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Leveraged Loans: Lions Gate Eyes $4.6B Of Financing Backing Starz Acquisition

J.P. Morgan, Bank of America Merrill Lynch, and Deutsche Bank have committed debt financing in connection with Lions Gate’s planned $4.4 billion acquisition of Starz, which is expected to close by the end of the year.

starzThe total committed financing package totals $4.6 billion and includes $3.6 billion of secured and unsecured financing and a $1 billion revolver. Lions Gate also plans to refinance roughly $1.7–1.9 billion of debt at Lions Gate and at Starz and fund the cash portion of the deal with bank and bond financing. Pro forma leverage, excluding synergies, is expected to be roughly 5–5.5x as of Dec. 31, 2016. Lions Gate’s existing convertible notes and Starz capital leases will remain in place.

In the secondary market, the Lions Gate 5% fixed-rate second-lien term loan due 2022 popped up to a 101/102 market, from 99/99.5 yesterday, sources said. There is $400 million outstanding under the loan, which is currently callable at 102. J.P. Morgan is administrative agent.

Starz, meanwhile, has a $1 billion revolver due April 2020 that, as of March 31, had a borrowing capacity of $609 million. Pricing on the revolver is tied to a leverage-based grid, at L+150–225. Bank of Nova Scotia is administrative agent.

Santa Monica, Calif.–based Lions Gate is rated BB–/Ba3 and trades on the New York Stock Exchange under the ticker LGF. Englewood, Colo.–based Starz is rated BB/Ba2 and trades on the Nasdaq under the symbol STRZA. — Richard Kellerhals/Kerry Kantin

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US Leveraged Loan, High Yield Bond Issuance Just Saw Smallest Issuance of 2016

US leveraged finance issuance

The combined $4.6 billion of U.S. leveraged loan and high yield bond issuance was the least recorded during a week in all of 2016, according to LCD, an offering of S&P Global Market Intelligence.

To be fair, both segments spent much of the week with their eye on Thursday’s Brexit vote, so launching deals to generally wary markets was not the order of the day, to be sure. Leveraged loans totaled $3.2 billion last week while high yield bond issuance totaled a paltry $1.4 billion.

Year-to-date loan issuance is $209 billion, down some 10% from 2015. U.S. high yield bond issuance totals $120 billion, down 36% from last year. – Tim Cross

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US Leveraged Loan, High Yield Bond Issuance Eases as Markets Eye Brexit, Fed

Leveraged finance issuance cooled considerably last week ahead of the Brexit vote in the U.K. and a Fed announcement in the U.S., and on the heels of a surge of activity in both the high yield bond and leveraged loan markets the previous week.

US leveraged loan high yield bond issuance

Issuance in the two segments totaled $15.1 billion last week, $9.9 billion in loans and $5.2 billion in bonds. That’s down significantly from the $30 billion the previous week ($17.9 billion/$12 billion), according to LCD, an offering of S&P Global Market Intelligence.

Year to date, U.S. leveraged loan issuance totals $203 billion, down from $218 billion at this point in 2015. There has been $117 billion in high yield issuance, down 34% from the $179 billion at this point last year.

Of note in the leveraged loan market, power concern Dynegy brought to market a $2 billion credit to refinance debt backing an ENGIE M&A deal, while business payment processing co. Wex approached the market for a $1.21 billion institutional loan backing the acquisition of Electronic Funds Source (there was a sizable revolving credit, too).

The highest-profile deal in the bond market last week: a $2.9 billion offering from Reynolds Group. That debt helps fund a cash tender offer. – Tim Cross

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Revlon Eyes $3B in Leveraged Loan, High Yield Bond Debt for Elizabeth Arden Buy

Revlon disclosed that it has entered into a commitment letter with Citigroup and Bank of America Merrill Lynch providing a $1.8 billion leveraged loan, a $400 million asset-based revolver, and up to $400 million of a senior unsecured bridge loan in connection with the planned $870 million acquisition of Elizabeth Arden. Additionally, Revlon is seeking to privately place $400 million of senior unsecured notes.

