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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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Mitsubishi UFJ Financial Taps Grant Moyer as Head of Leveraged Capital Markets

Mitsubishi UFJ Financial Group announced today that Grant Moyer has joined the firm as head of leveraged capital markets for the securities business in the Americas.

Moyer joins Mitsubishi UFJ Securities from Goldman Sachs, where he spent the last decade in the leveraged finance division, most recently as a managing director.

Moyer will be based in New York and will report to Paul Young, international head of capital markets at Mitsubishi UFJ Securities, and Jeffrey Knowles, head of syndications at MUFG Union Bank.

The leveraged capital markets business was established earlier this year to combine MUFG’s capital markets and leveraged finance division for the structuring and delivery of all debt products—including syndicated bank loans, institutional loans, and bonds—from one business unit.

Prior to his time at Goldman Sachs, Moyer spent 10 years at Bank of America and its legacy firms in various leveraged acquisition finance roles. — Rachelle Kakouris

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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/High Yield Bond Issuance Down Sharply from 2015

european leveraged finance volume

European leveraged finance issuance – high yield bonds and leveraged loans – so far this year is down roughly 50% from the same period a year ago, according to LCD, an offering of S&P Global Market Intelligence.

As in the U.S., the European speculative-grade market has seen this biggest change. So far high yield has seen €13.8 billion of issuance, down severely from the €38 billion at this point in 2015. European leveraged loan issuance, at €20 billion, is down from the €26 billion at this point last year. – Staff reports

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This story chart is part LCD’s weekly European High Yield analysis, available 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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Intelsat debt, shares edge higher on 1Q results, new bond guarantee

Intelsat debt and shares advanced today after the satellite giant reported better-than-expected first-quarter results and reaffirmed its 2016 sales and earnings outlook based on the ongoing demand for broadband data, a heavy backlog of contracts, the successful launch of a new satellite last month, and preparation for the launch of more of its next generation fleet.

Most notably, however, investors heard that that a first-lien guarantee is now in place on a previously non-guaranteed series of Intelsat Jackson 6.625% senior notes due 2022, and that CC/Caa3 paper surged six points, to 64/65, according to sources.

Other bonds at various spots in the multi-tiered issuer were mixed. The previously guaranteed Intelsat Jackson 5.5% senior notes due 2023, which are notched higher, at CCC/Caa2, slipped two points, with trades reported on either side of 63, while the same entity’s first-lien 8% notes due 2024 dipped three quarters of a point, to 103.25/103.75, according to sources and trade data.

Meanwhile, at parent Intelsat Luxembourg 8.125% notes due 2023, which are a deeper step lower, at CC/Ca, the paper advanced two points, to 28.5/29.5, according to sources. And other “Jackson” bonds were steady, like the 7.5% notes due 2021, which held 69.5/70.5, the sources added.

Over on the NYSE, the company’s shares, which trade under the symbol “I,” increased roughly 6.5% this morning, to $3.93.

In the loan market, the Intelsat’s B-2 term loan due 2019 (L+275, 1% floor) was marked 94.125/94.625 on the results, up from either side of 94 prior, albeit a 95 context a week ago, according to sources.

Revenue in the quarter was $552.6 million, which was down from $602.3 million in the year-ago first quarter, but roughly 2% higher than the S&P Global Market Intelligence consensus estimate for $542.8 million, filings showed. As for the EBITDA result, first-quarter earnings were $407.5 million, which was down from $460.5 million last year, but right in line with the S&P GMI consensus mean estimate for $408.4 million.

Looking ahead, the company left unchanged via reaffirmation its full-year 2016 outlook for revenue of $2.14–2.20 billion and adjusted EBITDA to $1.625–1.675 billion, filings show.

Recall that the abovementioned, first-lien 8% notes were issued at par last month, with B–/B1 ratings, via Goldman Sachs and Guggenheim to support general corporate purposes, including prepayment in full of an intercompany loan of $360 million that upstreamed a dividend to parent “Luxembourg.” That issuance halted access to the “Jackson” undrawn revolver and triggered the guarantee to the 6.625% notes, according to a company statement.

Luxembourg-based Intelsat completed its IPO in April 2013, but a BC Partners–led group named Serafina still owns a majority of the satellite concern’s common shares. Prior to today’s rally, the company’s market capitalization on the NYSE was approximately $400 million. — Matt Fuller/Kerry Kantin

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ExamWorks nets financing for buyout by Leonard Green

Bank of America Merrill Lynch, Barclays, and Deutsche Bank have committed to provide the debt financing that will back the roughly $2.2 billion buyout of NYSE-listed ExamWorks by Leonard Green & Partners. Details of the financing are not yet available.

The private equity firm would pay $35.05 per share, according to the company. The acquisition, which was announced this morning, is expected to be completed in the third quarter, subject to shareholder approval and customary closing conditions.

ExamWorks has $500 million outstanding of 5.625% notes due 2023. That deal priced in April 2015 via a Bank of America Merrill Lynch–led bookrunner group with proceeds earmarked to refinance existing debt. The B–/B3 notes changed hands last week in a 103.25-103.5 context, trade data shows.

Atlanta, Ga.–based ExamWorks is a provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance, case-management, and other related services. The company recorded $140.7 million of adjusted EBITDA in 2015 on revenue of $819.6 million. Existing corporate ratings are B+/B2. — Jon Hemingway

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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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High Yield Bond, Leveraged Loan Issuance Take Pause After Week of Jumbo Deals

US leveraged finance issuance

U.S. leveraged finance issuance returned to earth last week as the high yield bond and leveraged loan markets began to digest jumbo deals launched to investors the previous week.

