Seix Advisors hires Wu from CIFC to expand CLO business

Seix Investment Advisors has announced the hiring of John Wu as managing director of structured capital markets. Wu will primarily be responsible for the expansion of the firm’s CLO business.

Wu was previously the co-head of structured products, a senior portfolio manager, and managing director overseeing 15 CLO new issue/refinancing transactions at CIFC.

Prior to CIFC, he was the head of CLO structuring at UBS and director in global credit trading at Deutsche Bank. He began his career in the Credit Derivatives group at Goldman Sachs. – Staff reports


Rolls-Royce acts on low U.S. yields in rare bond market appearance

Another muted primary-market session was enlivened by a $1.5 billion deal for RollsRoyce, a name last seen in the U.S. debt markets more than two decades ago. The company, which sought to bolster its liquidity position amid share buybacks and capital-spending plans, launched $500 million of five-year notes at T+105 and $1 billion of 10-year notes at T+160, or firm to guidance ranges and substantially through initial whispers in the areas of T+137.5 and T+187.5, respectively.

Moody’s today noted that the company was motivated to capitalize on “historically low yields available in the U.S. bond market,” and said the ratings outlook at the A3 level was unaffected despite the attendant rise in leverage for the infrequent borrower.

The deal also came as the CDX IG 25 was, on net, little changed today in the 87.5 bps area, with most single-name constituents tighter for a second straight session, and with the index down from recent multiyear highs near 95 bps. But while the footing is firmer week to week, issuers unencumbered by earnings blackouts still have every reason to proceed with caution: many recent new issues continue to trade wide of issuance, including long-dated bonds placed by Hewlett Packard Enterprise in a $14.6 billion, curve-spanning offering backing its spin-off from the hardware business, a deal that the company was forced to pay 40-70 bps in new-issue concessions to clear.

Meantime, five-year CDS referencing the debt of DuPont rose 11% today to a four-year high in the mid-80 bps area, after the company yesterday said it would replace CEO Ellen Kullman with Tyco International Chairman Edward Breen, who was recently added to DuPont’s board amid what the company described as a “challenging environment” necessitating a “deep dive” into the company’s cost structure. The move dovetailed with steady pressure from activist investors to explore ways to unlock value, including via a possible breakup of the company. DuPont spreads vaulted higher from a low base in July 2013, after activist Nelson Peltz’s Trian Fund Management took a big stake in the company, in what was considered a contributing factor in DuPont’s later decision to spin off its titanium dioxide unit to shareholders.

After inking a deal to acquire Pharmedium Healthcare for $2.575 billion, the five-year CDS referencingAmerisourceBergen was steady today in the 40 bps area, which is where it has been indicated throughout the year, trade data show. ABC in February placed a $1 billion offering backing its $2.5 billion acquisition of MWI Veterinary Supply, an animal-health distribution company.

Standard & Poor’s Ratings Services today affirmed the A- rating and stable outlook on ABC, citing expectations for a “modest” increase in leverage to 1.6x for fiscal 2016, pro forma for the latest acquisition, from 1.2x. ABC plans to secure a $1 billion, five-year term loan in support of the transaction, and will fund the balance with cash on hand and by utilizing its credit facility, the company said today.

Today’s only other primary-market highlight was provided by Royal Bank of Canada’s $1.75 billion offering of 2.1% covered bonds due October 2020, which was placed at 72 bps over mid-swaps, or 2.107%. The issue was printed in line with guidance and at the firm end of early whispers in the area of 75 bps plus mid-swaps. The new 2020 covered bonds were inked at levels above the Canadian bank’s last five-year secured offering, in January, when it placed a $2 billion offering of 1.875% covered bonds due February 2020 at mid-swaps plus 44, or 1.878%. – Staff reports


Concordia sets London, NY meetings this week for cross-border leveraged loan

Goldman Sachs, Credit Suisse, Jefferies, and RBC Capital Markets have set lender meetings in New York and London this week to launch their cross-border loan financing backing Concordia Healthcare’s roughly $3.5 billion acquisition of Amdipharm Mercury Limited (AMCo).

