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YouTube, slides: Dec. 2013 European leveraged loan market analysis

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

Loan issuance was €5.4 billion during the month while high yield issuance was €7.4B. Both markets remain buoyant and open. Secondary markets were up, while inflows into high yield funds are estimated to be €1B. The European loan index (ELLI) was up. Four CLOs priced in November, with seven still in the pipeline.

This month LCD looks at:

  • Leveraged loan prices
  • High yield bond prices
  • ELLI multi-currency loan returns
  • Volume: new issue loans vs HY bonds
  • ELLI default rate

The video is available here.

The URL for the video:

PDF slides of the video on Slideshare is available here.

URL for the slides:

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email.

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YouTube, slides: December 2013 US Leveraged Loan Market Analysis

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

New-issue leveraged loan activity pushed further into record territory during the month. The S&P/LSTA Index posted a 0.49%. The universe of S&P/LSTA Index loans grew by $22 billion, to a record $674 billion. Inflows accelerated. The loan default rate eased.

Looking ahead, the calendar of new M&A-driven transactions remains light.

This month LCD looks at:

  • Leveraged loan volume; M&A loan volume
  • Average Bid of S&P/LSTA Loan Index
  • S&P/LSTA Index Loans Outstanding
  • Visible Inflows
  • Average New-Issue Clearing Yield of First Lien Loans
  • Loan Default Rate
  • M&A Institutional Loan Forward Calendar


The video is available here.

 

PDF slides of the video on Slideshare.

 

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email, or here:

http://www.youtube.com/user/LCDcomps

If you’d like to embed an LCD video on a web page or in other digital media, it’s simple via the “embed” button on the YouTube page for the video. You can also embed the slides via Slideshare.

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YouTube, slides: Nov. 2013 European leveraged loan market analysis

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

The European leveraged finance primary and secondary markets had a moderate month. Loan issuance was €2.3 billion in October 2013, while high yield issuance was €5.3 billion.

Estimated inflows to European high yield funds for October are a gigantic €1.32 billion, bringing the estimated year to date number to €4.87 billion. A slew of CLOs are expected to price before the end of the year.

This month LCD looks at:

  • Leveraged loan prices
  • High yield bond prices
  • ELLI multi-currency loan returns
  • Volume: new issue loans vs HY bonds
  • Volume: PIK toggle notes
  • ELLI default rate


The video is available here.

 

PDF slides of the video on Slideshare is available here.

 

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email.

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Europe: BlueBay Total Credit Fund, sub-investment grade debt fund, launches

BlueBayThe launch late last month of the BlueBay Total Return Credit Fund sees the fund manager offer investors global exposure to sub-investment-grade debt, including both high-yield bonds and leveraged loans. This marks a first for BlueBay, which notes that it is bringing together many of its higher-yielding specialties into a single pooled product for the first time.

The fund aims for a total return of 5-10% over the credit cycle, and investments will focus on an array of credit products, such as loans, high-yield bonds, emerging-market debt, convertibles, and CDS. Unlike a fund-of-funds, the new fund will hold the underlying securities directly.

The fund can invest up to 10% of its asset in leveraged loans, which are non-UCITS eligible assets, provided they qualify as money-market instruments, according to the prospectus. Among other restrictions on the fund: it can only invest up to 10% of net assets in equities, a further 10% in money-market funds, up to 25% in convertibles, and up to a third in money-market instruments.

The fund is managed by BlueBay’s Asset Allocation Committee, which is comprised of a team of six.

BlueBay Asset Management was founded in 2001. As of Sept. 31, it manages over $56 billion for institutions and high-net-worth individuals. – Staff reports

 

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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 lcdcomps.com the video is at the end of this story.)

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email, or here:

http://www.youtube.com/user/LCDcomps

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Dell sets price talk on LBO bonds after shift of $1.25B to loan market

Price talk is 5.5-5.75% for Dell‘s $2 billion offering of seven-year (non-call three) first-lien notes, while a coordinated, $1.25 billion second-lien issue is being pushed into the loan market, instead of being arranged as an eight-year (non-call three) bond deal, according to sources. With that update out to accounts, bookrunners are taking recommitments through 12:00 p.m. EDT on Monday, with pricing to follow, the sources add.

The price guidance comes at the wider end of early market whispers and it swaps to floating-rate equivalents of roughly L+340. Arrangers haven’t firmed the revised structure on the loan, which has been significantly oversubscribed ahead of Monday’s deadline, but market participants indicate second-lien bonds would move into the first-lien term loan, likely in both the U.S. and Europe.

