US Leveraged loan volume hits $8.5B this week, thanks to Dollar Tree

US leveraged loan issuance

The U.S. leveraged loan market saw $8.5 billion in new issuance during the week, thanks in large part to a $5.2 billion credit backing the merger of discount retail store chain Dollar Tree with Family Dollar.

With this week’s activity, year-to-date issuance totals $31.2 billion. That’s down significantly from the $45.8 billion seen at this point in 2014. Indeed, there were only a handful of leveraged loans making their way to market this week, as investors continue to focus on higher-quality deals, while making lesser-quality issuers pay up. - Staff reports


US Leveraged loan funds see 29th straight week of investor withdrawals

Cash outflows from bank loan funds declined to $443.1 million for the week ending Jan. 29, according to Lipper. That’s down from $738.1 million last week and $593.7 million two weeks ago.

leveraged loan funds

Inflows from exchange-traded funds, at $11.2 million, slightly offset mutual fund withdrawals of $454.3 million. This is only the second ETF inflow in the last 16 weeks, according to Lipper, but the latest ETF outflows have been negligible. Recall that ETFs were very heavy, at 18% of the big withdrawal six weeks ago, and that was anomalous to almost every other reading during the year.

The latest outflow represents the 29th consecutive weekly withdrawal and the 40th outflow in 42 weeks, for a net redemption of $26.5 billion over that span.

The trailing four-week average moderates to negative $537 million for the week, from negative $684 million last week and negative $821 billion two weeks ago. The observation five weeks ago, at $1.3 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.

The net $2.1 billion outflow for the first four weeks of the year, with 3% ETF-related, is in contrast to last year, which showed a net inflow of $3.4 billion for the same period, with 10% ETF-related. For the full-year 2014, outflows were roughly $17.3 billion, with ETFs representing about 3% of that total, or $516 million.

In today’s report, the change due to market conditions was slightly negative, at $31.7 million, or -0.04% of total assets, which were $86.7 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 8%. – Joy Ferguson


Crestline-Kirchner takes over from Medley to manage two funds

Crestline-Kirchner has taken over from Medley Capital as manager of two investment funds.

The funds, called MOF I Funds, will change names.

Medley Opportunity Fund Ltd. will be renamed CK Pearl Fund Ltd., and Medley Opportunity Fund LP will now be called CK Pearl Fund LP. The funds launched as early as 2006.

The underlying investments include real estate projects and operating companies of small to midsize business. The assets include some debt positions.

The investments are across industries, including manufacturing, technology, developed and undeveloped land, and natural resources. Some of the investments are the result of equity that has been converted from debt of defaulted borrowers.

Crestline-Kirchner Private Equity Group, formed in 2013, is a joint venture between Crestline Investors and Bud Kirchner, founder of the Kirchner Group.

Medley Capital Corporation, an externally managed BDC that trades on the NYSE as MCC, lends to privately held small- and middle-market companies, mainly in North America. The portfolio largely comprises first-lien and second-lien loans, but also warrants and equity. It is managed by MCC Advisors, a subsidiary of Medley Management, which trades on NYSE as MDLY. – Abby Latour


Alcentra names Hatfield as global CIO, Yang as head of the Americas

Alcentra today announced several executive leadership appointments, with Paul Hatfield returning to the Group’s global headquarters in London in an expanded role as global chief investment officer. He will lead the firm’s initiatives related to multi-strategy credit portfolio management and customized investment solutions.

Jack Yang succeeds Paul Hatfield, as Alcentra’s head of the Americas, while retaining his responsibilities as global head of business development. In his new role, Yang is responsible for the firm’s business operations in the Americas, and product development, marketing, fundraising and investor relations globally.

Both report to David Forbes-Nixon, Alcentra’s chairman and CEO. – Sarah Husband


Dollar Tree readies $7B leveraged loan backing Family Dollar buy

Arrangers J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, RBC Capital Markets, and US Bank have scheduled Dollar Tree’s M&A loan deal for launch with a lender meeting on Monday, Jan. 26, at 2:00 p.m. EST, sources said.

The financing backing the purchase of Family Dollar is now structured as a $1.25 billion, five-year revolver, a $500 million, five-year term loan A, and a $5.2 billion, seven-year term loan B.

The underwriting group now includes PNC, TD Securities, Capital One, Regions Bank, Citizens Bank, Bank of Tokyo-Mitsubishi UFJ, SunTrust Robinson Humphrey, SMBC, HSBC, Fifth Third, and Huntington National.

The original commitment called for $5.4 billion of term debt and $2.8 billion in new senior unsecured notes, sources said. Earlier, Dollar Tree said it would also use $569 million of available cash and a $240 million revolver draw to back the acquisition.

Family Dollar shareholders approved the transaction earlier this week, and closing is expected in March.

The combination of Dollar Tree and Family Dollar would create the largest discount retailer in North America by number of stores.

Chesapeake, Va.-based Dollar Tree operates variety stores in the U.S. and Canada. – Chris Donnelly/Richard Kellerhals


S&P: CLO exposure to recent Oil & Gas rating actions is limited

Standard & Poor’s Ratings Services has reviewed exposure in U.S. CLO transactions to the 23 oil and gas exploration and production companies whose ratings were affected by its Jan. 16, 2015 rating actions.

As per that report, the following borrowers were downgraded:

  • WPX Energy, to BB/Stable from BB+/Negative
  • Energy XXI, to B/Negative from B+/Negative
  • Warren Resources, to B-/Stable from B/Stable
  • Swift Energy, to B-/Stable from B/Stable
  • Midstates Petroleum Co., to B-/Negative from B/Stable
  • Magnum Hunter Resources Corp., to CCC+/Negative from B-/Negative
  • Black Elk Energy Offshore Operations, to CCC-/Negative from CCC+/Negative
  • Rooster Energy, to CCC-/Negative from CCC+/Developing.