The seven-year covenant lite institutional debt includes a $1.1 billion U.S. dollar term loan B, set to launch with a meeting on Thursday, Oct. 1 at 10 a.m. EDT, and a £500 million (roughly $759 million) sterling term loan B, launching with a lender meeting on Wednesday, Sept. 30 at 9:30 a.m. BST, sources said.

Altogether, arrangers have provided $4.3 billion of credit facilities and bridge commitments to finance the acquisition, and refinance all of AMCo’s outstanding loans. As noted earlier, Concordia will pay £800 million in cash for the acquisition and provide Cinven with 8.49 million of its own common shares. This will leave the private equity firm with a 19.9% stake in Concordia.

The bonds are expected to total round $950they  million, sources said. Of note, Concordia’s existing 7% notes include a 3.5x first-lien incurrence test, so leverage through the loans will be less than that cap.

Concordia today has roughly $575 million of institutional loans and AMCo has £500 million already, so the new money raise is only about $500 million, all in dollars, sources noted.

AMCo was formed through the merger of Mercury Pharma and Amdipharm, which were acquired by Cinven in August and October 2012, respectively. AMCo is an international specialty pharmaceuticals company, focusing on off-patent products. –Chris Donnelly/Nina Flitman


International Medical Group to be acquired by ABRY Partners

ABRY Partners has agreed to buy insurance firm International Medical Group from existing sponsors Altaris Capital Partners and Galen Partners, according to the company. Details of the transaction were not disclosed.

Altaris and Galen have controlled the company since 2012.

International Medical Group, founded in 1990, provides international medical insurance and travel insurance. The company is headquartered in Indianapolis, Ind., and has a European subsidiary that is based in the U.K. – Jon Hemingway


European leveraged loan default rate hits lowest point since 2008

european leveraged loan default rate

The lagging 12-month default rate by principal amount for the S&P European Leveraged Loan Index (ELLI) dropped to 1.4% in August, from 2.4% in July, and is now at the lowest level since November 2008, when it stood at 1.07%.

In the 12 months ended Aug. 31, the ELLI tracked €1.4 billion of institutional loan defaults and restructurings, down from €2.3 billion at the end of the prior month.

More on the ELLI here.


High yield bond market in Aug: slow issuance, wider spreads

High-yield issuance in August was $10.2 billion, barely surpassing the $10 billion of volume in July but outpacing the $3.1 billion priced last August, LCD data shows. Note that issuance concluded on Aug. 19, when KIK Custom Products priced the last deal before the late summer shutdown. August is now the second slowest month of the year, next to July, with June the third slowest month at $21.2 billion. For the year-to-date, volume in 2015 through August is 1.4% behind last year’s pace, at $205.85 billion versus $208.80 billion. That gap has narrowed from the 5% decline at the end of July, but prior to July, volume had been running ahead of the pace for 2014.

Recall July’s slowdown was tied to commodities volatility, China’s stock market plunges, and early in the month, fears of a default in Greece. In August, those issues, apart from Greece, took an even greater toll on the market, and the debate continues over whether the Fed will raise interest rates in September. More participants are taking the view, given the latest disruptions in global markets, that it won’t.

Had the high-yield primary market not already shut down by Aug. 19, the tough conditions late-month would have certainly prevented issuers from tapping the market regardless. Already, several of the 19 deals that priced in August had to come with healthy concessions as investors pushed back amid tough conditions. As seen in June and July, the bulk of issuance came from time-sensitive M&A and LBO issuers, to represent 39% of total volume for the month, although dividend and recapitalization/stock repurchase use of proceeds both grew as compared to previous months.

The yield to worst on the S&P U.S. Issued High-Yield Index finished the month much wider at 7.17%, from 6.59% on July 31. The option-adjusted spread widened to T+573, from T+511 at the end of July. – Joy Ferguson/Matt Fuller

HY market in Aug


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



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.