific/Koch Deal bankers at Citigroup and GE Capital were not returned. A spokesman at UAL declined comment, as did a spokesman at Hits Market JPMorgan. The $21 billion credit backing the acquisition of Georgia-Pacific Corp. by Koch hit the market last Tuesday. The underwriter of the $11 billion in loans is Citigroup. JPMorgan and Deutsche Deluxe Gets Reworked Bank are the joint bookrunners on the deal (CIN 1/9). The The deal backing the leveraged buyout of Deluxe Film by financing consists of a five-year, $1.5 billion revolver; a five-year, MacAndrews & Forbes Holdings from The Rank Group was $2 billion “A” term loan; a seven-year, $5 billion “B” term loan reworked last week. The five-year revolver was increased from and an eight-year, $2.5 billion second-lien loan. Koch is $125 million to $150 million, raising the total value of the deal acquiring Georgia-Pacific for a total of $21.2 billion, which to $758 million. Additionally, pricing on the revolver and includes cash and the assumption of assumed or refinanced debt. $458 million term loan “B” dropped from the LIBOR plus Pricing on the revolver, term loan “A” and term loan “B” is 4-4 1/4% range down to LIBOR plus 3 3/4%. Credit Suisse set at LIBOR plus 2 1/4%. The second-lien loan is priced at First Boston and Bear Stearns are leading the deal. A $150 million second-lien term loan priced at LIBOR plus 8 1/4%, was LIBOR plus 3 1/2%. The deal is set to close around the end of marketed before the holidays and not available to investors this January. go-around (CIN, 1/9). Headquartered in Atlanta, Georgia-Pacific is one of the Deluxe Film is the world’s largest distributor of trailer and world’s leading manufacturers and distributors of tissue, pulp, release prints for the motion picture industry as well as the paper, packaging, building products and related chemicals. They industry’s biggest processor of 35 mm film. Officials at Bear employ over 55,000 workers in 300 facilities throughout the Stearns and CSFB declined to comment. Calls to Deluxe and U.S., Canada and 11 other countries. Calls to Georgia Pacific MacAndrews & Forbes were not returned. and Koch were not returned. A Citigroup spokesman was unavailable for comment. JPMorgan and Deutsche Bank spokesmen declined comment. Hilton Acquisition Financing Comes To Market UAL Exit Financing Launches The $5.5 billion deal backing Hilton Hotels’ acquisition of Syndication of the exit financing for UAL Corp., the holding Hilton Group PLC came to market last Tuesday. The deal will corporation for United Airlines, launched last Monday. The loan unite the two Hilton brands that split in the 1960s and will allow comprises a six-year, $300 million revolving credit facility and a Hilton Hotels, which operates primarily in the U.S. and Canada, six-year term loan that has the potential to be worth as much as to become a global hotel business. The merger will create the $2.7 billion. Both tranches are priced at LIBOR plus 4 1/2%. largest hotel company in the world in terms of revenue. The financing is being led by JPMorgan and Citigroup. GE The Bank of America and UBS-led credit comprises a five- Capital is the syndication agent on the deal, which is scheduled year, $2.75 billion revolver; a five-year, $2 billion term loan “A” to close at the end of the month. and a seven-year, $750 million “B” term loan. The pricing on the Standard & Poor’s placed a B+ rating on the both the revolver revolver and term loan “A” is LIBOR plus 1 1/2%, while the and the term loan. Additionally, S&P assigned a recovery rating term loan “B” has pricing of LIBOR plus 1 5 /8%. The deal is of 1 to the facility. S&P anticipates assigning a corporate rating solely for the hotel operations of Hilton Group. The British of B to both United and UAL following the company’s company will then change its name to Ladbrokes PLC and emergence from bankruptcy. Moody’s Investors Service placed a switch its focus to its betting operations, which are prevalent rating of B1 on UAL’s exit loan. throughout Europe. United entered Chapter 11 bankruptcy protection in The reorganized Hilton Hotels business will comprise December 2002. A bankruptcy hearing is scheduled for this almost 2,800 hotels throughout 80 countries. Brands will Wednesday and if approval is granted, United plans to emerge include: Conrad, Doubletree, Hampton Inn, Hilton Garden from bankruptcy around Feb. 1. As the second largest U.S. Inn, Homewood Suites by Hilton and Hilton Vacations carrier behind American Airlines, United has struggled with Club, as well as the flagship hotel. A spokeswoman at Bank of its business since 2001 as a result of high fuel prices and America declined comment. Calls to Hilton and UBS were cheaper ticket prices from non-legacy airlines. Calls to not returned. Copying prohibited without the permission of the publisher. 