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European leveraged loans see 6th-biggest loss ever

The S&P European Leveraged Loan Index (ELLI) lost 0.16% on Aug. 24 following the sharp fall in global equity markets. This was the sixth biggest daily loss since the Index began tracking daily pricing in May 2013 (excluding currency fluctuations).

Yesterday’s loss pushed August market value return further into the red, at negative 0.29% for the month. As a result, the Index was flat so far in August, at 0.01%, as the negative market value virtually wiped out 0.30% of interest return.

Market players said that many names were down a quarter to half a point yesterday, as Europe showed its habitual resilience despite the turmoil in other markets, although some cross-border names or those with high-yield bonds took a larger step downwards. Some assets came loose, including from market-value funds, but there were buyers on hand with CLOs looking to ramp warehouses, market sources said.

This morning, European equities were firmer despite further weakness overnight in China, and trading activity in the loan market was muted with levels broadly unchanged. The iTraxx Crossover tightened, seen at 352/354 at press time. Loan market participants say they are now waiting to see, in the near term, whether the broader volatility will have any impact on the pace of issuance and on the clearing yields of the next batch of primary deals. – Staff reports
 

 

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Loan defaults set to hit 6-month high with Samson Resources Ch 11 filing next month

The default rate of the S&P/LSTA Leveraged Loan Index will increase to 1.27% by principal amount next month, from 1.17%, when Samson Resources via Samson Investment Company files for bankruptcy, tripping a default on its second-lien secured loan. The default rate by issuer count will tick up to 0.77%, from 0.67%, according to LCD.

The default rate would be at a six-month peak, or the highest level since 3.79% as of March 31, although that was including Energy Future Holdings, which is no longer counted in the default rate due to the rolling-12-month basis. Excluding EFH, the default rate post-Samson would hit its highest level since February 2014 when it was 1.86%, according to LCD.

Privately held, KKR-controlled Samson on Friday announced publicly that it has entered into a restructuring support agreement with certain lenders holding 45.5% of the company’s second-lien debt, and with its sponsor on a proposed balance sheet restructuring that “would significantly reduce the company’s indebtedness and result in an investment of at least $450 million of new capital.”

Under the terms of the RSA, second-lien lenders, including Silver Point, Cerberus and Anschutz, have agreed to invest at least $450 million of new capital to provide liquidity to the balance sheet post reorganization and permanently pay down existing first-lien debt, the company said.

As a result, the company said it would not make the interest payment due today under its sole outstanding corporate issue, the $2.25 billion of 9.75% unsecured notes due 2020, but instead would use the 30-day grace period triggered by its non-payment “to build broader support for the restructuring and continue efforts to document and ultimately implement the reorganization transaction as part of a Chapter 11 filing.” The debt is worthless, trading below 1 cent on the dollar, down from around 30 in March, and a par context a year ago before the bear market mauling in oil.

The Samson loan default would not be particularly large, as the second-lien term loan was originally $1 billion in the Index. However, it’s notable as the second largest loan default this year, or since Caesars Entertainment kicked off the New Year in mid-January with the sixth largest default on record, at $5.36 billion across four tranches in the Index, according to LCD.

Assuming no other defaults leading up to Samson next month, it would become sixth loan-issuer default in the Index this year, following rival coal credits Alpha Natural Resources earlier this month, Patriot Coal in May, and Walter Energy in April, as well as exploration-and-production company Sabine Oil & Gas in April. Meanwhile, the eight ex-Index defaults this year are Altegrity, Allen Systems, American Eagle Energy, Boomerang Tube, Chassix, EveryWare, Great Atlantic & Pacific Tea, and Quicksilver Resources.

The shadow default rate for the Index is currently at 0.72%, down from 0.82% last month, but nearly triple the 0.29% rate in April. There is $5.51 billion of Index outstandings on the shadow list, and that includes Samson since its hiring of Kirkland & Ellis and Blackstone Group in February. This rate includes loans that are paying default interest but which are still performing, loan issuers that have bonds in default, and issuers that have hired bankruptcy counsel or that have secured a forbearance agreement.

There are five loan issuers on the shadow list that are publicly known. Beyond Samson, it’s Gymboree, Dex Media, Millennium Health, and Vantage Drilling, all of which are consulting advisors. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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Alex Toys, maker of Slinky, expanded loan from THL Credit for acquisitions

THL Credit increased an investment in Alex Toys in the fiscal second quarter to fund two acquisitions.

