YouTube: June 2014 US leveraged loan market analysis (plus slides)

LCD’s video analysis detailing the US leveraged loan market during May is now on YouTube.

Loan prices rebounded during the month after April’s mini correction, a result of strong CLO issuance and slowing volume.

Looking to the summer, most players think the market will remain largely CLO-driven, with retail a slight drag on demand. Loan supply, meanwhile, is roundly expected to be lackluster. Though the M&A loan calendar remains within the recent range, some transactions are not expected to launch until the fall, and there are few blockbuster executions in the mix.

This month LCD looks at:

  • Average Bid of S&P/LSTA Loan Index
  • S&P/LSTA Index Loans Outstanding
  • Visible inflows
  • Average New-Issue Clearing Yields of First-Lien Loans
  • Loan Default Rate
  • M&A Institutional Loan Forward Calendar

The video is available here.

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Despite cooler leveraged loan mart, dividend volume hits recent high in April

leveraged loan dividends

The leveraged loan market may have cooled in April, but dividends remained hot. Indeed, issuers inked $7.9 billion of new recap-related loans during the month, up from $7.5 billion in March. April’s loan dividend total was the highest since May 2013, even as overall leveraged loan volume downshifted to $52.5 billion, from $64.8 billion in March.

You can read more about how leveraged loan dividends work here, in LCD’s Online Loan Market Primer.


Rocket Software withdraws recap loan due to choppy market conditions

Rocket Software today withdrew its proposed dividend recapitalization financing, according to sources.

The issuer elected to withdraw the transaction due to recent choppy market conditions, sources said. Rocket Software is the third opportunistic deal withdrawn from the market this month. On Friday, Booz Allen Hamilton cancelled a proposed refinancing of its TLB, while early in the month WideOpenWest pulled a proposed repricing of its term loans.

Jefferies earlier this month launched a covenant-lite deal that was split between a $550 million six-year first-lien term loan and a $175 million, seven-year second-lien term loan, proceeds of which would have been used to refinance existing debt and fund a dividend to Court Square Capital Partners and management. Via the transaction, the issuer would have also reduced pricing on both term loan tranches.

The first-lien had been talked at L+375, with a 1% LIBOR floor, offered at 99.5, while guidance on the second-lien was L+725, with a 1% floor, offered at 99.

A late 2012 add-on took Rocket’s first-lien term loan due February 2018 to roughly $357 million. The loan is priced at L+450, with a 1.25% LIBOR floor. The issuer also has in place a $105 million second-lien term loan stemming from an early 2012 transaction that backed a $260 million dividend, sources noted. The second-lien is priced at L+875, with a 1.5% floor.

Rocket Software is a global provider of enterprise-infrastructure software. The firm is engaged in business and technology partnerships with IBM, EMC, Fujitsu, HP Enterprise Services, Datatel, Avaya, Motorola, and others. The issuer has 83% revenue visibility and renewal rates of 95%, sources noted. – Kerry Kantin


Presidio (Sponsor: American Securities) sets $600M leveraged loan for dividend recap

presidioBarclays, Morgan Stanley, PNC, and SunTrust Robinson Humphrey are launching a dividend recapitalization for Presidio with a bank meeting on Tuesday, March 4, at 10:00 a.m. EST. Presidio, a provider of advanced-technology infrastructure solutions, is seeking a $600 million B term loan due March 31, 2017.

Proceeds will be used to refinance existing debt, fund a one-time distribution to shareholders, and pay related fees and expenses. PNC is administrative agent on the loan, sources noted.

Presidio in August 2012 placed a $385 million term loan at L+450, with a 1.25% LIBOR floor. Amortization on the existing loan, currently 1%, is poised to kick up to 5% later this year. The deal includes a total leverage test.

Sponsor American Securities contributed $230 million of equity in the 2011 LBO, a transaction that leveraged Presidio at roughly 3.8x, all senior, according to sources.

The issue is currently rated B+/B1, with current loan ratings at B+/Ba3. – Chris Donnelly


Asurion outlines price talk as $2.25B recap leveraged loan launches

Bank of America Merrill Lynch, Morgan Stanley, Barclays, Credit Suisse, Deutsche Bank, and Goldman this morning launched their mix of add-on and new covenant-lite first- and second-lien loans for Asurion.

Proceeds will be used to refinance the company’s holdco debt and fund a distribution to shareholders and option holders, sources said. The issuer appears to be raising more than $1.2 billion of incremental debt.