3 Credit Investment News www.creditinvestmentnews.com January 16, 2006 American Media Refinancing B of A Backs CorSolutions Medical Hits Mart Acquisition Financing A $510 million refinancing for American Media hit the market Bank of America is leading a $485 million deal backing Matria last Tuesday. The deal consists of a six-year, $60 million revolver Healthcare’s acquisition of CorSolutions Medical. The and a seven-year, $450 million term loan “B.” JPMorgan is financing, syndication of which launched last week, breaks down leading the deal and Deutsche Bank is also involved in the into a five-year, $30 million revolver; a six-year, $245 million financing. Both tranches are priced at LIBOR plus 3 1/4%. senior secured “B” term loan; a $125 million term loan “C” and Commitments are due by the end of January. a seven-year, $85 million second-lien loan. Pricing is LIBOR plus American Media is the publisher of six of the largest circulation 2 1/2% on the revolver, “B” and “C” term loans and LIBOR weeklies in the U.S. including Star, Weekly World News and the plus 6 1/2% on the second lien. National Enquirer. Other publications include Health and Fitness, Moody’s Investors Service has affirmed its B1 corporate Shape and Men’s Fitness. The company also produces more than family rating on Matria and has rated the revolver and the “B” 200 mini-magazines covering topics such as finance, family, and “C” term loans B1. A rating of B3 has been placed on the health, pets, homes and relationships. Larry Bornstein, senior second-lien loan. Based in Marietta, Ga., Matria provides v.p., general management and planning at American Media, could healthcare, disease and high-risk pregnancy management not be reached by press time. Bankers did not return calls. programs and services. Calls to Matria were not returned. People & Firms Leveraged Finance Pros Launch time to make a debut and coincidently the market is very strong, so our timing is good.” New Lending Co. Charlesbank is the strategic investor in the firm. It is a Looking to capitalize on a market of smaller deals, Peter middle-market private equity firm that manages more than Gleysteen and Charlesbank Capital Partners have teamed up to $1 billion of capital. form Commercial Industrial Finance Corp. (CIFC). Open to all sectors of lending, it will work on typical deals of about $50 million. “There are record breaking levels of liquidity in the Moody’s Plans New loan market [now], provided that the deal is north of Ratings Guidelines $100 million,” said Gleysteen, a former head of JPMorgan’s Moody’s Investors Service plans to introduce both loss-given- syndicated loan business and CIFC’s founder and ceo. “Once default ratings and probability-of-default ratings on non-financial you go into double digits, it’s limited and it is the less than speculative-grade corporate issuers. It has published a rating $100 million space that we are addressing.” methodology and is looking for feedback from market The 13-member firm brings together three of Gleysteen’s participants by Feb. 28. The new ratings disaggregate two former colleagues at JPMorgan Chase, Nga Tran, Liz Chow and assessments already used in long-term ratings. Currently, long- Steve Vaccaro. Other CIFC members include: Kevin Walz, from term ratings are opinions about expected credit loss, which PB Capital, Alex Jackson, from JH Whitney and Sean incorporate the likelihood of default and the expected loss in the Dougherty from Standard & Poor’s, among others. Gleysteen event of default. Separating the two should result in less said the company will continue to grow. Along with targeting conservative ratings on bank loans. small, senior secured leveraged loans, it will also invest in large “One of the reasons we embarked on this path, is that leveraged loans, second-lien tranches, revolvers and non-U.S. investors have told us they want to better understand what drives credits. The firm is very busy, according to Gleysteen, and has credit ratings, what is the likelihood of default,” explained Mike already booked business. He would not comment on specific Rowan, group managing director and co-head of corporate deals, however. finance in the Americas. “We had observed through our own On a loan-by-loan basis, CIFC can substitute for competitors research that the ratings on senior secured bank debt relative to in club loans and increase loan originator lending capacity for senior unsecured bonds seemed a bit conservative and we were individual obligors. The new company launched last Thursday looking into that issue.” Rowan could not comment on any with a day one investment capacity of $400 million. “It was a names that might be affected. natural evolution of putting the business together in terms of The loss-given-default ratings (LGDs) will be assigned to the timing,” Gleysteen said. “The start of the year was just a good corporate family and its individual rated debt issues, such as 4 Copying prohibited without the permission of the publisher. January 16, 2006 www.creditinvestmentnews.com Credit Investment News loans, bonds and preferred stock. Probability-of-default (PDRs) El Asmar said he hired four additional staffers, including two ratings will be assigned to issuers, not specific debt instruments. internal transfers and two recent graduates. He referred further The standard Moody’s alpha-numeric scale will be used and the questions to a spokeswoman, who did not return calls by press rating will express Moody’s opinion regarding the likelihood any time. El Asmar oversees the structuring and sale of products entity within a corporate family will default on any part of its across asset classes and has built the investor solutions group to debt obligations. 