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Leveraged loan funds report third consecutive week of inflows

Leveraged loan funds reported inflows of $208 million for the week ended July 22, following inflows of $34 million and $19 million in the previous two weeks, which reversed a five-week outflow streak worth a combined $1.2 billion, according to Lipper.

This week’s result was attributed to a $168 million inflow to mutual funds, along with a $40 million inflow to the ETF segment. In contrast, last week’s $34 million inflow came from a $37 million inflow to ETFs offset by a $3 million outflow from mutual funds.

With today’s net inflow, the trailing four-week average improves to negative $26 million, from negative $122 million last week and negative $208 million two weeks ago.

The year-to-date outflow is now $3.9 billion, with 2% tied to ETFs, versus an inflow of $352 million at this point last year that was roughly 216% tied to ETFs.

In today’s report, the change due to market conditions was negative $98.5 million, which is essentially nil against total assets, which were $93.3 billion at the end of the observation period. The ETF segment comprises $6.8 billion of the total, or approximately 7% of the sum. – Joy Ferguson

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Leveraged loan fund assets under management hit two-year low

loan fund assets under management

After eking out two months of growth, loan mutual funds’ assets under management declined $2.9 billion in June – the biggest drop since January – to a two-year low of $135.6 billion, from $138.5 billion a month earlier, according to data from Lipper FMI and fund filings.

The reason? institutional investors in June adopted a low-wattage risk-off posture across risk assets, amid growing tensions surrounding the Greek debt situation. (Early data from July suggests that loan fund assets are stabilizing.) – Steve Miller

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US Leveraged loan funds see second straight investor cash inflow

leveraged loan fund flows

Loan funds reported inflows of $34 million for the week ended July 15, following an inflow of $19 million last week, which itself reversed a five-week outflow streak worth a combined $1.2 billion, according to Lipper.

However, take note that the small inflow this week was attributed to $3 million outflow from mutual funds filled in by an inflow of $37 million to the ETF segment. In contrast, last week’s net inflow was one third mutual fund and two thirds ETF.

With today’s net inflow, the trailing four-week average is now negative $122 million, versus negative $268 million last week and negative $208 million two weeks ago.

The year-to-date outflow remains at $4.1 billion, with 3% tied to ETFs, versus an inflow of $765 million at this point last year that was roughly 100% tied to ETFs.

In today’s report, the change due to market conditions was positive $215 million, which is essentially nil against total assets, which were $93.2 billion at the end of the observation period. The ETF segment comprises $6.8 billion of the total, or approximately 7% of the sum. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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High yield bond prices rebound after two-week slump

The average bid of LCD’s flow-name high-yield bonds advanced 49 bps in today’s reading, to 99.92% of par, yielding 6.71%, from 99.43% of par, yielding 6.89%, on July 9. Gains were broad based within the sample, with 11 on higher ground against three unchanged and one decliner.

Today’s positive observation is the first gain after a two-week slump. It wipes out Thursday’s 16 bps decrease, for a net gain of 33 bps week over week, but with the recent losses, the average is negative 80 bps over the past two weeks and negative 72 bps in the trailing-four-week reading.

The rebound comes alongside modest equity market gains since Greece’s deal over the weekend. However, it’s been fairly tenuous in high-yield as participants continue to keep an eye on U.S. Treasury rates and commodity prices.

The average bid sits at positive 422 bps for the year to date.

Recall that prior to sample revisions at the start of the year, the average bid had plunged to a three-year low of 93.33 on Dec. 16. However, a snap-back rally followed, and the average bid closed the year at 96.4, for a total loss of 536 bps in 2014.

With today’s increase in the average bid price, the average yield to worst slipped 18 bps, to 6.71%, but the average option-adjusted spread to worst cinched inward by 29 bps, to T+506. The greater move in spread as compared to yield can be linked to the weakness in the Treasury market of late, as rising yield encourages spread-to-Treasury compression.

Today’s reading in the flow names is wider than with broad index yield, but fairly in line with spread. The S&P Dow Jones U.S. Issued High Yield Corporate Bond Index closed yesterday with a 6.4% yield to worst and an option-adjusted spread to worst of T+484.

For further reference, take note that a June 24, 2014 reading of 106.98 – close to the February 2014 market peak of 107.03 – had the flow-name bond average yield at 5.02%, an all-time low, but spreads weren’t quite there. Indeed, the average yield was 7.63% at the prior-cycle peak in 2007, and the average spread at the time was T+290.

