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US Leveraged loan volume hits $8.5B this week, thanks to Dollar Tree

US leveraged loan issuance

The U.S. leveraged loan market saw $8.5 billion in new issuance during the week, thanks in large part to a $5.2 billion credit backing the merger of discount retail store chain Dollar Tree with Family Dollar.

With this week’s activity, year-to-date issuance totals $31.2 billion. That’s down significantly from the $45.8 billion seen at this point in 2014. Indeed, there were only a handful of leveraged loans making their way to market this week, as investors continue to focus on higher-quality deals, while making lesser-quality issuers pay up. – Staff reports

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Veresen Midstream on tap next week to launch $600M leveraged loan

RBC Capital Markets, TD Securities, and HSBC will hold a lender meeting on Wednesday, Feb. 4, to launch a $600 million, seven-year B term loan for Veresen Midstream LP, a joint venture being formed by Veresen Inc. and KKR that is acquiring assets from Encana Corp.

TD is left lead on the associated pro rata deal that is being syndicated in Canada, sources noted.

Veresen Midstream will acquire certain natural-gas-gathering-and-compression assets supporting Montney development in the Dawson area of northeastern British Columbia from Encana along with the Cutbank Ridge Partnership between Encana and Cutbank Dawson Gas Resources Ltd., a subsidiary of Mitsubishi Corp.

Veresen Midstream will be funded initially through the committed debt financing and a $500 million cash equity contribution from KKR, while Veresen will fund its initial equity investment by contributing its Hythe/Steeprock assets, sources said.

In addition to the term loan, the deal includes a $1.275 billion non-revolving expansion facility which will be largely undrawn initially and available to fund future growth, and a $75 million revolving credit facility which will be available for operating and working capital requirements. – Staff reports

 

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US Leveraged loan funds see 29th straight week of investor withdrawals

Cash outflows from bank loan funds declined to $443.1 million for the week ending Jan. 29, according to Lipper. That’s down from $738.1 million last week and $593.7 million two weeks ago.

leveraged loan funds

Inflows from exchange-traded funds, at $11.2 million, slightly offset mutual fund withdrawals of $454.3 million. This is only the second ETF inflow in the last 16 weeks, according to Lipper, but the latest ETF outflows have been negligible. Recall that ETFs were very heavy, at 18% of the big withdrawal six weeks ago, and that was anomalous to almost every other reading during the year.

The latest outflow represents the 29th consecutive weekly withdrawal and the 40th outflow in 42 weeks, for a net redemption of $26.5 billion over that span.

The trailing four-week average moderates to negative $537 million for the week, from negative $684 million last week and negative $821 billion two weeks ago. The observation five weeks ago, at $1.3 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.

The net $2.1 billion outflow for the first four weeks of the year, with 3% ETF-related, is in contrast to last year, which showed a net inflow of $3.4 billion for the same period, with 10% ETF-related. For the full-year 2014, outflows were roughly $17.3 billion, with ETFs representing about 3% of that total, or $516 million.

In today’s report, the change due to market conditions was slightly negative, at $31.7 million, or -0.04% of total assets, which were $86.7 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 8%. – Joy Ferguson

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Crestline-Kirchner takes over from Medley to manage two funds

Crestline-Kirchner has taken over from Medley Capital as manager of two investment funds.

The funds, called MOF I Funds, will change names.

Medley Opportunity Fund Ltd. will be renamed CK Pearl Fund Ltd., and Medley Opportunity Fund LP will now be called CK Pearl Fund LP. The funds launched as early as 2006.

The underlying investments include real estate projects and operating companies of small to midsize business. The assets include some debt positions.

The investments are across industries, including manufacturing, technology, developed and undeveloped land, and natural resources. Some of the investments are the result of equity that has been converted from debt of defaulted borrowers.

Crestline-Kirchner Private Equity Group, formed in 2013, is a joint venture between Crestline Investors and Bud Kirchner, founder of the Kirchner Group.

Medley Capital Corporation, an externally managed BDC that trades on the NYSE as MCC, lends to privately held small- and middle-market companies, mainly in North America. The portfolio largely comprises first-lien and second-lien loans, but also warrants and equity. It is managed by MCC Advisors, a subsidiary of Medley Management, which trades on NYSE as MDLY. – Abby Latour

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Alcentra names Hatfield as global CIO, Yang as head of the Americas

Alcentra today announced several executive leadership appointments, with Paul Hatfield returning to the Group’s global headquarters in London in an expanded role as global chief investment officer. He will lead the firm’s initiatives related to multi-strategy credit portfolio management and customized investment solutions.

Jack Yang succeeds Paul Hatfield, as Alcentra’s head of the Americas, while retaining his responsibilities as global head of business development. In his new role, Yang is responsible for the firm’s business operations in the Americas, and product development, marketing, fundraising and investor relations globally.