20 from scratch when he started last year. These changes would be applied to the roughly 1,300 Before joining BNP, Hammerschmidt spent 12 years at corporate names in North America that are speculative grade, Morgan Stanley in New York, Hong Kong and San Francisco. according to Moody’s. The changes are expected to be introduced in the next six-to-18 months in North America. The changes would likely be rolled out in waves during that period, Trading based on industry. Hallmark Entertainment Term Barclays Bulks Up Structured Loan Breaks Above Par Hallmark Entertainment’s $215 million term loan “B” broke in Products Group the secondary market at 101 last week. A trader said trading Barclays Capital has hired Jerry Hammerschmidt as a director in volume was low on the name because of the small size of the New York selling structured products to financial institutions. deal. JPMorgan leads the loan, which is priced at LIBOR plus Hammerschmidt had been a managing director in hedge fund 2 1/2%. The credit line also includes a $75 million term loan “A” sales for six months at BNP Paribas in New York before joining priced at LIBOR plus 2 1/4%, a $65 million second lien priced Barclays. He declined comment on the reasons for his move. He at LIBOR plus 6 1/2%, and a $90 million revolver priced at started last Thursday and is reporting to Philippe El Asmar, head LIBOR plus 2 1/4%. of investor solutions for the Americas. Hallmark Entertainment, a subsidiary of Hallmark Cards, is The most comprehensive annual discussions on vital fixed-income legal and compliance issues. Topics Include: ■ What’s on the Minds of SEC ■ Current Primary Markets Issues Keynote speaker: Regulators? Annette Nazareth ■ Research & Market Commentary Commissioner ■ Current SRO Issues in the Bond ■ Structured Products U.S. Securities and Markets Exchange Commission ■ Municipal Finance ■ Compliance Ofﬁcers’ Roundtable ■ European Regulatory Developments ■ Credit Derivatives for Securities Lawyers ■ Litigation and Enforcement ■ Handling a Crisis: Avian Flu For details and registration, visit www.bondmarkets.com/LegalConference Credit Investment News www.creditinvestmentnews.com January 16, 2006 one of the largest producers of movies for television. The on Lear’s net income, assets and shareholders’ equity for the year Hallmark Channel, a global television network that focuses on and quarter ended 2005. family friendly entertainment, is a subsidiary of the company. Moody’s Investors Service revised its rating outlook on Lear One investor said “members of the Lindsay Wagner fan club are to negative from stable. The action reflects lower production welcome,” was a catch phrase for the bank meeting back in volumes from Lear’s two largest customers, General Motors and December. A company spokesperson did not return calls. Ford, as well as challenges to the company’s profitability. A spokeswoman for Lear and a spokesman for Visteon did not return calls. Quebecor Media’s Downsized Term Loan Breaks KarstadtQuelle Trades Up Quebecor Media’s $350 million term loan, which was downsized from $460 million, broke in the secondary market at 101 1/4 last On Delisting Rumors week. Bank of America leads the deal, which is priced at LIBOR German retailer KarstadtQuelle’s bank debt traded up on rumors plus 2%. A $525 million new issue of 7.75% ’16 senior notes its main shareholders are planning to acquire and delist the also broke in the market and traded in the 101-102 range. company. Its second-lien term loan climbed nine points to the A trader said the term loan was downsized, while the size of 104-106 range, while its senior secured term loan “B” traded up the notes was increased because of higher demand for the credit a point to the 97-98 range. in the bond markets. Quebecor Media, a subsidiary of Quebecor A delisting would be positive for the second-lien debt holders Inc., a Canadian media communications company, sold the because they would be paid back above par based on a call notes in a 144a private placement. provision contained in the credit. The company has also posted Moody’s Investors Service assigned a B2 senior unsecured good sales figures, helping to boost trading levels. Last week, the rating to the new note issue. The rating agency said in a report company said it had generated sales growth for the first time in that the company has a good position in the Canadian ten years. In 2005, sales in its department and sales stores newspaper and cable sectors and enjoys diverse cash flows. increased 1.2% to EUR1.5 billion. KarstadtQuelle, which is Europe’s largest department store and mail order group, took a number of steps to reduce its debt Visteon, Lear Bonds Trade Down last year, including the sale of real estate assets. In 2005, its group The bonds of Visteon Corp. and Lear Corp. traded down as both net liabilities fell to EUR2.7 billion, compared to EUR3.9 billion companies announced additional charges and costs they would in 2004. In December, it sold 40 properties for more than incur in 2005. Visteon’s 8.25% ’10 bonds fell two-and-half points EUR400 million. A company spokesman did not return calls. to 86, while Lear’s 8.11% ’09 bonds fell a point to 93.4. The companies made the announcement at the Detroit Automotive Conference in Dearborn, Mich. Visteon senior Investment Strategy executives announced the auto supplier would incur $800 million in restructuring costs related to a three-year PA Investor Shuns New restructuring plan of certain underperforming plants and Issue Corporates businesses. The company plans to sell or close up to 23 of its Chuck Frank, v.p. and senior portfolio manager of $912 million facilities in 2006 and 2007. In a filing with the Securities and at S&T Wealth Management, is keeping his distance from new Exchange Commission, Visteon said it expects that $250 million issue corporate bonds. Frank bases his strategy on the assumption of the