The following borrowers had their outlook revised:

  • Chesapeake Energy Corp., to stable from positive (affirmed ‘BB+’ corporate credit rating)
  • Whiting Petroleum Corp., to negative from stable (affirmed ‘BB+’ corporate credit rating)
  • SM Energy Co., to stable from positive (affirmed ‘BB’ corporate credit rating)
  • Denbury Resources, to negative from stable (affirmed ‘BB’ corporate credit rating)
  • Legacy Reserves, to negative from stable (affirmed ‘B+’ corporate credit rating)
  • Chaparral Energy, to stable from positive (affirmed ‘B’ corporate credit rating)
  • Halcon Resources Corp., to negative from stable (affirmed ‘B’ corporate credit rating)
  • SandRidge Energy, to negative from stable (affirmed ‘B’ corporate credit rating)
  • Sabine Oil & Gas, to negative from stable (affirmed ‘B’ corporate credit rating)
  • Clayton Williams Energy, to negative from stable (affirmed ‘B’ corporate credit rating)
  • EXCO Resources, to negative from stable (affirmed ‘B’ corporate credit rating)
  • American Eagle Energy Corp., to negative from stable (affirmed ‘CCC+’ corporate credit rating).


The following borrowers had their rating placed on CreditWatch negative:

  • Apache Corp. – ‘A-’ rating on CreditWatch with negative implications
  • Breitburn Energy Partners – ratings placed on CreditWatch with negative implications.


The following borrower had its rating affirmed:

  • Continental Resources – ‘BBB-’ corporate credit rating affirmed. The outlook is stable.


Based on the agency’s review, a total of 17 U.S. CLOs have exposure to companies whose ratings were either lowered or placed on CreditWatch negative as part of the Jan. 16 rating actions. The largest exposure was 0.62%. All other exposures were less than 0.5%. Based on the small exposure, S&P doesn’t expect any rating actions for U.S. CLO transactions as a result of the Jan. 16 rating actions.

Based on its review in December 2014 of roughly 700 U.S. CLOs, the average CLO exposure to loans issued out of the oil and gas sector was only about 3.3%.

S&P will continue to review whether, in its view, the ratings currently assigned to CLO transactions exposed to the oil and gas sector remain consistent with the credit enhancement available to support them. – Staff reports


US House passes Volcker extension legislation

The U.S. House of Representatives today passed legislation that would grant a two-year extension, to July 21, 2019, of the application of the Volcker Rule to banks’ AAA and AA CLO holdings. The bill passed by a vote of 271-154.

As reported, the legislation, H.R. 37, last week failed as it was brought to the House floor under suspension of the rules, a parliamentary measure that requires two-thirds approval.

The bill now moves to the Senate. The White House, however, has indicated President Obama would veto the bill.

“The LSTA is encouraged that the House of Representatives passed a narrow Volcker fix, which will prevent banks from engaging in a forced sale of well-performing CLO AAA and AA notes,” said Meredith Coffey, executive vice president of research and analytics at the LSTA. “We hope the Senate and the Administration support this sensible modest improvement.”

LSTA Executive Director Bram Smith yesterday wrote a letter to the House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) and Ranking Member Rep. Maxine Waters (D-Calif.) expressing the organization’s support for the legislation, and specifically the language that would extend to 2019 implementation of the Volcker Rule with respect to banks’ CLO holdings.

“If left unaddressed, banks will be forced to sell these safe investments to opportunistic buyers who will demand a deep discount. If Volcker implementation is extended just two years, this problem will resolve itself,” Smith wrote, noting that by 2019, the vast majority of the CLO notes that are not Volcker compliant will have matured or been redeemed.

For the text of the legislation, click here. – Kerry Kantin


Leveraged loan mart softens in December as demand deficit deepens

loan supply v demand

Loan market technical conditions weakened in December as capital formation faded more quickly than supply. In all, the amount of S&P/LSTA Index loans outstanding exceeded visible demand from CLO formation and retail flows by $5.8 billion: $7.9 billion to $2.1 billion. It was the deepest demand deficit in three months, edging November’s $5.5 billion figure. – Steve Miller

This analysis is part of a longer LCD News story, available to subscribers here, also details

  • US prime fund flows
  • US CLO issuance
  • Volume of leveraged loans breaking for trading
  • Loan outstandings
  • Secondary loan prices
  • Leveraged loan returns
  • Loan yields


Follow Steve on Twitter for leveraged loan insight and analysis.


Lloyds appoints four to leveraged loan market team

Lloyds today announced four appointments to its loan market team, with Alaric Fountain-Barber and Alessandro Valenti joining the firm’s leverage debt capital markets business.

Fountain-Barber, who was most recently at Barclays Capital, is understood to have started at the U.K. bank today as a director. He has previously worked in leveraged finance roles at Societe Generale CIB and UBS.

Valenti has made an internal move from Lloyd’s corporate capital structure advisory team to its leverage finance business. Previously, he has worked as a structured finance analyst at Fitch.

Both Fountain-Barber and Valenti report to Carlo Fontana, head of leverage debt capital markets.

Elsewhere in the Lloyds loan team, Nadia Jalal has moved internally from the global corporates relationship team to become an associate within the corporate loan capital markets business, while Ab Shome has joined the bank from RBS as a director on the loan markets real-estate team. – Nina Flitman