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Loan mutual fund outflows ease; ETFs show inflows

Cash outflows from bank-loan funds eased further to $298 million during the week ended Aug. 27, from $540 million in the week ended Aug. 20 and $687 million the week prior, according to Lipper. The influence of bank-loan ETFs on this week’s number was negative 17%, as Lipper recorded a $51 million inflow into ETFs. This compares to a $47 million outflow last week.

There now have been 18 weeks of outflows over the past 20 weeks, for a total outflow of $10.2 billion over that span, which follows a record-shattering 95-week inflow streak that totaled $66.7 billion.

The trailing-four-week average improves slightly to negative $755 million per week, from negative $782 million last week. This measure remains below the recent peak of negative $858 million, from the week ended June 11.

The year-to-date fund-flow reading pushes deeper into negative territory, at $3 billion, based on a net withdrawal of $3.6 million from mutual funds against a net inflow of $509 million to ETFs. In the comparable year-ago period, inflows totaled $39.7 billion, with 11% tied to ETFs.

The change due to market conditions was a positive $143 million, versus total assets of $104.4 billion at the end of the observation period. The ETF segment comprises $7.9 billion of the total, or approximately 8%. – Joy Ferguson

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Europe: Credit Suisse hires Howe to Leveraged Finance and Sponsors Group

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Alison Howe has been appointed as a managing director in Credit Suisse’s Leveraged Finance and Sponsors Group, based in London, according to market sources. She is due to start in November, and will report to Mathew Cestar and Didier Denat, co-heads of the Leveraged Finance and Sponsors Group in EMEA.

The bank has been active in recruiting new hires to its Leveraged Finance and Sponsors Group, with other recent additions including Matthew Grinnell as managing director, and Luis Vitores and David Savage, both of whom will be focusing on first-time corporate leveraged finance issuers, principally in the mid-cap sector.
– Staff reports

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James River Coal nets court nod for asset sale to Blackhawk Mining

The bankruptcy court overseeing the Chapter 11 proceedings of James River Coal Co. yesterday approved the sale of the company’s assets to JR Acquisition, an affiliate of Blackhawk Mining, for an aggregate purchase price of $52 million, plus assumption of certain liabilities.

As reported, according to court filings the purchased assets include those assets known as the Hampden Complex (including the assets of debtor Logan & Kanawha Coal Company); the Hazard Complex (other than the assets of debtor Laurel Mountain Resources); and the Triad Complex.

According to its website, Blackhawk Mining was formed in 2010 to acquire and operate idled coal reserves, mines, preparation-plant and loading facilities formerly owned by Black Diamond Mining in Floyd County, Ky. Among other things, Blackhawk operates a combination of underground continuous miner sections and contour-surface mines, with a high-wall miner in the Elkhorn and Fireclay, Ky., and coal seams, with production processed through a preparation plant and train-loading facility at Spurlock, Ky. – Alan Zimmerman

 

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Burger King nets financing for Tim Hortons merger

burgerkingBurger King Worldwide has obtained commitments for $12.5 billion of financing to fund the cash portion of its merger with Tim Hortons, including a $9.5 billion debt financing package led by JP Morgan and Wells Fargo, the company announced.

The debt financing for the transaction, which was unveiled today, will consist of a $6.75 billion TLB, a $500 million revolving credit, and senior secured second-lien notes in the amount of $2.25 billion. In addition, Berkshire Hathaway has committed $3 billion of preferred equity financing. Berkshire is simply a financing source and will not have any participation in the management and operation of the business, sources said.

Burger King has roughly $685.6 million outstanding under its current TLB due 2019 and $965.6 million under its TLA due 2017, part of its $2.8 billion of long term debt, sources said.

The transaction is subject to customary closing conditions, including approval of Tim Hortons shareholders and receipt of certain antitrust and regulatory approvals in Canada and the U.S. Since 3G Capital already owns approximately 70% of the shares of Burger King and has committed to vote in favor of the combination, no shareholder vote is required of Burger King shareholders.

The merger will create a quick service restaurant company with roughly $23 billion in system sales and over 18,000 restaurants in 100 countries. Following the closing of the transaction, each brand will be managed independently.

Under the terms of the transaction, which has been unanimously approved by each company’s Board of Directors, Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 common shares of the new company per Tim Hortons share. Based on Burger King’s unaffected closing stock price on Aug. 22, 2014, this represents total value per Tim Hortons share of C$89.32, and based on Burger King’s closing stock price on Aug. 25, 2014, this represents total value per Tim Hortons share of C$94.05. As an alternative to the default mixed transaction consideration described above, each Tim Hortons shareholder will have the ability to elect to instead receive, for each Tim Hortons share held, either C$88.50 in cash; or 3.0879 common shares of the new company, in each case subject to pro ration.

The C$89.32 unaffected offer value represents a premium of 39% based on the volume weighted average price of Tim Hortons stock over the past 30 days ending Friday Aug. 22, 2014, and a 30% premium based on Tim Hortons closing stock price on Aug. 22, 2014.

3G Capital will retain all of its investment in Burger King by converting its roughly 70% equity stake in Burger King into equity of the new company. On a pro forma basis, 3G Capital is expected to own approximately 51% of the new company with the balance of the common shares to be held by current public shareholders of Burger King and Tim Hortons.

Upon completion of the transaction, each outstanding common share of Tim Hortons will be converted into the right to receive C$65.50 in cash and 0.8025 of a common share of the new parent company, which is subject to the right of the holders of Tim Hortons common stock to make elections as noted above. Upon completion of the transaction, each outstanding common share of Burger King will be converted into 0.99 of a share of the parent company and 0.01 of a unit of a newly formed Ontario limited partnership controlled by the new parent company, however, holders of shares of Burger King common stock will be given the right to elect to receive only partnership units in lieu of common shares of the new parent company, subject to a limit on the maximum number of partnership units that can be issued.

Shares of the new parent company will be traded on the New York Stock Exchange and the Toronto Stock Exchange, and units of the new partnership will be traded on the Toronto Stock Exchange. The partnership units will be convertible on a 1:1 basis into common shares of the new parent company, however, the units may not be exchanged for common shares for the first year following the closing of the transaction. Holders of partnership units will participate in the votes of shareholders of the new parent company on a pro-rata basis as though the units had been converted. 3G Capital has committed to elect to receive only partnership units.

The transaction is expected to be taxable, for U.S. federal income tax purposes, to the shareholders of Burger King, other than with respect to the partnership units received by them in the transaction. The transaction is expected to be taxable to shareholders of Tim Hortons in the U.S and Canada. – Chris Donnelly