restructuring charge will be non-cash costs and $400 that return available on corporate bonds is not worth the risk of million is expected to be reimbursable under an escrow taking them on. “We much prefer looking at callables [agencies]. agreement with Ford Motor Co. In order for us to invest in corporates [they] need to have Meanwhile, Lear executives announced the company is taking exceptional value; even on the occasion that we do invest, we an additional $342 million goodwill impairment charge in the don’t go out very long,” Frank noted. fourth quarter of 2005 for its interior products division. This is Although he may not be investing in any new issue corporates, on top of the $670 million impairment charge that the company Frank has not sold off his old corporate bonds. One closely held originally estimated it would have to take during the same corporate is that of General Motors Acceptance Corp. “General period. The additional impairment charge reflects deterioration Motors looks like they are going to sell off GMAC to a third in the commercial outlook for this sector. In an SEC filing, Lear party, in fact, the bond market sees it as imminent,” Frank noted. Corp. said the impairment charge would have a negative impact “We should see a credit upgrade for them once they sell. We are 6 Copying prohibited without the permission of the publisher. January 16, 2006 www.creditinvestmentnews.com Credit Investment News not going to be actively buying any more, but it would be a good high yield. Median high-yield issuance is forecasted to be $98 idea to hold onto GMAC; they will be stronger.” billion this year, a 30% increase over 2005. “We really don’t look at specific credit situations. We wouldn’t Growth is expected to be particularly strong in the CDO buy something like AIG, for example, because that has been sector. The median forecast has cash CDO issuance at $173 overblown by the market; we don’t look at specific recovery for billion in 2006, an 8.8% increase over the estimated $159 value.” Frank’s portfolio is comprised of 84% government billion issued in 2005. Leveraged loans are expected to be the agencies and 16% in previously held corporates. His benchmark largest volume cash CDO collateral at $63 billion in issuance, is the Merrill Lynch Intermediate Government/Corporate Index. up 12.5% from 2005, and accounting for nearly 40% of total “It’s very suitable for what we do here,” Frank commented. His cash issuance. duration is between three and four years. Michael Decker, senior v.p. and head of policy and research at the association, said more banks are expected to repackage loans into collateralized loan obligations. “Banks are expanding lending Structured Credit activity to satisfy the demand of companies which choose to BMA Survey Forecasts Increased borrow through banks. To the extent that banks are ramping up lending activity, some loans are finding their way into CLOs,” CDO, Corporate Bond Issuance said Decker. A robust economy and rising issuer demand for financing is The survey also found that members expect weaker credits to expected to drive an increase in corporate bond issuance and suffer as investors show less demand for yield. The growth in collateralized debt obligations this year, according to an annual CDOs and CLOs is partly driven by investors seeking higher survey of members of the Bond Market Association. credit quality. “There is a trend among some groups of Corporate bond issuance is expected to rise 1.6% to $719 institutional investors that are looking to improve the credit billion in 2006. Respondents expect the highest growth to be in quality of their portfolios,” said Decker. Secondary Marketplace Par Credit Trading Activity This chart, provided by Citigroup Global Markets, tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities. LIBOR SPREAD Issuer Tranche Rating Coupon Maturity Bid(new) Ask(new) Accuride TLB B+/B2 225 January-12 101.5 102 Allegheny Energy TLC NR 175 February-11 101.25 101.625 Allied Waste TL/LC B1/BB 200 March-12 100.5 100.875 American Air TLB B+/B2 525 December-10 101.75 102.25 Amkor Tech TL B+/B1 450 October-10 103.5 104 Blockbuster RC NR 125 July-04 95.75 96.75 Blockbuster TL B Ba2/BB 250 August-11 96.75 97.75 Charter TLA B/B2 300 April-10 100.125 100.375 Charter TLB B/B2 325 April-11 100.5 100.75 Constellation TLB BB/Ba2 175 December-11 101.125 101.625 Direct TV TLB BB-/Ba2 150 March-10 101 101.25 El Paso TL B3/B- 275 October-09 100.75 101.125 GGP TLA Ba2/BB+ 225 October-07 100 100.5 Giant Eagle TLB BB+/Ba3 125 November-11 100.625 101.125 Goodyear 1L TL B1/BB 175 March-06 100.75 100.375 Hayes Lemmerz TLB B1/BB- 325 June-10 99.75 100.25 Jarden TLB B1/BB- 200 January-12 100.75 101 Lifepoint TL B BB/Ba3 162.5 April-12 100.5 100.75 Loews TLB B1/B+ 225 July-11 100 100.375 Mediacom Broad TLC BB+/Ba3 200 October-14 101.375 101.75 MGM TLB Ba3/B+ 225 April-12 100.75 101 Nalco TLB B1/BB- 200 November-10 101 101.5 Novelis TL BB-/Ba2 175 January-12 101.375 101.75 Panamsat TLB Ba3/BB 225 May-11 101 101.375 Revlon TLB B3/B- 600 July-10 103 103.75 RH Donnelley TLD BB/Ba3 175 December-10 100.5 101.5 Rockwood TLE B1/B+ 225 June-12 101.25 101.5 Select Medical TL BB-/B1 175 February-12 100 100.5 UAL DIP RC BB+/Ba3 500 June-05 99.75 100.25 UAL DIP TLB BB+/Ba3 500 June-05 100.5 101 This information is based on sources which we believe to be reliable but has not been independently verified. Accordingly, Citibank/Salomon Smith Barney and its affiliates do not assume responsibility for, and do not make representations or warranties (express or implied) as to the accuracy of the information. This information sheet does not constitute an offer to sell or a solicitation of an offer to purchase any securities or other instruments described herein. Copying prohibited without the permission of the publisher. 