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European Leveraged Loan Issuance Surges to €6.4B as Refinancings Emerge

european leveraged loan issuance

European new-issue loan volume rose to €6.4 billion in April, making it the second-busiest month so far in 2016, behind January’s buyout-fuelled tally of €8.6 billion. Half of April’s total — €3.2 billion — came from refinancings, as market conditions warmed, allowing a greater range of activity than was seen in the M&A-heavy first quarter.

In April, borrowers raised the highest volume of new loans for refinancing purposes since March 2015, thanks to large transactions such as Inovyn and Numericable. In all, seven borrowers tapped the loan market to refinance existing senior debt, high-yield bonds, or a combination of various debt structures. – Staff reports

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Bankruptcy: Aeropostale Files Chapter 11 in Manhattan; has $160M DIP

Aéropostale today filed for Chapter 11 in bankruptcy court in Manhattan, the company announced.

The company said it intends to emerge from Chapter 11 within the next six months “as a standalone enterprise with a smaller store base, increased operating efficiencies and reduced SG&A expenses.”

The company announced an initial store closure list of 113 U.S. locations, as well as all of it 41 stores in Canada, with closings set to begin in the U.S. this weekend and in Canada next week.

The company further said it was continuing its previously announced sale process, adding that it expects that any potential sale would also be completed within the next six months.

According to Bloomberg, the company has more than 700 locations in the U.S. Over the past three years, it has closed more than 200 locations.

In addition to store closings, the company said it would use Chapter 11 to resolve its ongoing dispute with Sycamore Partners, the company’s largest secured lender and owner of its second largest supplier, that the company said has “put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans.”

Among other things, according to court papers, the supplier, MGF Sourcing, has demanded onerous payment terms from the company.

Among other first day motions, the company filed a motion asking the bankruptcy court to require MGF Sourcing, to perform its obligations under its agreements with the company.

Lastly, in connection with the Chapter 11 filing the company has a $160 million DIP facility commitment form Crystal Financial.

In court papers, the company said it received four DIP proposals from prospective lenders, which it narrowed down to two options, one from Crystal Financial and the other from Bank of America.

The facility is comprised of a $75 million term facility and an $85 million revolver, of which the company is seeking immediate access to $45 million and $55 million, respectively, on an interim basis.

Interest under the facility is at L+500. Among others, the facility carries a 5% underwriting fee.

As for milestones, the DIP requires the company to file a reorganization plan within 60 days (July 3), obtain disclosure statement approval within 95 days (Aug. 7), begin soliciting votes on the reorganization plan within 100 days (Aug. 12), begin a plan confirmation hearing within 130 days (Sept. 11), obtain plan confirmation within 140 days (Sept. 21), and emerge from bankruptcy within 145 days (Sept. 26).

In addition, the DIP requires the company to pursue a Section 363 sale process simultaneously with the plan confirmation process on the following timeline: file a motion with the bankruptcy court to approve bid procedures within 75 days (July 18), which shall include a form of a stalking horse purchase agreement; forward bid packages to potential bidders within 75 days (July 18); obtain approval of a stalking horse sale and bid packages within 105 days (Aug. 17); conduct an auction within 141 days (Sept. 22); obtain approval of a sale within 143 days (Sept. 24); and close on a sale within 145 days (Sept. 26).

The DIP provides that while the company may abandon the reorganization plan confirmation process at any time during the proceedings, it may not abandon the sale process without the lenders’ consents. — Alan Zimmerman

This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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2016 European High Yield Bond Issuance, by Country

european high yield bond issuance by country

French companies are the most active high yield issuers in Europe this year, with eight offerings totaling €1.9 billion, according to S&P Global Market Intelligence LCD.

Automotive engineering/production concern Faurecia was the largest French issuer, with a €700 million deal, most of which backed repayment of 9.375% notes (the new issue priced to yield 3.625%, making for a hefty cost reduction for the company). – Staff reports

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This analysis first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Leveraged Loans: Purchase Price Multiples on European LBOs Rise

european LBO purchase price multiple

LBOs in Europe are getting more expensive for private equity sponsors.

The average purchase price, as a multiple of trailing EBITDA, reached 10x in 2016’s first quarter, more than any full-year average, according to S&P Global Market Intelligence LCD.

The multiples paid on these buyouts fall across a wide range. Many of the deals that came to market in the first quarter were bought for an unremarkable multiple, in the 8–9x area, but a good handful of transactions topped 10x — some by a fair margin. – Ruth McGavin

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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European Leveraged Loan Default Rate Edges to 1.7% in March

european leveraged loan default rate

The lagging 12-month default rate for the S&P European Leveraged Loan Index (ELLI) was 1.7% in March, up from 1.3% in the 12-month period ended February, according to S&P Global Market Intelligence LCD. In the 12 months ended March 31, the ELLI tracked €1.5 billion of institutional loan defaults and restructurings, down from €2 billion at the end of last year.

The ELLI default rate is calculated by summing up the par amount outstanding for issuers represented within the Index that have defaulted in the last 12 months, and dividing that by the total amount outstanding in the Index at the beginning of the 12-month period (excluding issuers that have already defaulted prior to this date).

