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CLO roundup: Europe supply passes FY forecast, US pipeline builds

Europe saw the bulk of the action this week, pricing three new CLO transactions, against two for the U.S. market. The ABS East conference, taking place at the start of the week, dampened new-issue activity stateside, leaving the European CLO market to step into the spotlight on two counts: supply and spreads.

LCD subscribers can click here for full story, analysis, and the following charts:

  • Deal pipeline
  • US arbitrage CLO issuance and institutional loan volume
  • Global CLO volume

. - Sarah Husband

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Leveraged Loans: CLOs drive investor mart as retail remains in red

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In the third quarter, the investor base for new-issue leveraged loans grew even more dependent on CLO funding amid (1) retail outflows from loan funds and (2) ongoing reticence by banks and securities firms to play in loans in which they don’t have an arranger role.

Banks, in fact, were again bit players during the first three quarters of 2014, taking a record-low 9.9% of non-arranger allocations to leveraged loans, according to LCD’s analysis, down from 14.1% in 2013. Banks’ share in the third quarter was in line, at 9.8%.

LCD subscribers, please click here for full story, analysis, and the following charts:

  • Share of institutional volume rate four-B or higher
  • Number of loan investor groups
  • Visible inflows to the loan asset class
  • Primary market for institutional loans
  • Average AAA CLO spread
  • Share of S&P/LSTA Index bid below par and single-B YTM
  • Repricing volume
  • Primary market for institutional loans
  • Relative-value players’ share of allocations and high-octane volume
  • Primary allocations of 2014 institutional loans by investor type
  • Number of managers that issued a 2.0 CLO
  • Average CLO size
  • CLO and Index outstandings
  • CLO outstandings as a share of S&P/LSTA Index
  • CLO outstandings
  • Assets under management 2Q 2014


– Steve Miller

Follow Steve on Twitter for an early look at LCD analysis, plus market commentary.

 

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Leveraged loan default rate to remain low in months ahead: LCD survey

Managers expect loan defaults to remain scarce in the near future, according to LCD’s latest quarterly buyside survey, taken in early September.

On average, managers predicted that the lagging-12-month default rate of the S&P/LSTA Leveraged Loan Index will end 2014 at 0.78% by amount, versus 0.44% in August. (These figures exclude Energy Future Holdings. Including EFH, they are 3.88% and 3.34%, respectively.) Looking out to September 2015, managers expect the rate to climb to 1.38% (EFH will have fallen from the lagging 12-month rolls by then).

For LCD subscribers, please click here to access the complete story, analysis, and the following charts:

  • Earnings growth of S&P companies
  • Averaged cash-flow coverage of outstanding loans
  • Averaged leverage of large LBOs
  • Average (EBITDA-capex)/cash interest of large LBOs

– Steve Miller

Follow Steve on Twitter for an early look at LCD analysis, plus market commentary.

 

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CLO roundup: September gets off to slow start in both US, Europe

It’s been a tentative post-summer return for the CLO market with just three new issue CLOs pricing so far in the U.S. this month, and the Dryden XXVII tap providing Europe’s only new issue activity to date. Still, a number of transactions are expected to price this week, ahead of the IMN’s ABS East Conference in Miami next week (Sept. 21-23).

Global CLO issuance in 2014 stands at $97.71 billion, according to LCD.

LCD subscribers can click here for full story, analysis, and the following charts:

  • Deal pipeline
  • US arbitrage CLO issuance and institutional loan volume
  • European arbitrage CLO issuance and institutional loan volume


– Sarah Husband

 

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Leveraged loan funds see outflow for 9th straight week, modest ETF influence

Cash outflows from bank loan funds declined slightly to $342 million during the week ended Sept. 10, versus outflows of $435 million last week and $297 million two weeks ago, according to Lipper. The influence of bank-loan ETFs on this week’s number was 21%, as Lipper recorded a $70 million outflow from ETFs. This compares to a $20 million inflow into ETFs last week.

There now have been 20 weeks of outflows over the past 22 weeks, for a total outflow of $10.9 billion over that span, which follows a record-shattering 95-week inflow streak that totaled $66.7 billion.

The trailing four-week average narrows to negative $404 million per week, from negative $490 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 $3.9 billion, based on a net withdrawal of $4.3 billion from mutual funds against a net inflow of $459 million to ETFs. In the comparable year-ago period, inflows totaled $42 billion, with 11% tied to ETFs.