7 February 7-8, 2006, Le Parker Meridien, New York City February 9, 2006, Le Parker Meridien, New York City Attend Both & Save! 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Strasburger & Price, LLP Bingham McCutchen LLP GE Capital Mayer Brown Rowe & Maw LLP Sun Capital Partners, Inc. BNP Paribas GE Corporate Financial Services MBIA The Bank of New York Boston Street Advisors Inc Glass & Associates, Inc. Mellon HBV Alternative The Rohatyn Group GMAC Commercial Mortgage Corp. Strategies LLC Cadwalader Wickersham & Taft The World Bank Goldin Associates, L.L.C. MikroServE (Nig) Limited CapitalSource Finance LLC Tompkins, LLC Goldman, Sachs & Co. Moneda Asset Management Carl Marks LLC Tradewinds Investment Management Greenberg Traurig, LLP Morgan Creek Capital Management Cedarview Capital Management, LP TRG Management Greenhill & Co., LLC Morgan Stanley Chadbourne & Parke LLP United States Bankruptcy Court - Greylock Capital Management LLC Morris Anderson & Associates, Ltd. District of Maine Chanin Capital Partners Guggenheim Partners Net Serviços de Comunicações S.A. Varde Partners, Inc CM&D Capital Advisors LLC H.I.G. Capital New York University Salomon Center Viking Global Investors LP Concordia Advisors LLC Hawaiian Airlines, Inc. Noronha Advogados Weil, Gotshal & Manges LLP Congress Financial Corporation HP Financial Services November Capital Investment Wescott Strategic Management LLC Conway Mackenzie & Dunleavy Advisors Corporación Andina de HSBC Bank USA NA Weston Group Orrick, Herrington & Sutcliffe LLP Fomento (CAF) Hughes Hubbard & Reed LLP Wilmer Cutler Pickering Hale & Pegasus Capital Dorr LLP Corporate Turnover Consulting HVB Group Plough Penny Partners XRoads Solutions Group For Speaker & Agenda Updates Visit www.iievents.com To Register: 1.800.437.9997 or 18.104.22.16870 or firstname.lastname@example.org CLE/CPE Credits Available In Association with: Sponsored by: January 16, 2006 www.creditinvestmentnews.com Credit Investment News Yield Curves (JANUARY 10) Source: Standard & Poor's Global Fixed Income Research Yield curve spreads are derived from the industrial sector. % 10.0 Treasurys A BB+ 9.0 AAA BBB BB/BB- 8.0 AA 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0 5 10 15 20 25 30 YEARS TO MATURITY Weekly Credit Advancers/Decliners (01/5/06-01/12/06) The following charts show the top five advancers and decliners in terms of % moves in the loan, bond and credit default swap markets for the previous week. Data provided by Markit Group. Loan Advancers Loan Decliners Facility Previous Bid Current Bid Percent Change Facility Previous Bid Current Bid Percent Change McLeod (5/00) TLb 27.25 28.5 4.59 J.L. French (2nd Lien 8/04) Hybrid TL 27 23.8 -11.852 Calpine (2nd Lien 8/03) Hybrid TL 81.2 84.896 4.55 Citation 5/05 TLB 98.3 97.9 -0.407 Meridian Automotive (4/04) TLb 79.1 81.5 3.03 Masonite International (US Tranche) TLB 98.886 98.58 -0.309 Atkins Nutritionals (12/03) TLb 61.333 62.6 2.07 LifeCare Holdings (8/05) TLb 94.05 93.85 -0.213 J.L. French (8/04) TLb 90.7 92.4 1.87 Blockbuster (8/04) TLb 96.773 96.648 -0.1 Bond Advancers Bond Decliners Name Spread Weekly Chg (bp) Name Spread Weekly Chg (bp) Ford Mtr Cr Co 5.75 12Jan09 455 -128 Cingular Wireless LLC 7.125 15Dec31 117 11 Gen Mtrs Corp 7.2 15Jan11 780 -96 Quebecor World Cap Corp 6.125 15Nov13 278 10 Gen Mtrs Accep Corp 5.625 15May09 309 -96 Comcast Corp 6.5 15Jan15 88 10 Visteon Corp 8.25 01Aug10 628 -90 Boston Scientific Corp 4.25 12Jan11 47 10 Amern Axle & Mfg Inc 5.25 11Feb14 297 -47 Tyco Intl Gp S A 6.5 21Nov31 153 10 CDS Advancers CDS Decliners Name Spread Weekly Chg (bp) Name Spread Weekly Chg (bp) Dana Corp 861 -95 Computer Sciences Corp 155 56 Ford Mtr Co 875 -93 Maytag Corp 151 54 Amern Axle & Mfg Inc 514 -93 Quebecor World Inc 298 23 Ford Mtr Cr Co 480 -81 The Gap Inc 121 20 Gen Mtrs Accep Corp 369 -78 Lexmark Intl Inc 92 14 N.B. Loan data is in price format Source: Markit Group Copying prohibited without the permission of the publisher. 9 Credit Investment News www.creditinvestmentnews.com January 16, 2006 Search Directory The following directory includes year-to-date search and hire activity for high-yield, distressed debt and CDO managers. The accuracy of the information, which is derived from many sources, is deemed reliable but cannot be guaranteed. All amounts are in US$ millions unless otherwise stated. To report manager hires and new searches, please call Kristen Haunss at (212) 224-3990, or fax (212) 224-3602. New Searches Asset Mandate Fund Info Size Fund Type Assignment Size Consultant Comments/Firm Hired Newton (Mass.) Retirement USD240 Public D.B. Global / USD25 Segal Advisors, RFPs are available by contacting Brian Keenan at System Active Fixed-Income Boston, MA, U.S. (email@example.com). Proposals are due Jan. 30. Selections should be made during 2Q. Waltham Contributory Retirement USD140 Public D.B. US / Active Fixed-Income / USD8 Wainwright Investment Finalists selected: BlackRock, Eaton Vance, Caywood Scholl, and System High-Yield Counsel, Boston, MA, U.S. Goldman Sachs Asset Management. Selection expected soon. Fall River (Mass.) Contributory USD216 Public D.B. US / Active