Both report to David Forbes-Nixon, Alcentra’s chairman and CEO. – Sarah Husband

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PODS tightens pricing, shifts to larger 1st-lien leveraged loan

Leads Morgan Stanley, Barclays, and Goldman tightening pricing across the board on their oversubscribed $610 million first- and second-lien financing backing Ontario Teachers’ Pension Plan’s purchase of PODS, a provider of moving and storage services. The issuer also shifted $20 million to the first-lien term loan. Recommitments are due tomorrow at noon EST.

Pricing on the now $410 million, seven-year first-lien term loan was reduced to L+425, with a 1% LIBOR floor, offered at 99.5. The soft call protection has been increased to 12 months from six months. By contrast the originally $390 million term loan was L+450-475, with a 1% LIBOR floor, at 99.

As revised the loan will yield 5.45% to maturity, down from 5.8-6.07% at initial talk.

The now $150 million, eight-year second-lien term loan is now priced at L+825, with a 1% floor, at 99. The loan, originally $170 million, had been talked in the L+850 area, with a 1% floor, offered at 98.5.

The second-lien term loan is callable at 102 and 101 in years one and two, respectively, and will yield 9.77% to maturity, down from 10.14% at earlier talk.

The covenant-lite financing also includes a $50 million revolver. Morgan Stanley is left lead on the first-lien, with Barclays as left lead on the second-lien.

The issuer is rated B/B2. The first-lien debt is rated B+/B1, with a 2 recovery rating. The second-lien debt is rated CCC+/Caa1, with a 6 recovery rating.

Teachers last month agreed to purchase PODS from Arcapita Partners at a value estimated to be in excess of 12x LTM EBITDA. The issuer would be leveraged in the low-6x area, and equity would comprise about 50% of capitalization, sources said. The RC will be subject to a maximum-first-lien-leverage test at 30% utilization. The loan includes 50 bps of MFN protection for life, sources added.

Clearwater, Fla.-based PODS provides both residential and commercial services in 46 U.S. states, Canada, Australia, and the U.K. – Chris Donnelly/Kerry Kantin

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Dollar Tree readies $7B leveraged loan backing Family Dollar buy

Arrangers J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, RBC Capital Markets, and US Bank have scheduled Dollar Tree’s M&A loan deal for launch with a lender meeting on Monday, Jan. 26, at 2:00 p.m. EST, sources said.

The financing backing the purchase of Family Dollar is now structured as a $1.25 billion, five-year revolver, a $500 million, five-year term loan A, and a $5.2 billion, seven-year term loan B.

The underwriting group now includes PNC, TD Securities, Capital One, Regions Bank, Citizens Bank, Bank of Tokyo-Mitsubishi UFJ, SunTrust Robinson Humphrey, SMBC, HSBC, Fifth Third, and Huntington National.

The original commitment called for $5.4 billion of term debt and $2.8 billion in new senior unsecured notes, sources said. Earlier, Dollar Tree said it would also use $569 million of available cash and a $240 million revolver draw to back the acquisition.

Family Dollar shareholders approved the transaction earlier this week, and closing is expected in March.

The combination of Dollar Tree and Family Dollar would create the largest discount retailer in North America by number of stores.

Chesapeake, Va.-based Dollar Tree operates variety stores in the U.S. and Canada. – Chris Donnelly/Richard Kellerhals

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Fifth Street BDC appoints Owens as CEO, replacing Tannenbaum

Fifth Street Finance Corp. has named Todd Owens as CEO, replacing Leonard Tannenbaum.

Owens most recently was president of Fifth Street Finance Corp., a role he held since September 2014.

Prior to Fifth Street, Owens spent 24 years at Goldman Sachs, where he was head of U.S. West Coast Financial Institutions Group, head of specialty finance, and a senior member of the bank group. He was also lead banker on FSC’s IPO.

Tannenbaum remains chairman and CEO of Fifth Street Asset Management, manager of two publicly traded BDCs, Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR).

Fifth Street Asset Management joined fellow BDC managers Medley and Ares, which all listed shares in IPOs last year.  – Abby Latour

Follow Abby on Twitter for news and insights on the middle market and BDCs segments.

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S&P: CLO exposure to recent Oil & Gas rating actions is limited

Standard & Poor’s Ratings Services has reviewed exposure in U.S. CLO transactions to the 23 oil and gas exploration and production companies whose ratings were affected by its Jan. 16, 2015 rating actions.

As per that report, the following borrowers were downgraded:

  • WPX Energy, to BB/Stable from BB+/Negative
  • Energy XXI, to B/Negative from B+/Negative
  • Warren Resources, to B-/Stable from B/Stable
  • Swift Energy, to B-/Stable from B/Stable
  • Midstates Petroleum Co., to B-/Negative from B/Stable
  • Magnum Hunter Resources Corp., to CCC+/Negative from B-/Negative
  • Black Elk Energy Offshore Operations, to CCC-/Negative from CCC+/Negative
  • Rooster Energy, to CCC-/Negative from CCC+/Developing.