The change due to market conditions was a negative $308 million, versus total assets of $103.7 billion at the end of the observation period. The ETF segment comprises $8 billion of the total, or approximately 8%. – Joy Ferguson

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CLO roundup: Pipelines point to busy year-end for both US, Europe

After a busy summer, with both the U.S. and European CLO markets churning out new transactions in August, there is every indication that CLO issuance will remain strong all the way through to year-end.

Global CLO issuance in 2014 has now risen to $96.64 billion, according to LCD.

The U.S. remains the main driver of this total, printing $10.68 billion of volume from 20 deals in August, versus $13.39 billion from 23 deals in July and $13.78 billion in June, according to LCD. Note that refinancings are not included in these numbers.

LCD subscribers, please click here for full story, analysis and the following charts:

  • Global CLO volume (Jun 13-Sep 5)
  • US arbitrage CLO issuance and institutional loan volume
  • European arbitrage CLO issuance and institutional loan volume
  • Deal pipeline

– Sarah Husband

 

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Cool summer: Loan break prices sink to 2-year low in August

With the loan market getting off to a rocky start in August, the average price at which first-lien institutional loans broke for trading slumped to a two-year low of 99.65% of par during the month, from 99.91 in July.

The average issue price was also materially lower last month, sliding to 99.02 – its lowest monthly level since December 2012 – from 99.23 in July.

LCD subscribers can click here to access full story, analysis, and the following chart:

  • Averaged new-issue yield to maturity for leveraged loans


– Kerry Kantin

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Leveraged loans return 0.15% in August; YTD return is 2.73%

Through August, the S&P/LSTA Index is up 2.73%, versus 3.28% during the first eight months of 2013. Despite August’s market-beating gain, the Loan 100 lags in the year to date, at 2.46%, versus 2.99% during the same period last year.

Complete story, analysis, and the following charts are available to LCD subscribers, please click here.

  • Annual returns
  • Average bid of the S&P/LSTA Index
  • Returns by type of debt
  • Weekly loan fund flows
  • Par amount outstanding of the S&P/LSTA Index
  • CLO issuance
  • Average new-issue first-lien spreads
  • Repricing volume by month
  • Institutional M&A forward calendar


– Steve Miller

Follow Steve on Twitter for an early look at LCD analysis, plus market commentary.

 

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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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Withdrawn deal: Bioplan/Arcade tables loan for now; will relaunch in September

bioplan-2-42581Goldman Sachs, Credit Suisse, Barclays, and Deutsche Bank have postponed until September syndication of their financing backing the merger of Bioplan and Arcade Marketing due to market conditions, sources said. The transaction requires regulatory approvals and wasn’t expected to close until mid-to-late-September, sources noted.

Amid difficult market conditions arrangers earlier attempted to jump-start the deal, boosting first-lien pricing to L+450, with a 1% LIBOR floor, offered at 98.5, and increasing talk on the second-lien term loan to L+800, with a 1% floor, at 98.

The covenant-lite deal will comprise a $375 million, seven-year first-lien term loan with six months of 101 soft call protection; a $145 million, eight-year second-lien term loan with 102, 101 call protection; and a $65 million five-year revolver. The first-lien loan was talked earlier at L+400-425, with a 1% floor, at 99, while talk on the second-lien loan was previously at L+750-775, with a 1% floor, at 99. The deal would have included a ticking fee that kicks in at half the spread for days 31-60, rising to the full spread on day 61. Goldman is left lead on the first-lien facilities, while Credit Suisse is left lead on the second-lien term loan.

The issuer is rated B/B3. The first-lien debt is rated B+/B2, with a 2 recovery rating. The second-lien debt is rated B-/Caa2, with a 5 recovery rating.

Ileos, which is owned by Oaktree, and KKR-controlled Visant earlier this month agreed to combine the units into a new business providing sampling products and services for the beauty, fragrance and personal-care segments, sources said.

Oaktree will hold a 75% stake in the venture, while KKR and DLJ Merchant Banking will hold the remaining 25% ownership interest.

The new venture is expected to generate annual revenue of approximately $450 million on a combined basis, according to Ileos. The combined venture would generate roughly $88 million of annual EBITDA, sources added. The transaction is expected to close by the beginning of the fourth quarter of 2014.

The Bioplan subsidiary of Ileos specializes in unit-dose sampling and promotional turnkey products, providing vials, sprays, sachets, tubes and thermoform units for care, perfume, and makeup. Arcade Marketing is a global provider of sampling products for the fragrance, cosmetics, and skincare segments. – Chris Donnelly