Fixed- USD10 Meketa Investment Group, Searching for a high-yield bond manager. RFPs are available at Retirement System, Income /High-Yield Braintree, MA, U.S. (http://www.meketagroup.com/mgrCenter.php). Proposals are due Jan. 12, 2006. Watertown (Mass.) Contributory USD70 Public D.B. US / Active Fixed- USD4 Wainwright Investment Searching for an active high-yield bond manager. RFPs are Retirement System Income /High-Yield Counsel, Boston, MA, U.S. available at (http://www.winvcounsel.com). Responses are due Jan. 17, 2006. Danville (Va.) Regional Foundation, USD200 Foundation US/ Active Fixed-Income USD40 Barry Bryant, Dahab Searching for a bond manager. RFP available at Associates, Bay Shore, NY (http://www.dahab.com). Proposals due Nov. 7 with finals presentations scheduled for February. Iowa Municipal Fire & Police USD1,400 Public D.B. Global/ Active Fixed-Income USD50 Summit Strategies Searching for a global tactical fixed-income manager. Interested Retirement System Group, St. Louis, MO managers should contact Dennis L. Jacobs at (515) 254-9200. Proposals due Nov. 30. Will make a selection in January. New Mexico Educational USD7,500 Public D.B. US/ Active Fixed-Income USD1,300 Wilshire Associates, Issued an RFP for at least one fixed-income manager. RFP is available Retirement Board Santa Monica, CA at (http://www.era.state.nm.us). Proposals were due Nov. 10, with a selection expected at the Dec. 9 board meeting. Plymouth County (Mass.) USD520 Public D.B. US/ Active Fixed-Income/ USD20 Wainwright Investment Searching for a high-yield bond manager. RFP is available at Retirement System High-Yield Counsel, Boston, MA (http://www.winvcounsel.com/rfp.html). Proposals were due Nov. 9. Indiana State Police Pension Fund USD300 Public D.B. US/ Active Fixed- USD18 N/A The fund is seeking a high-yield or hybrid fixed-income manager Income/ High-Yield to increase returns. An RFP, which will be released next week, will be due Oct. 21. Waltham Contributory Retirement USD140 Public D.B. US/ Active Fixed-Income/ USD8 Sara Colorado, Wainwright Searching for a high-yield bond manager. Email Sara Colorado at System High-Yield Investment Counsel, (firstname.lastname@example.org) for a copy of the RFP. Proposals Boston, MA due Nov. 1, 2005. No timeframe for selection Hampshire County Retirement System USD138 Public D.B. Global/ Active USD8 Amanda Martin New Searching for a global fixed-income manager. RFPs are available Fixed-Income England Pension Consultants at (http://www.mass.gov/perac/rfp/hampshirecounty0905.pdf). Cambridge, MA Proposals were due Sept. 23. Woburn Retirement System USD85 Public D.B. US/Active Fixed-Income/ USD5 N/A Searching for a high-yield bond manager. Email Gus Aristizabal High-Yield at (email@example.com) for copy of the RFP. Proposals were due Aug. 29. Idaho Endowment Fund USD837.5 Endowment US/Active Fixed- USD5 RBC Dain Rauscher Searching for a collateralized debt manager to Investment Board Income/CDO handle USD5 million maiden allocation. Haverhill Retirement System USD145 Public D.B. US/Active Fixed-Income/ USD5 Wainwright Investment Issued an RFP for a high-yield bond manager. RFPs are High-Yield Counsel available by contacting Jeff Locke at (firstname.lastname@example.org). Proposals were due March 17, 2005. Medford Retirement System USD125 Public D.B. US/Active Fixed-Income/ USD6 New England Pension Searching for a high-yield bond manager. Email High-Yield Consultants (email@example.com) for RFP. Proposals were due Jan. 21, 2005. Selection expected by 2Q 2005. Marlborough Retirement System USD75 Public D.B. US/ Active Fixed- USD5 Ben Paradise, Meketa Searching for a high-yield bond manager. RFPs are available at Income/ High-Yield Investment Group, (http://www.meketagroup.com/mgrCenter.php). Proposals were Braintree, MA due Oct. 28. Potential Searches New Orleans Employees’ Retirement USD390 Public D.B. US / Active Fixed-Income USD20 Morgan Stanley Investment Fund will likely search for at least one non-core fixed-income System Consulting, New Orleans, manager in 2006. LA, U.S. Cooper Industries USD600 Corporate D.B. US/ Active Fixed-Income/ N/A None, May consider increasing its exposure to portable alpha fixed-income Portable Alpha strategies. Is looking for new strategies but hasn’t found anything satisfactory, so at the moment any increases would be with incumbent Westridge. Missouri Local Government USD2,800 Public D.B. International/ Active N/A None, Considering investing in international fixed-income. Employees Retirement System Fixed-Income No timeframe for decision on whether to search. California State Teachers USD126,000 Public D.B. US/ Active Fixed-Income N/A Altura Capital, Deferred a decision on portfolio changes until a Dec. 7 investment Retirement System (CalSTRS) New York, NY committee meeting. Possible shift could result in managers hires. Illinois State Teachers USD34000 Public D.B. US/Alternative/ USD204 Callan Associates Plan is building up its distressed debt allocation. No timeframe Retirement System Distressed Debt Chicago, IL for decision on whether to search for a new manager or give assets to an incumbent. 