The debt financing will be used to fund the acquisition as well as refinance Revlon’s and Elizabeth Arden’s debt. As of March 31, 2016, Revlon had $647.7 million outstanding under its B term loan due 2017 (L+250, 0.75% LIBOR floor) and $649.5 million outstanding under its B term loan due 2019 (L+300, 1% floor).

Revlon

Wikipedia

In the secondary, Revlon’s loans have been up around par. Holders of Revlon 5.75% notes due 2021 have held on to the debt, trade data show. The paper last changed hands at par on June 10, and trading on the notes was light leading up to the announcement. Elizabeth Arden’s 7.375% notes due 2021 saw greater gains. The paper, also not an active mover in the secondary market, changed hands at 102.25 on Friday morning, down slightly from the 102.75 price on Thursday afternoon. Prior to this, however, the notes last sold on May 26 at 72 and a quarter, trade data show.

Revlon’s existing 5.75% notes, which totaled $492.7 million as of March 31, though, will remain outstanding.

Elizabeth Arden, meanwhile, as of March 31, had $42.5 million in borrowings and $3.4 million in letters of credit outstanding under its $300 million revolver due December 2019, $25 million in outstanding borrowings under its second-lien revolver, and $350 million outstanding under its 7.375% senior notes due March 2021.

Revlon expects pro forma leverage will be roughly 4.2x net by the end of 2016.

Revlon and Elizabeth Arden yesterday announced that they have signed an agreement under which Revlon will acquire the outstanding shares of Elizabeth Arden for $14 per share. The acquisition is expected to close by the end of 2016.

New York–based Revlon sells beauty and personal care products. The company’s shares trade on the NYSE under the ticker REV. Elizabeth Arden, which is based in Miramar, Fla., also sells beauty products. Elizabeth Arden’s shares trade on the Nasdaq under the ticker RDEN. Elizabeth Arden is rated CCC+/Caa1. — Richard Kellerhals/Jakema Lewis

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Citi Names Raja as Head of EMEA High Yield Trading

Citi have announced that Amit Raja has become Head of EMEA High-Yield Trading, in addition to his current responsibilities as Global Head of Distressed Trading and EMEA Head of Par Loan Trading, effective immediately.

This follows news that David Cohen, the now previous Head of EMEA Flow Credit Trading, will be leaving Citi. To ensure continuity, Cohen will continue to manage the investment-grade trading desk until the end of June, and is involved in the succession process. Cohen joined Citi in New York in 2010. — Luke Millar

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US Leveraged Finance Volume Soars Again As Loan, High Yield Bond Issuers Flock To Market

The U.S. leveraged finance market shifted into an even higher gear last week as junk bond and leveraged loan issuers continue take advantage of borrower-friendly conditions, combining for $29.4 billion in new issuance.
US leveraged finance issuance

The leveraged loan market made the biggest splash. Roughly 30 issuers launched credits last week for a hefty $17.4 billion in volume, according to LCD, an offering of S&P Global Market Intelligence. However, while that’s an impressive number, it did little to help yield-hungry investors looking to put cash to work.

“In a market heavy with refinancing and repricing activity, many deals offered no new money at all,” writes Chris Donnelly, in his weekly market wrap for LCD. “Last week’s transactions produced only about $7 billion of new institutional loans.”

One of those was courtesy retailer J.C. Penney, which launched a $2 billion credit that would refinance a real estate term loan.

Also last week, Ferrara Candy, maker of Chuckle’s, Brach’s, and Now & Later candies, among others, wrapped a $535 million credit that refinanced debt and funded a dividend to private equity sponsor Catterton Partners (dividends are another loan market trend picking up steam).

The high yield bond market was busy as well, racking up some $12 billion in issuance, the most in a week since November, according to LCD.