Asurion is planning a $300 million fungible add-on to its TLB-1 due May 24, 2019, talked at L+375, with a 1.25% LIBOR floor, and offered at 99-99.5, along with a new non-amortizing $250 million, three-year TLB-3 that is talked at L+300, with a 0.75% LIBOR floor, and offered at 99.5. All the new and existing first-lien loans will now include 12 months of 101 soft call protection.

The new $1.7 billion, seven-year second-lien term loan is talked at L+750-800, with a 1% LIBOR floor, offered at 98, sources said. The loan will be non-callable for one year, followed by 103 and 101 call premiums in years 2-3, respectively.

Asurion will amend alongside the new loans, increasing pricing on both its B-1 and B-2 loans and including a 50 bps amendment fee.

Pricing on the $3.9 billion covenant-lite B-1 term loan due May 2019 would increase to L+375, with a 1.25% LIBOR, from L+325, with a 1.25% LIBOR floor and a 101 soft call premium that runs through Feb. 22, 2014.

The roughly $850 million B-2 term loan due July 8, 2020, currently priced at L+275, with a 0.75% LIBOR floor would increase to L+350, with a 0.75% LIBOR floor.

New money commitments and amendment consents are due at noon EST on Wednesday, Feb. 26.

At current talk, yields would be as follows:

  • The new money TLB-1 would yield 5.21-5.33% to maturity; including the fee, the amended TLB-1 would yield 5.21%;
  • The amended TLB-2 would yield 4.41% to maturity;
  • The new TLB-3 would yield 3.99% to maturity;
  • The new second-lien term loan would yield 9.19-9.73%.

The current $1 billion unsecured term loan sits at Lonestar Intermediate Super Holdings LLC. The 7.5-year, covenant-lite loan is priced at L+950, with a 1.5% LIBOR floor. It is non-callable for two years and then callable at 102 and 101 in years three and four, respectively.

Asurion, which provides protection services for the wireless industry, is controlled by Madison Dearborn, Berkshire Partners. Providence Equity Partners, and Welsh, Carson, Anderson & Stowe. – Chris Donnelly


Leveraged Loan Volume Rebounded Last Week to $8.3B Though Activity Remained Tepid

weekly leveraged loan volume

Leveraged loan volume in the U.S. totaled $8.3 billion last week, up sharply from the $3.5 billion the previous week, though volume overall remains unimpressive.

The largest deal to launch was a $1.68 billion credit backing CACI International’s acquisition of Six3 Systems. Both companies provided information solutions and services in support of national security missions and government transformation for intelligence, defense, and federal civilian customers.

Of interest last week, private equity concerns Carlyle and Stone Point launched a $135 million term for financial advisory concern Duff & Phelps backing, among other things, a dividend to the sponsors. As well, the loan was covenant-lite, meaning it has fewer restrictions than seen on traditional loans. (You can read more about how covenant-lite loans work here.) Despite the looser structure and dividend purpose, the credit saw appetite enough in the institutional investor market that the fee on offer to join the deal was trimmed during syndication, according to LCD’s Chris Donnelly and Kerry Kantin.

Of the 16 deals officially launching during the week (through yesterday), five were covenant-lite while eight arrived courtesy private equity sponsors (including Duff & Phelps).

With last week’s activity, year-to-date leveraged loan volume totals $508 billion, easily outpacing the full-year 2012 total of $465 billion. The full-year record is $535 billion in 2007. These volume numbers entail “new-money” deals, as opposed to credits that simply reset existing tranches of add-on loans, amendments and restatements.


Duff & Phelps’ (Carlyle Group, Stone Point) $135M add-on loan enters trading above issue price

duff-and-phelpsThe $135 million add-on term loan for Duff & Phelps broke for trading this afternoon at 99.875/100.375, versus issuance at 99.5, according to sources. The covenant-lite loan due April 2020 is priced at L+350, with a 1% LIBOR floor and includes six months of 101 soft call protection. Credit Suisse, Barclays, RBC Capital Markets, and Goldman Sachs arranged the transaction. The issuer, which was acquired earlier this year by an investor group led by The Carlyle Group and Stone Point, plans to use proceeds to repurchase a portion of a tax-receivable agreement and fund a shareholder dividend. There’s also an amendment alongside the capital raise, which pays a 10 bps fee. The amendment will refresh the incremental tranche at its original level, permit the dividend, reset call protection, and delay the excess cash flow sweep until 2014, sources said. The issuer’s existing $349 million term loan, the proceeds of which backed the leveraged buyout of the company, was syndicated in March via Credit Suisse, Barclays, and RBC Capital Markets. The seven-year loan cleared the market at L+350, with a 1% LIBOR floor, and was issued at 99.75. The financing package also included a $75 million, five-year revolving credit with a springing covenant. Duff & Phelps is a New York City-based provider of independent financial advisory and investment banking services. Terms:

Borrower Duff & Phelps
Issue $135 million add-on term loan
UoP Repurchase a portion of a tax-receivable agreement, fund shareholder dividend
Spread L+350
LIBOR floor 1.00%
Price 99.50%
Tenor/maturity April, 2020
YTM 4.67%
Call protection six months 101 soft call
Corporate ratings B/B2
Facility ratings B/B2
S&P recovery rating 3
Financial covenants none
Arrangers/bookrunners CS, Barclays, RBC, GS
Admin agent CS
Sponsor Carlyle Group, Stone Point

Europe: PE firms load up on dividends via leveraged loan, high yield bond marts

european dividend volume

Private equity sponsors have used the combined strength of the European leveraged loan and high-yield markets to pay themselves €5.3 billion of dividends in the year to the end of September. This is a record for the post-financial-crisis era, and is roughly evenly split between the loan and high-yield markets.

September’s dividend recaps on the loan side included Charterhouse-owned Card Factory, which raised a £165 million C term loan, and Providence-owned satellite services provider M7, which raised a €355 million financing.

You can read more about dividend/recaps here, in LCD’s online leveraged loan market Primer. It’s free. 


YouTube, slides: October 2013 US Leveraged Loan Market Analysis

LCD’s video analysis detailing the US leveraged finance market during September is now on YouTube.

With interest rates trending lower during the month loan returns trailed those of high-yield and other fixed-income categories, reversing the pattern of the prior four months, when 10-year Treasury rates were on the rise. Looking ahead, most participants think supply is more likely to ebb than to rise in the out months of 2013.

This month LCD looks at:

  • Leveraged loan volume
  • Average bid of S&P/LSTA loan 100 index
  • S&P/LSTA Index loans outstanding
  • Visible inflows
  • New-issue clearing yields of first-lien loans
  • Covenant-lite share of  new issue volume
  • High yield bond prices
  • Loan default rate
  • M&A institutional loan forward calendar

The video is available here.

The URL for the video:

PDF slides of the video on Slideshare are available here.

URL for the slides:

(If you’re reading this on the video is at the end of this story.)

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TransDigm investors give amendment nod as $700M term loan fills

Investors today approved an amendment that paves the way for TransDigm’s dividend recapitalization deal, sources said. Meanwhile, the company’s $700 million incremental C term loan shopped by a Credit Suisse-led arranger group has been oversubscribed in advance of the deadline on Tuesday, June 25, sources said.

The add-on debt is offered at 98-98.5 and would be fungible with the issuer’s existing covenant-lite C term loan maturing in 2020, which is priced at L+300, with a 0.75% LIBOR floor. At the proposed guidance, the loan would yield 4.08-4.17% to maturity.

Credit Suisse, UBS, Barclays, Citi, Morgan Stanley, and RBC Capital Markets are arranging the loan, proceeds of which, along with $700 million of bonds, would be used to fund a shareholder dividend. UBS will be left lead on the adjoining bond deal, sources noted.

TransDigm said this morning that it would be seeking an amendment to its existing loan to allow for the proposed transaction. The contemplated dividend would total $1-1.8 billion, according to the company. Pro forma leverage would increase to roughly 6x. The amendment will also shift the revolver to a springing covenant and widen certain incurrence tests to allow for the deal.

Lenders to the new and existing C term loans will be offered one year of 101 soft call protection, sources noted.

TransDigm last tapped the loan market in February for a covenant-lite refinancing via Credit Suisse that was split between the $2.2 billion TLC due 2020 as well as a $500 million TLB due 2017 (L+275, 0.75% floor). The TLC, which is currently covered by a 101 soft call premium that rolls off in February 2014, had been pegged in a 100.5/101 context prior to news of the proposed debt-financed dividend, sources said. The issuer is currently rated B+/B1.

TransDigm supplies engineered aircraft components for commercial and military aircraft. The company trades on the New York Stock Exchange under the ticker TDG and has a market capitalization of nearly $8.4 billion. – Chris Donnelly/Kerry Kantin