10 Copying prohibited without the permission of the publisher. January 16, 2006 www.creditinvestmentnews.com Credit Investment News Potential Searches (cont’d) Asset Mandate Fund Info Size Fund Type Assignment Size Consultant Comments/Firm Hired Oakland County (Mich.) Employees USD1,000 Public D.B. US/Active Fixed-Income/ N/A Portfolio Analytics Intends to review its fixed-income portfolio. Retirement System High-Yield High-yield is a possibility. Georgia Firefighters’ Pension Fund USD530 Public D.B. US/ Active Fixed- USD53 Consulting Services If a potential bill to permit more investment flexibility is passed, Income/ High-Yield Group LLC, Memphis, TN fund would invest 10% in high-yield. Fund expects investment freedom to still be a couple of years off, however. Georgia Peace Officers Annuity & USD360 Public D.B. US/ Active Fixed- USD12 Southeastern Advisory, If a potential bill is passed to relax investment restrictions, Benefit Fund Income/ High-Yield Atlanta, GA would invest 10% of its assets in high-yield, private equity and real estate to increase returns. Seattle City Employees’ Retirement USD1,700 Public D.B. US/ Active Fixed- USD15 None, Fund is talking to firms that offer structured credit strategies, such as System Income/ CDO CDOs and CLOs. No timeframe for decision on whether to search. Vermont State Employees Retirement USD1,000 Public D.B. US/ Active Fixed-Income N/A New England Pension Being educated on active fixed-income vs. passive fixed-income. System Consultants, Cambridge, MA Updated Searches Idaho Endowment Fund USD870 Endowment US/ Alternative/ CDO USD5 RBC Dain Rauscher, Will search for maiden CDO manager once review is done. Investment Board Minneapolis, MN Ohio Police & Fire Pension Fund USD9,000 Public D.B. US/Active Fixed-Income/ USD177 Wilshire Associates Shenkman Capital was terminated due to poor performance. High-Yield Assets will be used to fund new manager. IAM National Pension Fund USD5,200 Union/Multi- US/Active Fixed-Income/ USD150 Hamilton Lane Advisors Columbia Management Group was terminated due to employer D.B. High-Yield organizational changes. No timeframe for decision on whether to conduct a replacement search. National Electrical Benefit Fund USD10,200 Union/Multi- US/Active Fixed-Income/ USD160 Marco Consulting Group Columbia Management Group was terminated due to employer D.B. High-Yield organizational changes. No timeframe for decision on whether to conduct a replacement search. Illinois State Teachers Retirement USD34,000 Public D.B. US/ Active Fixed- USD190 Gordon Dickerson, Callan LM Capital was terminated due to poor performance and strategic System Income/ Core Associates, Chicago, IL concerns. Money was given to incumbent Taplin, Canida & Habacht. Worcester (City of) Retirement USD629 Public D.B. Europe/ Alternative/ N/A Had discussed an allocation to distressed debt System Absolute Return but no moves are imminent. Source: iisearches - The Premier Daily Sales and Marketing Tool for Investment Managers. For further information please go to www.iisearches.com or contact Keith Arends at 212-224-3533. I-GRADE COLLINS & AIKMAN (continued from page 1) (continued from page 1) assumed default probability of BBB, or sub-investment grade Lear executives said the company is still in discussions to form credits, making them less attractive to structures. The change the joint venture with billionaire investor Wilbur Ross, who in S&P’s rating model created a buzz in the market when bought Collins & Aikman’s European business in November. But announced in November, triggering a rush of issuance under David Wajsgras, cfo, added that the timing of the ultimate the old regime. The alterations, according to market officials, proposed joint venture “represented a significant unknown that bring S&P’s model more in line with that of Moody’s directly affects our near term outlook.” Investors Service. Bob Rossiter, ceo of Lear, told investors that according to the The sudden jump in investment-grade yield has put pressure way the joint venture is structured, the deal would probably not on houses to print transactions before market saturation squeezes go ahead if Ross does not acquire Collins & Aikman’s North spread levels in the sector. A number of structures are already American business, which is under bankruptcy protection. He roadshowing, including a €200 million plus deal from Calyon. added, “We believe we should go ahead with the joint venture Other firms in line include Morgan Stanley and UBS. Officials and we are exploring that.” from both firms declined comment. “People will naturally It is still unclear whether Ross will go ahead with plans to gravitate toward the higher end to get kinder pricing,” said an acquire the North American business. According to a bankruptcy arranger at a U.S. house in London. court document filed with the United States Bankruptcy Court An official close to Calyon said its deal, named Sonata, is for the Eastern District of Michigan, he has only discussed issuing a five-year note and a seven-year note linked to a portfolio participation in a potential bid for the U.S. assets with Lear, of 125 investment-grade corporate CDS. It is paying more than Franklin Mutual Advisors and Ross’ limited partners. 100bps over six-month LIBOR and has a fixed recovery rate of Rossiter said Ross is confident he is in a good position to 40%. “A string of similar transactions will drive spreads tighter so acquire the business. Wajsgras said the company has discussed they want to take advantage early,” said the official. Arrangers at further acquisitions with WL Ross, including the possibility of the French firm declined comment. —Laura Cochrane buying Collins & Aikman’s North American business. Ross did Copying prohibited without the permission of the publisher. 