The highest-profile high yield name last week was DISH, which approached the market for $750 million but ended up with a whopping $2 billion after upsizing the deal due to investor demand.

Also of note, Dell priced $3.25 billion of notes backing its acquisition of EMC.

The appetite in both the leveraged loan and high yield markets comes as cash flows into each market look to stabilize. U.S. loan funds saw theirthird straight inflow last week, while U.S. high yield funds saw their second straight gain (a sizable $748 million), according to Lipper.

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Valeant Debt Falls, Default Protection Cost Widens as Drugmaker Slashes Guidance

High yield bonds backing Valeant Pharmaceuticals fell as much as four points in the London session before retracing some losses after the Canadian drugmaker cut its 2016 guidance for a third time, reflecting in part what it said was “the impact of significant disruption…faced over the past nine months.”

ValeantThe short-tenor 6.75% notes due 2018 slumped two points, to 95/96 early in the session, but recovered a bit, with the most recent block trades at 97, according to sources and trade data. The company’s 5.875% notes due 2023 and 6.125% notes due 2025—tied for the eighth-largest single tranches ever sold, at $3.25 billion apiece—were both super active in the low 80s, but bounced off lows as short-sellers covered quick trades. Sources relay low quotes of 81/82 and 79.5/80.5, respectively, but a mild recovery is underway, with recent prints at 82.75 and 81.75, trade data show.

The €1.5 billion issue of 4.5% notes due 2023 dropped four points to 74–75, from 78 before the announcement. The notes have since bounced back to 78 as U.S buyers stepped in, according to sources.

Over in derivatives, five-year CDS in the name widened roughly 9% this morning, to 9.5/11.5 points upfront, according to Markit. While about $87,500 more expensive today, at approximately $1.05 million at the midpoint upfront payment, in addition to the $500,000 annual payment, to protect $10 million of Valeant bonds, it’s still a bit cheaper than the record wides of 13.5 points upfront in mid-April.

The company’s equity, which trades on the NYSE under the ticker VRX, plunged 31% to $22.53. The company’s stock has lost more than 90% of its value from its August 2015 peak.

Over in the leveraged loan market, the pharmaceutical concern’s loans softened on the news, with the TLF due 2022 (L+425, 0.75% LIBOR floor) marked at 97.75/98.25, from 98.5/99 previously, according to sources.

The company said it now expects to generate adjusted EBITDA in the range of $4.8–4.95 billion, from $5.6–5.8 billion previously.

For the quarter ended March 31, Valeant reported a loss of $373.7 million, or $1.08 a share, compared with a profit of $97.7 million, or 29 cents a share in the year-ago period. The results also fell short of the S&P Global Market Intelligence consensus estimate for a loss of $329.77 million, or 94 cents a share.

Revenue climbed 9.3% to $2.37 billion, beating the consensus estimate of $2.33 billion.

Valeant said in its conference call that it expects to be in compliance with its debt covenants this year.

The B/B2 company ended the quarter with $1.2 billion in cash and long-term debt of $31.3 billion, of which it said it plans to pay down $1.7 billion by the end of December.

Valeant avoided defaulting on its debt agreements by filing the delayed report. As reported, the company received a notice of default from holders of its 5.5% senior unsecured notes due 2023 for failing to file its first-quarter 2016 results in a timely manner. The company in April also avoided default after it filed its annual report having delayed due to concerns over its accounting practices.

Note that Valeant is the second-largest issuer of performing loans in the S&P/LSTA Leveraged Loan Index, behind only Avago Technologies. It was the most widely held obligor in 2.0 CLOs in the third and fourth quarters of 2015, according to S&P Global Ratings. — Staff reports

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US Leveraged Finance Issuance Dips to $14.4B as High Yield Takes Pause

U.S. leveraged finance issuance slipped to $14.4 billion last week as the leveraged loan market remained busy, though the high yield bond market slowed after a torrid period of activity the previous week.