 

The following borrowers had their outlook revised:

  • Chesapeake Energy Corp., to stable from positive (affirmed ‘BB+’ corporate credit rating)
  • Whiting Petroleum Corp., to negative from stable (affirmed ‘BB+’ corporate credit rating)
  • SM Energy Co., to stable from positive (affirmed ‘BB’ corporate credit rating)
  • Denbury Resources, to negative from stable (affirmed ‘BB’ corporate credit rating)
  • Legacy Reserves, to negative from stable (affirmed ‘B+’ corporate credit rating)
  • Chaparral Energy, to stable from positive (affirmed ‘B’ corporate credit rating)
  • Halcon Resources Corp., to negative from stable (affirmed ‘B’ corporate credit rating)
  • SandRidge Energy, to negative from stable (affirmed ‘B’ corporate credit rating)
  • Sabine Oil & Gas, to negative from stable (affirmed ‘B’ corporate credit rating)
  • Clayton Williams Energy, to negative from stable (affirmed ‘B’ corporate credit rating)
  • EXCO Resources, to negative from stable (affirmed ‘B’ corporate credit rating)
  • American Eagle Energy Corp., to negative from stable (affirmed ‘CCC+’ corporate credit rating).

 

The following borrowers had their rating placed on CreditWatch negative:

  • Apache Corp. – ‘A-‘ rating on CreditWatch with negative implications
  • Breitburn Energy Partners – ratings placed on CreditWatch with negative implications.

 

The following borrower had its rating affirmed:

  • Continental Resources – ‘BBB-‘ corporate credit rating affirmed. The outlook is stable.

 

Based on the agency’s review, a total of 17 U.S. CLOs have exposure to companies whose ratings were either lowered or placed on CreditWatch negative as part of the Jan. 16 rating actions. The largest exposure was 0.62%. All other exposures were less than 0.5%. Based on the small exposure, S&P doesn’t expect any rating actions for U.S. CLO transactions as a result of the Jan. 16 rating actions.

Based on its review in December 2014 of roughly 700 U.S. CLOs, the average CLO exposure to loans issued out of the oil and gas sector was only about 3.3%.

S&P will continue to review whether, in its view, the ratings currently assigned to CLO transactions exposed to the oil and gas sector remain consistent with the credit enhancement available to support them. – Staff reports

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SIG Combibloc sets talk as cross-border term loan launches to US investors

An arranger group led by Barclays today launched to U.S. investors SIG Combibloc’s cross-border loan deal, setting price talk of L/E+450-475, with a 1% LIBOR floor and a 99 offer price on the seven-year covenant-lite term loan. The loan includes six months of 101 soft call protection and would yield 5.8-6.07% to maturity at current guidance.

A London bank meeting is set for tomorrow at 2:00 p.m. GMT.

The €1.965 billion, seven-year cross-border term loan backing an acquisition by Onex Corp. is expected to include tranches of €985 million and $1.225 billion, although the official split is yet to be outlined.

The acquisition financing also includes a €300 million, six-year multicurrency revolving credit facility and €700 million-equivalent of senior unsecured notes, split into tranches of €350 million and $440 million.

Arrangers of the loan are Barclays, Bank of America Merrill Lynch, Goldman Sachs, Credit Agricole, Mizuho, Nomura, Rabobank, RBC, Royal Bank of Scotland, and UniCredit. Bank of America Merrill Lynch is left lead on the bonds.

Loan commitments will be due on Tuesday, Feb. 3.

The issuer also launched an offering of eight-year (non-call three) cross-border unsecured notes. Bank of America Merrill Lynch (B&D), Barclays, and Goldman Sachs are global coordinators. Nomura, RBC, Credit Agricole-CIB, Mizuho, RBS, and UniCredit are bookrunners. A European roadshow will take place Jan. 22-26, and the U.S. leg will run Jan. 27-30.

SIG is rated B+/B2. The first-lien debt is rated B+/B1, with a 3 recovery rating. The unsecured debt is rated B-/Caa1, with a 6 recovery rating.

The transaction will leverage SIG at 4.6x on a net-senior-secured basis, and at 6.3x on a net total basis.

Onex Corp. announced its takeover of the Reynolds Group Holdings’ drinks-carton division SIG Combibloc in November. Roughly €3.575 billion will be paid at the close of the acquisition, and up to another €175 million is payable based on the performance of the firm over the next two years.

Reynolds acquired Switzerland-based SIG Combibloc (formerly known as SIG Holding) in May 2007 for roughly €1.7 billion. The group produces packages and cartons for beverage and liquid food products, including juices, milk, soup, and sauces, with most of its revenue generated in Europe and Asia. – Staff reports