11 Credit Investment News www.creditinvestmentnews.com January 16, 2006 not return calls. tranche. Société Générale participated in the senior secured A spokesman for Collins & Aikman said the company is not yet facilities only. Dovillers said the group participated because of a in the final stages of a sale to WL Ross. He said there are a number relationship the bank has with Carlyle. It has looked at other deals, of parties considering buying the business and one option would but has not participated in another yet. —Kristen Haunss be to sell parts of the company. Two possible units it would seek to sell are its fabric making unit and its convertible roof plant. “To LIBOR Plus create value for creditors we are looking to determine if it is more beneficial to sell all or part of our assets,” said the spokesman. Lehman Brothers promoted two members of its leveraged Speculation that Ross was planning to take control of the auto finance team to managing director, Jeff Abt and Peter supplier was sparked over the summer when it was learned that Schellbach. Abt joined Lehman Brothers’ leveraged finance he had begun accumulating debt in Collins & Aikman (CIN, group in 1998 after four years at Scotia Capital. He has worked 8/8). Ross holds approximately 6.7% of Collins & Aikman pre- on the loan capital markets desk since 2001. Schellbach, a petition senior secured credit facility and approximately 10% of distressed trader, helped lead Lehman Brothers to a number three its debtor-in-possession financing. He is also the sole provider of ranking in the Loan Market Week’s 2005 Best Trading Desk an administration loan to the debtors’ European affiliates. survey, up from number 10 in 2004. Schellbach joined Lehman —Kim Moore Brothers in 2004, after a short stint at Goldman Sachs, where he was a v.p. and trader of distressed and crossover loans (LMW, SOCIÉTÉ GÉNÉRALE 3/4/04). He had previously worked at Deutsche Bank, where he (continued from page 1) was a distressed loan trader and then a salesman. Shunder, v.p., was brought over from Germany. The new push is the second go around for the bank. Sociéte Loose Change Générale had been involved in the U.S. for several years, but between 1998-2000 the business model was not as client-driven Investors looking to catch up on their gossip had to look no as the bank would have liked, de Laigue explained. As the further than the bank meeting last Tuesday for American Media. economic cycle played out, there were some client exposures that The meeting for the publisher of Star and the National Enquirer, did not turn out well and in 2000, management turned its focus offered the latest juicy details on Hollywood weddings, splits and to rebuilding the European business. de Laigue, who had all the baby drama one could ask for. spearheaded the European effort between 1990-98, went back to London in 2001 and the U.S. office was shut down. At the Quote Of The Week closing it had a portfolio of about $700 million of exposure, which it has brought down to zero. “There are record breaking levels of liquidity in the loan market de Laigue explained the bank hopes to draw upon its strength [now], provided that the deal is north of $100 million. Once you go in the European leveraged lending market, where they rank in into double digits, it’s limited and it is the less than $100 million the top three for leveraged finance arrangers in Europe, for Jan.- space that we are addressing.” —Peter Gleysteen, founder and ceo May 2005, according to EuroWeek. “We have a leading leveraged of Commercial Industrial Finance Corp., describing the his new finance practice in Europe, which we plan to combine with a firm’s lending strategy (see story, page 4). very strong product and industry capabilities in New York,” he said. Building on the bank’s European relationships will be a key One Year Ago In The Credit Markets aspect of building the U.S. franchise, he said. Of the dozen or so key relationships Société Générale has in Europe, about half are Warner Chilcott Corp.’s $1.4 billion “B” term loan brought in U.S. firms. “I think there will be a lot of interaction [between more than $2 billion in investor commitments despite having the European and U.S. desks], because the world is becoming total leverage over seven times. [Despite the high leverage, the smaller,” he said. “The markets in the U.S. and Europe are no pharmaceutical company’s strong business profile and steady longer separate, there has been an influx of the U.S. investor product revenue convinced buysiders.] Unsecured creditors of base into Europe.” de Laigue said there was not a right or wrong bankrupt airline ATA Holdings were set for a substantial recovery time to reenter the market, but said the decision was based on on their defaulted investments. The Seaport Group, a New York the strides the group had made in Europe. distressed dealer, was expecting ATA’s bonds to recover to the mid- The group served as a managing agent on its first deal in 70’s, as opposed to the mid-50’s where they were trading the week November. The financing backed the $942 million acquisition of before. [Predictions proved to be disastrously wrong as bonds of SS&C by The Carlyle Group. The deal consisted of a $75 million ATA were trading between 4.30 and 4.50, as of their last sale date revolver; $200 million term loan “B” and a $75 million Canadian on Dec. 21. The bonds had slid as low as the 2.00 range.] 12 Copying prohibited without the permission of the publisher.
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