All told, there was $7.6 billion in leveraged finance issuance last week, a steep drop from the $19 billion the previous week – when Numericable bolstered activity all-around – and the least since the week of March 11, according to S&P Global Market Intelligence LCD.

Year to date, U.S. high yield bond issuance totals $51.6 billion, down roughly 55% from this point last year. Leveraged loan issuance totals $104.8 billion so far in 2016, down 9% from the same period in 2015.

While the volume numbers are unimpressive for last week – $4.6 billion in high yield and $3 billion in leveraged loan issuance – investor tone is improving across the markets. The best example of this might be activity on loans already launched, and still in the syndications process.

“In the new-issue market, the strength is on display, with arrangers flexing down 13 deals over the past two weeks, while flexing higher only three,” writes LCD’s Kerry Kantin. “The market hasn’t seen this many deals flex lower since the beginning of August.”

In the loan market, a ‘flex’ is when pricing on a deal is lowered (favoring issuers) or increased (favoring investors), depending on investor demand (there’s more info on price flexes here).

Similarly, new issuance in the high yield bond market was limited last week, though investor sentiment has improved and bids for paper in the bond secondary increased, highlighting better appetite in market, writes LCD’s Matthew Fuller.

Investors remained largely on the sidelines regarding loan and high yield funds last week. U.S. loan funds saw a small, $73 million withdrawal – the third straight for the asset class – while high yield funds saw a similarly unspectacular $84 million inflow.

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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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US Leveraged Finance Issuance Tops $20B as Numericable Bolsters High Yield, Leveraged Loan Marts

U.S. leveraged finance issuance totaled a hefty $20 billion last week thanks to the largest single high yield bond tranche ever and a host of new credits in an improving leveraged loan market.

US leveraged finance volume

The weekly total is the most for the combined loan/bond markets since the $31.6 billion during the first week of November, according to S&P Global Market Intelligence LCD.

Numericable was the big news of the week as the French cable concern dramatically upsized its planned $2.25 billion bond offering, backing a refinancing, to $5.2 billion – the largest in-market increase for a single tranche ever – amid investor demand.

“The stunning upsize surpassed the prior record holder of $2.65 billion, to $3.4 billion, on the 7% notes due 2023 backing First Data last fall,” writes Matthew Fuller, who covers the high yield market for LCD.

With the help of Numericable, U.S. high yield bond issuance totaled $10.9 billion last week, the most in five months, says Fuller. There were other billion dollar-plus deals, as well: one for Charter Communications and one backing MGM Growth Properties.

The increased activity comes as investors return to high yield funds and ETFs, which saw $1.2 billion in cash last week, the 7th week of net inflows out of the last eight, according to Lipper.

With last week’s deals, U.S. high yield issuance year-to-date totals $47 billion. While that’s down some 55% from the same period last year, the 2016 market continues to gain ground on the 2015 pace (the YOY difference was roughly 75% a few weeks ago).

The U.S. leveraged loan market was likewise busy last week, posting $9.1 billion in issuance. Numericable was a factor here as well, contributing the week’s largest credit, a $2.6 billion deal that is part of the company’s refinancing package. But Numericable did not have the loan market to itself.

“With technicals receiving a quarter-end booster shot, investors filled a procession of deals for well-rated and seasoned issuers this week, writes LCD’s Chris Donnelly, in his weekly market wrap. “For well-regarded issuers, investors again appear to be throwing in commitments quickly, driving accelerated timing.”

The $9 billion this week brings year-to-date U.S. leveraged loan issuance to $102 billion. That’s down roughly 7% from the same period last year. – Tim Cross

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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With Risk-On in March, US Leveraged Loan Returns Trail High Yield, Equities, Despite Strong Month

asset class returns

Even though it just posted its best month since 2011, U.S. leveraged loan returns were in the middle of the pack in March, compared to other asset classes tracked by LCD, showing just how much investor appetite has changed of late.

With investors toggling to risk-on in March and the 10-year Treasury yield climbing four basis points, to 1.78%, loans gained a hefty 2.76% during the month, lagging equities and high yield, while outpacing investment-grade bonds and 10-year Treasuries.

The turnaround brings year-to-date loan returns to 1.55%. That’s impressive, considering the asset class returned -1.18% during the first two months of the year. – 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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S&P: 5 More Corporate Defaults During Week, Bringing YTD Tally to 36

global defaultsThree U.S. corporate debt issuers and two from emerging markets defaulted this week, bringing the total so far in 2016 to 36, compared to 25 at this point last year, according to S&P Global Market Intelligence.

The recent activity keeps the default pace through March 30 as high as it’s been since 2009, when there were more than 50 defaults.

New to the default rolls this week:

  • Foresight Energy
  • Southcross Holdings
  • Nuverra Environment Solutions
  • Mongolian Mining Corp.
  • PDG Realty S.A. Empreendimentos E Participacoes

 

Foresight, Southcross – both energy concerns – and Nuverra are U.S. entities. Overall, U.S. issuers comprise 30 of the 36 global corporate defaults. – Tim Cross

The full analysis is available to S&P Global Credit Portal subscribers here. It includes downloadable xls files detailing the Global Corporate Default Summary, a full list of global corporate defaults year-to-date, as well as data points backing up the above chart.