 

Bonds vs. loans
The average bid of LCD’s flow-name loans increased 19 bps in today’s reading, to 99.82% of par, for a discounted loan yield of 4.13%. The gap between the bond yield and discounted loan yield to maturity stands at 258 bps. – Staff reports

The data:

  • Bids rise: The average bid of the 15 flow names advanced 49 bps, to 99.92.
  • Yields fall: The average yield to worst slipped 18 bps, to 6.71%.
  • Spreads tighten: The average spread to U.S. Treasuries cinched inward by 29 bps, to T+506.
  • Gainers: The largest of the 11 gainers, Dish Network 5.875% notes due 2022, added two full points, to 100.75.
  • Decliners: The lone decliner, Intelsat 7.75% notes due 2021, shed 1.5 points, to 79.5.
  • Unchanged: Three of the 15 constituents were unchanged.

 

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Middle-market company revenue up in 1st two months of 2Q, index says

Revenue of privately held middle-market companies rose 9.26% in the first two months of the second quarter of 2015, outpacing revenue growth of 7.24% in the first quarter, according to an index created by Golub Capital and credit market expert Ed Altman.

EBITDA increased by 6.93% year-over-year during the first two months of the second quarter of 2015, compared to 6.42% in the first quarter. The Golub Capital Altman Index is based on the sales and earnings data of roughly 150 private U.S. companies in Golub Capital’s loan portfolio.

The index was featured in the inaugural edition of the quarterly Golub Capital Middle Market Report, which includes an analysis of the index. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

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Loan outflows continue for fifth week, led again by mutual funds

Loan funds reported outflows of $365 million for the week ended July 1, more than double the $174 million of outflows for the week ended June 24, according to Lipper. It was the fifth straight week of outflows for a combined $1.2 billion, which follows a stretch of three consecutive weeks of inflows that totaled $442 million.

Mutual funds again provided the majority of the latest outflow, at $271 million, compared to $93 million of ETF outflows. Last week, mutual funds reported outflows of $151 million, joined by $23 million in ETF outflows.

With today’s outflow, the trailing four-week average widens to negative $268 million, from negative $201 million last week, and negative $147 million two weeks ago.

The year-to-date outflow is $4.1 billion, with 4% tied to ETFs, versus an inflow of $1.2 billion at this point last year, with positive 70% tied to ETFs.

In today’s report, the change due to market conditions was $98 million, or roughly 0.11% against total assets, which were $93 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 7% of the sum. – Joy Ferguson

Loan Fund Flows July 6 2015

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With all eyes on Greece, Leveraged loans lose 0.42% in June; 1st setback of 2015

leveraged loan returns

 

In June, S&P/LSTA Index returns slipped into the red, at negative 0.42%, amid heavier conditions that prevailed for most of the month and recent concerns surrounding Greece that put pressure on all risk assets.

It was the first monthly setback of the year and followed a 0.19% gain in May. The largest loans that constitute the S&P/LSTA Loan 100 lagged the broader market with a 0.86% loss in June.

This group suffered disproportionately from Millennium Health’s outsized decline and from falling prices in the market’s two big distressed situations: Energy Future Holdings and Caesars. – Steve Miller

Follow Steve on Twitter for leveraged loan news and insights.

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Energy sector, Colt Defense focus of LCD’s Restructuring Watchlist

The beleaguered energy sector dominated activity this quarter on LCD’s Restructuring Watchlist, with Sabine Oil & Gas missing an interest payment on a bond and Hercules Offshore striking a deal with bondholders for a prepackaged bankruptcy.

Another high-profile bankruptcy this month was the Chapter 11 filing of gunmaker Colt Defense. Colt’s sponsor, Sciens Capital Management, agreed to act as a stalking-horse bidder in a proposed Section 363 asset sale. The bid comprises Sciens’ assumption of a $72.9 million term loan, a $35 million senior secured loan, and a $20 million DIP, and other liabilities.

The missed bond interest payment for Sabine Oil & Gas was due to holders of $578 million left outstanding of Forest Oil 7.25% notes due 2019, assumed through a merger of the two companies late last year.

The skipped payment comes after a host of other problems. Sabine Oil has already been determined to have committed a “failure to pay” event by the International Swaps and Derivatives Association, and will head to a credit-default-swap auction. The determination by ISDA is related to previously skipped interest on a $700 million second-lien term loan due 2018 (L+750, 1.25% LIBOR floor).