Alex Toys received a $13.2 million second-lien term loan and a $1 million equity investment in the quarter ended June 30, THL Credit said in a statement.

THL Credit’s debt investment in Alex Toys comprised a $30.2 million second-lien term loan due 2019 (L+1,000) as of June 30, up from a $17 million second-lien term loan due 2019 (also at L+1,000) as of March 31.

In May 2015, Alex Toys acquired Buzz Bee Toys, as well as France-based toymakers Janod and Kaloo.

Alex Toys sells branded toys, sports balls, educational activity kits, games, science kits, construction sets, and novelty products under brands such as POOF, Slinky, Scientific Explorer, Ideal, ZOOB, Backyard Safari, Zillionz, Shrinky Dinks, and Ruff Stuff.

THL Credit is an externally managed business-development company that trades on the NASDAQ under the ticker TCRD. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

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Mid-market corporate auctions in Europe to watch

Inflexion Private Equity has emerged as the frontrunner to acquire Quilvest-owned sushi chain Yo! Sushi, according to reports. Quilvest mandated Canaccord Genuity to run the process, which attracted several financial sponsors understood to include 3i Group and Morgan Stanley Private Equity, as well as Inflexion. Inflexion has subsequently won exclusivity after the final round of bidding, and is expected to acquire the company for roughly £100 million.

The auction of Dutch lingerie retailer Hunkemöller has taken an interesting twist, with U.S.-based private equity group Sycamore Partners reportedly submitting a last-minute bid that could trump offers from rival buyout groups CVC Capital Partners, Apax Partners, and The Carlyle Group, according to reports. The company, which is owned by PAI Partners, is valued at roughly €440 million.

Corsair Capital is understood to be close to launching a formal sale process for ATM company NoteMachine, according to market sources, who suggest Jefferies is likely to run the auction, which could begin in September or early October.

NoteMachine – which Corsair acquired in 2012 from buyout peer Rutland Partners – could fetch roughly £320 million. The business is backed by a £120 million unitranche loan provided by GE Capital and Ares Capital Europe joint venture the ESSLP, upsized last June from an existing £76.5 million facility.

Health and safety consultancy Santia is also set for the auction block, with turnaround investor and current owner Better Capital mandating PwC in recent weeks to advise on strategic options for the business. In Better Capital’s most recent financial statements, Santia carried a NAV of £40 million as of March 31, 2015 – up from £36.2 million a year earlier.

After a flurry of deals already in the sector this year, two more travel agents are soon to carry ‘for sale’ signs. Equistone Partners Europe is eyeing an exit for Audley Travel, according to reports, and has mandated Rothschild to run the auction. The business could be valued at more than £200 million.

Inflexion is also understood to be eyeing a realisation of its investment in On the Beach, which carries a £250 million valuation. The firm is reportedly exploring an IPO of the business, but could yet run an auction process.

Polish national airline LOT has attracted the interest of private equity group Indigo Partners, according to reports. Indigo, an experienced airline investor, is reportedly looking to buy a stake in the carrier and invest several hundred million zloty to help Warsaw, the airline’s home city, become a hub for the Central and Eastern Europe region.

In Ireland meanwhile, private equity group CapVest is lining up financing to support a bid for plastics and environmental services company One51. CapVest made a preliminary approach to the firm’s board regarding a €288 million (or €1.80 per share) offer for the Irish company. The firm generated EBITDA of €21.9 million last year, on revenue of €276.5 million. – Oliver Smiddy

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CLO roundup: US prints two deals, Europe closes on first refinancing

global CLO issuance

Just two new-issue transactions priced globally last week amid the August slowdown, with chatter in Europe saying two managers have already opted to delay pricing transactions until September, when the market is fully staffed again. Global issuance edged up to $77.86 billion, according to LCD. – Sarah Husband

Year-to-date statistics through July 31 are as follows:

  • Global issuance is $77.86 billion.
  • U.S. issuance is $67.21 billion from 126 deals, versus $79.54 billion from 146 deals during the same period last year.
  • European issuance is €9.58 billion from 24 deals, versus €7.7 billion from 18 deals during the same period last year.

twitter icon Follow Sarah on Twitter for news and analysis on the global CLO markets.