Ratings are BB+/Ba2 on the first-lien debt, with a 1 recovery rating, indicating expectations for very high (i.e. 90% to 100%) recovery in the event of default. Note that the bond deal structure includes a special 103 prepayment option for up to 10% annually, a 40% equity clawback option for three years, at par plus coupon, and a typical change-of-control put, at 101, according to sources.

Lead bookrunner Credit Suisse rolled out the long-awaited LBO bond deal earlier this week, with joint bookrunners Barclays, Bank of America, RBC, and UBS. Issuance is under Rule 144A for life, and the issuer entity is technically Denali Borrower.

Proceeds will be used to pay down a like-sized bridge financing that was sold earlier this year, according to sources. As reported, Credit Suisse was administrative agent on the first-lien bridge, while Barclays was administrative agent on the second-lien bridge. Bank of America Merrill Lynch. RBC Capital Markets, and UBS were underwriters. Details of the coordinated loan financing at launch are available for subscribers here.

With some $5 billion of annual EBITDA, Dell is expected to be leveraged into the low-2x area on a secured basis and into the 3x area total, market sources said.

Silver Lake has committed to provide $1.4 billion of equity. In addition, certain of the MD investors have entered into a rollover and equity financing commitment letter, dated as of Feb. 5, 2013, pursuant to which such MD investors have committed to roll-over approximately 273 million shares of the company’s common stock. CEO Michael Dell has additionally committed to invest up to $500 million in cash. Lastly, MSDC Management, L.P. has committed to provide $250 million of equity. – Matt Fuller/Chris Donnelly

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SunTrust hires Perry White for loan sales, Chris White for high yield

SunTrust Robinson Humphrey has announced two new hires for its leveraged finance team, according to sources.

Perry White has joined the firm as a managing director on the bank’s loan sales desk, and Christopher White is coming on board as a managing director on its high-yield syndicate desk.

Perry White joins SunTrust from Bank of America Merrill Lynch, where he was a managing director. He held a variety of positions at BAML, including those in leveraged loan capital markets, par loan sales, and as a sales manager for par loan trading.

Chris White most recently worked for Deutsche Bank, where he was a managing director in leveraged debt capital markets. – Staff reports

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Returns by asset class: Leveraged loans lead pack in grim June

returns by asset class

The performance of U.S. leveraged loans during the second quarter reflected the modestly falling fortunes of the market. After eking out a 0.19% return in May, the S&P/LSTA Leveraged Loan Index fell 0.59% in June (as of June 27), the largest monthly loss since May 2012. Of course, loans held up far better than either equities or fixed-income products, all of which suffered when expectations for rising rates drove the 10-year Treasury yield to 2.48% by June 27, from a recent low of 1.66% in May and 1.78% at year-end, according to the Federal Reserve. – Steve Miller

 

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Amid high yield bond turmoil Vue, FTE Auto might look to leveraged loans for LBOs

vue logoThe high-yield bond market may not be shut – AA Group placed £655 million of Class B secured notes today – but the ongoing volatility means most potential borrowers and their arrangers would prefer to wait for a few days of stability before dipping their toes back in. In contrast, the greater certainty of execution offered by the loan market has prompted talk that at least two borrowers may now be looking to finance recent acquisitions via loans, rather than through bonds as initially planned.

The acquisition of European cinema chain Vue Entertainment, for £935 million by Omers Private Equity and Alberta Investment Management Corp, is one such transaction. Talk here is that MLAs Goldman Sachs and Morgan Stanley may return to the loan market to finance the buyout, shelving initial plans to tap the high-yield bond market. Lenders to Vue have been put on standby for an imminent repayment, suggesting that a new deal is expected soon.

Similar discussions have taken place over FTE Auto, which was acquired by Bain Capital in May from PAI Partners. Morgan Stanley is understood to be leading the debt financing, which sources suggest was originally looking to tap the market for an issue of FRNs for the bulk of the financing, but which now may come as a senior secured loan. – Staff reports

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June 2013: European Leveraged Loan Market Analysis; Video, Charts

Issuance in the primary hit a post credit-crunch high in May, while secondary markets were down. CLO issuance was promising, with more in the pipeline, although new EBA directives threaten to hinder issuance going forward. More spread/yield compression is expected going forward, as issuers play loan and bond investors against each other in search of best terms.