Meantime, Hercules Offshore on June 17 announced it entered a restructuring agreement with a steering group of bondholders over a Chapter 11 reorganization. The agreement was with holders of roughly 67% of its10.25% notes due 2019; the 8.75% notes due 2021; the 7.5% notes due 2021; and the 6.75% notes due 2022, which total $1.2 billion.

Among other developments for energy companies, Saratoga Resources filed for Chapter 11 for a second time, blaming challenges in field operations, the decline in oil and gas prices, and an unexpected arbitration award against the company. Thus, Saratoga Resources has been removed from the list. Another company previously on the Watchlist, American Eagle Energy, has been removed following a Chapter 11 filing in May.

Another energy company, American Energy-Woodford, could work itself off the Watchlist through a refinancing. On June 8, the company said 96% of holders of a $350 million issue of 9% notes due 2022, the company’s sole bond issue, have accepted an offer to swap into new PIK notes.

Also, eyes are on Walter Energy. The company opted to use a 30-day grace period under 9.875% notes due 2020 for an interest payment due on June 15.

Another energy company removed from the Watchlist was Connacher Oil and Gas. The Canadian oil sands company completed a restructuring in May under which bondholders received equity. The restructuring included an exchange of C$1 billion of debt for common shares, including interest. A first-lien term loan agreement from May 2014 was amended to allow for loans of $24.8 million to replace an existing revolver. A first-lien L+600 (1% floor) term loan, dating from May 2014, was left in place. Credit Suisse is administrative agent.

Away from the energy sector, troubles deepened for rare-earths miner Molycorp. The company skipped a $32.5 million interest payment owed to bondholders on a $650 million issue of first-lien notes. Restructuring negotiations are ongoing as the company uses a 30-day grace period to potentially make the payment.

In other news, Standard & Poor’s downgraded the Tunica-Biloxi Gaming Authority to D, from CCC, following a skipped interest payment on $150 million of 9% notes due 2015. Roughly $7 million was due to bondholders on May 15, and the notes were also cut to D, from CCC with a negative outlook. The company operates the Paragon Casino in Louisiana.

Constituents occasionally escape the Watchlist due to improving operational trends. Bonds backing J. C. Penney advanced in May after the retailer reported better-than-expected quarterly earnings and improved sales.

In another positive development, debt backing play and music franchise Gymboree advanced after the retailer reported steady first-quarter sales and earnings that beat forecasts. Similarly, debt backing Rue 21 gained in May after the teen-fashion retailer privately reported financial results, according to sources. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more

Here is the full Watchlist, which is updated weekly by LCD (Watchlist is compiled by Matthew Fuller):

Watchlist 2Q June 2015

 

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Leveraged loan fund assets inch higher in May but remain down YTD

leveraged loan fund aum

In May, loan mutual funds’ assets under management inched up $504 million, or 0.37%, to $138.5 billion, according to data from Lipper FMI and public filings. The gain follows a $607 million advance in April. Despite these modest gains, AUM was still down $2.8 billion at the end of May from $141.3 billion at the end of 2014.

As the chart above illustrates, a punishing nine-month run in which AUM declines averaged $3.8 billion a month came to an end in January. In the four months since, AUM is up by an average of $457 million a month. – Steve Miller

Follow Steve on Twitter for leveraged loan market news and insights.

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Leveraged loan funds see small investor cash outflow, snapping 3-week streak

Outflows returned to loan funds for the week ending June 3, with Lipper reporting $93.9 million leaving the asset class, versus a $38.6 million inflow in the week ended May 27. The outflow follows three consecutive weeks of inflows that had totaled $442 million.

leveraged loan fund flows

Mutual funds provided the vast majority of the latest outflow result, at $92 million, joined by just $2 billion in ETF outflows, the data shows. Last week, mutual funds provided the bulk of the inflow result, at $37 million, versus just $1.5 million of inflows from ETFs.

With today’s outflow, the trailing four-week average dips slightly to positive $87 million, from positive $97 million last week, and positive $74 million two weeks ago.

The year-to-date outflow is still roughly $3.1 billion, with negative 3% tied to ETFs, versus an inflow of $3.6 billion at this point last year, with positive 23% tied to ETFs.

In today’s report, the change due to market conditions was a positive $127 million, which is just 0.13% against total assets, which were $94.5 billion at the end of the observation period. The ETF segment comprises $7 billion of the total, or approximately 7% of the sum. – Joy Ferguson

Note: This story was updated to correct a chart data error re the week ended April 22.