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S&P: Growth in Global Credit, Leverage to Continue. Then: Slow Burn or ‘Crexit’?

corporate debt levels

S&P Global sees global corporate credit demand growing over the next few years, to $62 trillion by the end of the decade, including some $24 trillion in “new” debt (as opposed to refinancings).

At the same time, borrower credit quality is weakening , thanks largely to “monetary expansion” in various countries.

This combination of factors leads S&P to a pair of scenarios, with the assumption that a credit correction of some kind is inevitable:

  • A slow burn, where weak companies fall over gradually (this is the base case assumption)
  • “Crexit”: A system-wide credit contraction, prompted by a series of economic/political shocks. Brexit, for instance … – Tim Cross

 

The full report, Global Corporate Credit: Despite An Inevitable Credit Correction, Debt Demand Will Swell To $62 Trillion Through 2020, is available to S&P Global Credit Portal Subscribers. It was written by Terry Chan, Diego Ocampo, David Tesher, and Paul Watters. It details:

  • Global corporate credit demand, by country
  • New corporate credit demand
  • Corporate credit growth cycle
  • Debt/GDP vs Credit growth
  • Financial risk trends of global corporate sample
  • Distribution of FFO/debt risk categories, by country/industry

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US Leveraged Loan Issuance Rebounds, High Yield Bonds Emerge as Post-Brexit Markets Heat up

There is life in the new-issue U.S. leveraged finance market for the first time since the U.K. Brexit vote, thanks largely to a rapidly accelerating leveraged loan segment that is seeing opportunistic issuers come off the sidelines.

U.S. syndicated loan issuance last week totaled a relatively hearty $14.3 billion, up noticeably from $3.4 billion the previous week, according to LCD, an offering of S&P Global Market Intelligence.

US leveraged finance issuance“Summer’s here, and a technically driven loan market is heating up,” writes LCD’s Chris Donnelly, in his weekly market wrap-up. “Accounts that fretted about repricing activity in recent weeks saw a slew of mark-to-market deals and refinancings, all poised to capture investor demand.”

Indeed, there was a handful of sizeable credits last week, including a $2.2 billion refinancing from New Zealand-based packaging concern Reynolds Group and a $1.8 billion loan backing Revlon’s acquisition of Elizabeth Arden.

There was also a jumbo $4.25 billion loan backing the bankruptcy exit/DIP loan refinancing of Texas Competitive Electric Holdings, the largest leveraged loan bankruptcy ever (as TXU).

Year to date, U.S. leveraged loan issuance now totals $239 billion, compared to $247 billion at this point in 2015.

Along with increased issuance, U.S. loan funds last week saw their first inflow of investor cash in a month, according to Lipper.

The U.S. high yield bond market was less active, though it too saw its best week of issuance since the Brexit vote, logging $3.9 billion in deals, according to LCD. More might be in store.

“Investors have a significant amount of money to put to work on the heels of a five-week slowdown, big inflows to the asset class, and large coupon-payment dates having passed in June,” says Matthew Fuller, who covers the high yield bond market for LCD.

About those inflows: They totaled a whopping $4.35 billion last week, the second-largest weekly sum ever, according to Lipper.

Year to date U.S. high yield issuance totals $124 billion, down significantly from the $189 billion at this point last year.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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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UFC Sets Leveraged Loan, High Yield Bond Backing Private Equity Buy of Co.

Financing for the $4 billion purchase of professional mixed martial arts organization UFC by WME IMG, Silver Lake Partners, KKR, and MSD Capital will include a $1.3 billion, seven-year covenant-lite term loan B and $500 million of unsecured notes, sources said. As expected, UFC will be financed on a stand-alone basis and will not result in a refinancing of talent agency WME IMG’s debt, sources said.

UFC logoGoldman Sachs will be left lead on the loan deal and is expected to commence pre-marketing of the transaction shortly, while Deutsche Bank will be left lead on the bond deal, sources said. As noted earlier, the financing package has been underwritten by Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, and KKR Capital Markets.