For the purposes of this analysis, LCD defines “default” as (a) an event of default, such as a D public rating, a D credit estimate, a missed interest or principal payment, or a bankruptcy filing; or (b) the beginning stages of formal restructuring, such as the start of negotiations between the company and lenders, or the hiring of financial advisors.- Staff Reports 

This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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S&P: ECB Stimulus to Boost European High Yield Bond Issuance in 2016

The European Central Bank’s March announcement of a new Corporate Securities Purchase Programme (CSPP) — expected to take effect in June — will be a game changer for corporate bond market issuance in Europe over the next few months, including for private equity-owned firms and leveraged corporates, according to S&P.

european leveraged finance volume

In its quarterly leveraged finance report, titled The ECB’s Corporate Buying Program Will Boost European High Yield Bond Issuance In First-Half 2016, S&P says that before the announcement, debt capital markets activity in Europe had been moribund in 2016, and had completely dried up for speculative-grade borrowers.

Inflows into high-yield funds had already begun to improve in early March, and secondary pricing fell to a point where investors started to step back in. These factors helped some well-known and highly rated names to start wading back into primary high-yield, but the ECB’s actions are likely to give the market a real boost, adds the agency.

S&P expects the anticipation of the ECB’s program launch in June will have a beneficial impact on new bond issuance, as spreads will tighten across the credit curve. This will likely lead to an increase in refinancing and recapitalization activity, as well as greater debt-funded merger and acquisition financing for corporates and private equity, it adds.

The risk from a credit perspective is that this scenario could lead to more shareholder-friendly activities — something that S&P says it will continue to monitor closely and flag to the market.

The report, which was published today on RatingsDirect, also discusses how the leveraged loan market stayed open throughout the months that were difficult for public bond issuance. Most of the deal flow came from LBOs and particularly smaller transactions, according to S&P. The rating agency also notes that borrowers active in the market used deal structures that show a reversion to the typical pre-crisis structure for leveraged buyouts, of senior secured loan lending with an accompanying revolving credit facility.

S&P anticipates that the current public debt market conditions will remain volatile throughout the year, leading to stops and starts in deal flow volume as borrowers take advantage of windows of opportunity to issue. Markets will remain vulnerable to disruption from overall volatility, including from idiosyncratic political risk, such as the U.K. referendum on whether to leave the EU, and the U.S. elections, the agency adds. — Staff reports

The report is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail toresearch_request@standardandpoors.com.

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Riding Buyouts, European Leveraged Loan Issuance Nears €12B in 1Q16

european leveraged loan issuance

From the perspective of primary loan issuance in the European market, the first quarter of 2016 has been something of a one-trick pony. The market saw a wave of buyout activity in January, but there was very little else until right at the end of the quarter.

Total loan issuance — both sponsored and corporate — amounted to €11.9 billion in the first quarter of 2016 (through March 18), down 18% from the closing quarter of 2015, and the weakest reading for any first quarter since 2012.

Thanks to a busy January, during which deals put together in the fourth quarter reached syndication, buyout loan volume totalled €8.7 billion in the year through March 18. This was the highest reading for buyout loan volume since the third quarter of 2008. – Staff reports

This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here

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Amid Inflows, ECB Stimulus, European Leveraged Loan Bids – And Market Hopes – Rise

european bids bid v ask

European leveraged loan market sentiment has taken a decided turn for the better.

The ECB announcement earlier in the month, combined with inflows into European and U.S. high-yield funds, as well as actual inflows into U.S. loan funds, have brightened the mood. And the arrival of new issuance in loan and bond markets has helped to lift investors’ spirits, landing Europe back in price-discovery mode.

The secondary market is recovering after a brief but steep dive in early February, during which the bid-offer spread of the flow names widened to 100 bps – a level not seen since January 2013.

“The market turned very negative very quickly, and now it has bounced back very quickly,” says a fund manager.

Indeed, one fund manager says that a danger now is a sudden burst of exuberance and a blind haste to book primary assets that leads straight back down the road to overly-aggressive debt structuring and insufficient flex language. “We learn, and we forget,” an arranger says. – Ruth McGavin

This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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European Leveraged Loans Gain 0.29%; YTD Return: -0.14%

The European Leveraged Loan Index (ELLI) gained 0.29% yesterday (excluding currency).

The ELLI has returned 0.97% thus far in March. The total return for the ELLI in the year to date is -0.14%. — Staff reports

This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.
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European Leveraged Loans Return -1.22% in February; Biggest Slide Since 2011

european leveraged loan returns

In February, the European loan market’s resilience demonstrated in the early weeks of the year crumbled, as leveraged loans tracked by the S&P European Leveraged Loan Index (ELLI) lost 1.22%, the worst monthly performance since September 2011 (excluding currency).

Although the market-value component of the return has been declining steadily for the past seven months, February’s 1.59% loss was far more severe.

In the year to Feb. 29, European loans lost 1.1%, versus a 1.36% gain at this time in 2015 (excluding currency). The difference stems from the market-value component, which has declined by 1.86% so far in 2016, compared to a 0.61% gain in the first two months of 2015. – Staff reports

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here