US leveraged finance issuance

Leveraged loans saw $11.3 billion in deals last week, down from two consecutive $16 billion-plus weeks of issuance, according to LCD, an offering of S&P Global Market Intelligence. Year to date, U.S. loan volume stands at $172.4 billion, down nearly 10% from this point last year.

Of note last week, retailer J.C. Penney unveiled a $2 billion institutional credit that will refinance an existing real estate term loan while Hertz Corp. brought to market a $700 million covenant-lite term loan backing debt refinancing. Hertz also launched last week a $1.7 billion revolving credit that will replace existing debt.

In all, 21 issuers unveiled deals last week as borrowers look to take advantage of sustained investor appetite, often to refinance existing credits or fund a dividend to equity sponsors/shareholders.

Last week’s high yield market was a different story, with just $3.1 billion in issuance, down from $11.8 billion the previous week, according to LCD.

“The previous week’s output nearly exhausted the immediate-term pipeline, especially with signs of fresh redemptions from the asset class,” said LCD’s Matthew Fuller, in his weekly market wrap up. “There were just three deals in market last week, for $3.1 billion, marking the lowest output in 15 weeks.”

The biggest issue last week: YUM! Brands, which owns the Taco Bell, Pizza Hut, and KFC fast food brands, among others, priced a $2.1 billion bond offering backing debt repay and a dividend to shareholders.

Including last week’s activity, U.S. high yield issuance YTD totals $100 billion, down 42% from the same period in 2015. – Tim Cross

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Leveraged Loans Return 0.89% in May, Besting High Yield Bonds

US leveraged loan returns

With lopsided market technicals generating another month of firm conditions, the S&P/LSTA Leveraged Loan Index recorded its third consecutive monthly gain in May, returning 0.89%.

Last month’s increase, though more modest than those posted in April and March, nevertheless pushes Index returns further into the black in 2016. The broader Index has returned 4.49% in the year to date.

Even though gains were more modest than in April or March, loans outperformed all of the asset classes LCD tracks for this analysis, aside from equities. For the year-to-date, however, high yield continues to lead the pack, easily. – Kerry Kantin

returns by asset class

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High Yield Issuance Jumps, Leveraged Loan Recaps Emerge As Finance Market Plods Along

U.S. leveraged finance issuance totaled $9.4 billion last week thanks largely to a spate of drive-by high yield bond deals, with the leveraged loan market seeing a host of opportunistic credits amid unimpressive overall volume in that segment.

The $9.4 billion is down slightly from the $10.7 billion recorded the previous week. High yield issuance totaled $6.8 billion last week, bringing the year-to-date total in that sector to $78.6 billion. That’s down 47% from the same period in 2015, according to LCD, an offering of S&P Global Market Intelligence.

US leveraged finance issuanceLeveraged loan issuance was a tepid $2.6 billion during the week, a sharp drop from the previous week’s $7 billion. That brings U.S. leveraged loan issuance to $128 billion so far in 2016, down some 18% from the same period last year.

Of note in high yield last week, Cheniere Energy wrapped a $1.25 billion offering backing a refinancing at the company’s Cheniere Corpus Christi level. The offering was upsized from $1 billion. NRG Energy also refinanced last week, pricing a $1 billion deal (BB-) at 7.25%.

This activity comes amid another hefty withdrawal from U.S. high yield funds (though cash inflows have returned in the past few days).

The leveraged loan market was slow last week as far as new issues, despite increasingly solid fundamentals. Indeed, there were a pair of dividend/recapitalizations – for Amneal Pharmaceuticals and clothing retailer J.Jill Group – indicating that market tone is improving.

The largest deal to launch was a $1.3 billion credit backing Pilot Travel Centers, which refinanced existing bank debt, trimming interest expense in the process.

The biggest news in the loan market last week: Investors poured a relatively whopping $303 million into U.S. loan funds, the largest such inflow in more than a year.

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