WME IMG will also serve as UFC’s operating partner. Silver Lake Partners and KKR will join WME IMG as new strategic investors, along with MSD Capital, L.P. and MSD Partners, L.P., which will provide preferred equity financing, sources said.

UFC produces more than 40 live events annually and is the largest Pay-Per-View event provider in the world, broadcast in over 156 countries and territories, to nearly 1.1 billion television households worldwide, in 29 different languages. UFC continues to capitalize on digital distribution platforms via its wholly owned subscription over-the-top service, FIGHT PASS, delivering exclusive live events, thousands of fights on demand, and original content to viewers around the globe.

UFC parent Zuffa in 2014 repriced its then $475 million TLB due 2020 to L+300, with a 0.75% LIBOR floor. — Chris Donnelly

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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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Download LCD’s Distressed Debt Weekly – Free!

LCD’s Distressed Weekly offers comprehensive news, analysis, data, and market calendars covering the distressed leveraged loan and high yield bond segments. This encompasses debt that’s trading at steep discounts or issuers which have recently underwent credit defaults or downgrades into junk territory.

Here’s some of what’s you’ll see in each Distressed Weekly.

  • Full distressed market news stories from LCD News
  • Weekly Market Wrap-up
  • Recent debtor-in possession loans
  • Recent loan covenant amendments
  • Bankruptcy hearing deadlines
  • Loan, high yield bond returns
  • YTD leveraged loan defaults
  • Chapter 11 Exit Pipeline
  • LCD’s Restructuring Watchlist
  • Upcoming loan maturities

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Leveraged Loan, High Yield Bond Markets Proceed Cautiously after Brexit Vote

leveraged finance issuance

The U.S. leveraged finance segment was quiet last week as market players worked around the July 4 holiday and began to navigate the post-Brexit vote landscape.

After posting no issuance the previous week there was $1.3 billion in high yield bond deals last week, most notably via Transocean Offshore, a fallen-angel issuer which launched a $1.25 billion offering to refinancing existing debt.

Year to date, U.S. high yield bond issuance totals $120 billion, down from $186 billion at this point in 2015, according to LCD, an offering of S&P Global Market Intelligence.

Despite no deal flow, there was news in the market. Institutional investors poured a hefty $1.8 billion into high yield funds last week, ending three weeks of withdrawals totaling $4.2 billion, according to Lipper.

The leveraged loan space was more active, though still unimpressive, with $3.4 billion in deals last week, after posting a scant $800 million the previous week. Of note, Realogy, the parent company of Century 21, ERA, Coldwell Banker, and Sotheby’s, set a $1.1 billion leveraged loan, also to refinance debt.

Year to date, U.S. leveraged loan issuance totals $216 billion, down some 10% from this point last year. – Tim Cross

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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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Download LCD’s Distressed Debt Weekly – Free!

LCD’s Distressed Weekly offers comprehensive news, analysis, data, and market calendars covering the distressed leveraged loan and high yield bond segments. This encompasses debt that’s trading at steep discounts or issuers which have recently underwent credit defaults or downgrades into junk territory.

Here’s some of what’s you’ll see in each Distressed Weekly.

  • Full distressed market news stories from LCD News
  • Weekly Market Wrap-up
  • Recent debtor-in possession loans
  • Recent loan covenant amendments
  • Bankruptcy hearing deadlines
  • Loan, high yield bond returns
  • YTD leveraged loan defaults
  • Chapter 11 Exit Pipeline
  • LCD’s Restructuring Watchlist
  • Upcoming loan maturities

Download your complimentary copy here! (We’ll send you a link.)


First, last name (required)

Company (required)

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With Brexit, 4th of July, US High Yield Bond/Leveraged Loan Marts Take Week Off

US leveraged finance issuance

There was practically zero new issuance in the U.S. leveraged loan and high yield bond markets last week, as all eyes were on the post-Brexit vote fallout and as market players took off early in anticipation of the Independence Day holiday.

Year to date, U.S. leveraged loan issuance stands at $209.6 billion, down 10% from the same period in 2015. High yield bond issuance totals $118.9 billion, down a hefty 36% from last year.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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: 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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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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 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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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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 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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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.