The details:

 

 

  • Loan issuance was €8.7 billion in May 2013, while high yield issuance was t €9.0 billion.
  • According to JP Morgan HY research: estimated inflows into European HY funds was €975 million for May versus €555 million for April. This brings year-to-date inflows to almost €4.0 billion.
  • Secondary markets were down. Loan markets were down 17 bps to finish the month at 100.41 while high yield markets were down 139 bps to finish the month at 103.24.
  • The S&P European Leveraged Loan Index (ELLI) finished the month up 0.11%.
  • Default rates stayed roughly the same.

 

 

Focusing on the secondary loan market, this chart details the average price of LCD’s European Loan flow name composite — a measure of the 12 largest, most liquid loans (consisting of 10 issuers) — since 2002.

Secondary loan prices fell 17 bps to finish the month at 100.41. Loan prices did go up as high as 100.61 only to fall 20 bps in the last week (on the back of softness in the global credit markets). This is the biggest swing in the last seven weeks, as a result, the average is at its lowest level since mid-April, although it remains 307 bps above the final reading of 2012.

 

 

This next chart details the average price LCD’S European High Yield Flow name composite – a measure of the 12 most liquid high yield issues – since the beginning of the year 2010.

The high yield market finished the month down 140 bps at 103.24, on the back of a sell-off in the broader credit markets. A sell-off in U.S. Treasuries started last week when the U.S. Federal Reserve flagged the potential for tighter monetary policy. A negative bias subsequently seeped into the credit markets – especially high-yield, where bonds across the board lost about a point. The average bid is now down 202 bps from the 2013 high of 105.26, from early May. Still, it is 28 bps higher in the year to date, having ended 2012 at 102.96.

 

This chart details the monthly return of the ELLI, a broad measure of European loan market returns that LCD calculates. All returns are ex-currency unless otherwise stated.

The European loan market had a positive return of 0.11% for the month of May, down from the 0.88% seen in April. This brings the year-to-date return to 3.19% versus 4.63% for the same period last year.

 

Now we turn from the secondary to the primary. This graph details new-issue volume for both leveraged loans and high-yield bonds.

Leveraged finance markets raised the bar in May, as issuance reached a post-crunch high of €17.6 billion, split fairly evenly between leveraged loans and bonds, at €8.7 billion to €9 billion respectively. Looking at loans first, the current volume is at its highest level in two and a half years. Sponsored volume accounted for the majority of May’s activity, at €7.6 billion, the highest reading since July 2008. Behind this impressive figure stand two mega-sized buyouts, each setting a post-crunch record in its own right.  First, the €3.3 billion loan financing the buyout of D.E. Master Blenders by a Joh. A. Benckiser-led investment group is the largest buyout-related loan in six years (since National Grid Wireless in May 2007). It also makes the top-ten list of LBO loans on record, dating back to when LCD started tracking the European leveraged loan market in 2000.

High-yield went from strength to strength in May, hosting the largest monthly volume of paper in the history of the market, with €9 billion issued. This came about due to a surge in issuance rather than just a few big tickets, with only five borrowers issuing deals sized at €500 million or more. A total of 23 companies tapped the high-yield bond market in May, compared with 12 in March 2011, the month which held the prior volume record, with €8.4 billion.

 

 

The default rate by principal amount was down to 5.8% at the end of May from 5.9% at the end of April while the default rate by issuer count fell to 7.2% at the end May from  at 7.1% at the end of April.

 

 

Themes to watch for going forward:

  • GSO Blackstone priced their CLO in May, bringing YTD CLO issuance at €1.34 billion with still a few more managers and vehicles on the forward pipeline. However new directives from the EBA could hinder new CLO issuance.
  • Further spread / yield compression is expected, as issuers use access to the capital markets to reduce existing spreads and vice-versa, essentially playing off loan investors against bond investors and vice-versa to get the best terms possible.
  • Given the buoyant equity markets, expect further IPOs from some sponsor led companies, allowing them to return cash back to their LPs.
  • Global co-mingled funds being launched, combining loans and high yield bonds that have a focus on both the US & Europe.

 

A video of this presentation is available at:

http://youtu.be/9Ub1tqpYfcM

 

Slideshare download is available at:

http://www.slideshare.net/lcdcomps/eur-sld-shrjune2013v3

– Sucheet Gupte