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CLO Round-up: With SEC clarity re risk-retention (finally), an active week

global CLO volume

After a sluggish start to the month, it was an active week in the U.S., both in terms of new issues and on the regulatory front. Four U.S. new-issue transactions priced, while in Europe, AXA Investment Managers priced the third deal of the month, a €362.3 million transaction, via J.P. Morgan. Through Friday, July 24, global issuance rises to $73.67 billion.

The SEC provided much-awaited guidance that CLOs issued prior to Dec. 24, 2014 – the date the final risk-retention rule was published – will be able to refinance debt tranches under certain conditions after the rule takes effect in December 2016 without being subject to risk retention. The SEC’s position is reflected in a July 17 no-action letter in response to a request from Crescent Capital Group. It provides the market with clarity around the refinancing issue, which has been a topic of discussion since the final risk-retention rule was first published in October 2014. – Kerry Kantin/Isabell Witt

Year-to-date statistics, through July 24, are as follows:

  • Global issuance totals $73.67 billion
  • U.S. issuance totals $63.94 billion from 120 deals, versus $71.11 billion from 133 deals during the same period last year
  • European issuance totals €8.75 billion from 22 deals, versus €6.92 billion from 16 deals during the same period last year

 

This analysis is taken from a longer LCD News story, available to subscribers here, that also details

  • Recently priced CLOs
  • CLO pipeline
  • US CLO volume/outstandings
  • European CLO volume/outstandings
  • European priced CLOs

 

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Tikehau hires Goold for European CLO business

Alison Goold has joined Tikehau as a portfolio manager in its European CLO business. In this new position, Goold will report to Debra Anderson, head of the CLO department.

Goold joins from BNP Paribas, where she had been a director in the leveraged syndications team. Previously she had been head of corporate credit and a portfolio manager at AgFe, an independent advisory and asset management firm, and before that was a managing partner at mezzanine fund manager Carta Capital.

Tikehau recently priced its debut €354.7 million CLO through Goldman Sachs. – Nina Flitman

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AssuredPartners’ buyout by Apax backed by BAML, RBC, MS

Bank of America Merrill Lynch, RBC Capital Markets, and Morgan Stanley have provided committed debt financing to back Apax Partners’ acquisition of insurance brokerage AssuredPartners from GTCR.

Sources indicate the debt financing will be U.S.-focused.

AssuredPartners is one of the largest insurance brokerage firms in the U.S. It was formed in 2011 as part of a strategic partnership between private equity firm GTCR and the company’s CEO and COO. It has offices in more than 30 states, the District of Columbia, and London. – Nina Flitman

 

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Online Loan Primer/Almanac updated with 2Q numbers, charts

LCD’s online Loan Market Primer has been updated to include second-quarter 2015 and historical volume and trend charts.

The online Primer can be found at LevergedLoan.com, LCD’s free website promoting the leveraged loan asset class. LeveragedLoan.com features select stories from LCD news, as well as weekly loan market trends, stats, and analysis.

We’ll update the Primer charts regularly, and add more as the market dictates (new this time around: LCD’s “What is a Leveraged Loan” explainer video).

Charts included with this release of the Primer:

The Loan Market Primer is one of the most popular pieces LCD has published. Updated annually (print) and quarterly (online) to include emerging trends, it is widely used by originating banks, institutional investors, private equity shops, law firms and business schools worldwide.

Check it out, and please share it with anyone wanting an excellent round-up of or introduction to the leveraged loan market.

Here’s the Primer table of contents (go online to see the submenus for each category):

  • What is a Leveraged Loan?
  • Market background
  • Leveraged Loan Purposes
  • How are Loans Syndicated?
  • Types of Syndications
  • The Bank Book
  • Leveraged Loan Investor Market
  • Public vs. Private Markets
  • Credit Risk – Overview
  • Syndicating a Loan – by Facility
  • Pricing a Loan – Primary Market
  • Types of Syndicated Loan Facilities
  • Second-Lien Loans
  • Covenant-Lite Loans
  • Lender Titles
  • Secondary Sales
  • Loan Derivatives
  • Pricing Terms/Rates
  • Fees
  • Original-Issue Discounts
  • Voting Rights
  • Covenants
  • Mandatory Prepayments
  • Collateral
  • Spread Calculation
  • Default/Restructuring
  • Amend-to-Extend