content

US Leveraged Loan Funds See $125M Investor Cash Inflow

loan fund flows

U.S. leveraged loan funds recorded an inflow of $125.4 million in the week ended Aug. 17, according to the Lipper weekly reporters only. This is the third straight week of increasing inflows to the asset class, following last week’s $96.4 million and $60.4 million in the week prior.

The reading was 37% attributable to the ETF segment, up from 20% of last week’s reading.

The trailing four-week average rose to $66.7 million, from $52.6 million last week, amid the increasing inflow.

Year-to-date outflows from leveraged loan funds now total $5.11 billion, based on outflows of $5.9 billion from mutual funds against inflows of $779 million to ETFs, or inverse 15%, according to Lipper.

The change due to market conditions this past week was positive $40.2 million, a negligible change against total assets, which were $59.2 billion at the end of the observation period. ETFs represent about 11% of the total, at $6.6 billion. — Jon Hemingway

Follow LCD News on Twitter.

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.

content

As CLO Market Shifts Gears, European Leveraged Loan Spreads Shrink in July

european loans STM

With technicals heating up in the European leveraged loan market, all-in spreads for new-issue single-B rated leveraged loans shrank to E+491 in July from E+563 in 2016’s second quarter, and from E+601 in the first quarter, according to LCD, an offering of S&P Global Market Intelligence.

One factor driving the market last month: Relatively strong CLO issuance, which reached a “2.0 era” high of €4.56 billion in the second quarter. – Staff reports

Follow LCD News on Twitter.

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.

content

Chesapeake Energy Upsizes Leveraged Loan by $500M, Tightens Interest Rate

Joint bookrunners Goldman Sachs, Citi, and MUFG have upsized Chesapeake Energy’s first-lien, last-out term loan to $1.5 billion, from $1 billion, and tightened pricing, according to market sources. Pricing was expected later today.

Price talk for the five-year loan is now L+750 with a 1% LIBOR floor, offered at par. Recall initial guidance including a spread range of L+750–775 and an OID of 99. The loan is non-callable for two years, with a first call at par plus 50% of the coupon, stepping to 25% and par.

chesapeake energy logoProceeds from the deal will be used to fund a tender offer for up to $500 million of the borrower’s outstanding bonds in terms of purchase price. The tender prioritizes the company’s shortest-dated bonds. It will redeem up to $400 million (purchase price) of its 6.35% euro senior notes due 2017, 6.5% senior notes due 2017, and 7.25% senior notes due 2018.

Up to $250 million will be spent on the second-priority floating-rate senior notes due 2019 and the third-priority notes, which comprise the following paper: 6.625% senior notes due 2020; 6.875% senior notes due 2020; 6.125% senior notes due 2021; 5.375% senior notes due 2021; 4.875% senior notes due 2022; and 5.75% senior notes due 2023.

The new debt will be secured against the same collateral that is tied to the company’s revolver. In case of default, payments to new term loan creditors will waterfall down after the revolver is repaid. The loan will carry an unconditional guarantee from Chesapeake’s directly and indirectly held wholly owned domestic subsidiaries, with the same guarantee in place for the revolving credit.

Agencies assigned issue ratings of B–/Caa1 and the recovery rating from S&P Global Ratings is 1. S&P Global also downgraded the corporate rating to CC, from CCC. Moody’s affirmed the corporate rating at Caa2. Outlooks are negative and positive, respectively. — Jon Hemingway/Rachel McGovern

Follow Rachel and LCD News on Twitter.

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.

content

US Leveraged Loans Gain 0.02% Today; YTD Return: 6.37%

Loans gained 0.02% today after going unchanged on Friday, according to the LCD Daily Loan Index.
The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.04% today.

In the year to date, loans overall have gained 6.37%.

Follow LCD News on Twitter.

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.

content

S&P: European Leveraged Finance Mart Shrugs Off Brexit Vote as Borrowers’ Market Persists

The European leveraged finance markets have held up extremely well since the shock of the U.K. electorate’s vote to leave the EU, according to a report published on Monday by S&P Global Ratings entitled ‘Borrower-Friendly Credit Conditions Endure As The European Leveraged Finance Market Shrugs Off Brexit Uncertainty’.

The high-yield bond market has come back to life after a three-week closure due to the referendum, says S&P. Meanwhile, the result of the Brexit vote barely disrupted the leveraged loan market, and the shortage of new issuance so far in 2016 is even giving some private equity sponsors an opportunity to take dividends, S&P adds.

S&P says much of the resilience in the capital markets can be attributed to stimulus measures such as the European Central Bank’s (ECB) Corporate Sector Purchase Programme (CSPP), and will be aided further by the recently announced corporate bond asset purchase scheme (CBPS) from the Bank of England.

European CLO issuance topped €5 billion in July. That's the most in one month during the '2.0 CLO' era.

European CLO issuance topped €5 billion in July. That’s the most in one month during the ‘2.0 CLO’ era.

Credit conditions for borrowers became much friendlier in the second quarter of 2016, with an uptick in loan repricing transactions, according to S&P, and the agency expects the European leveraged finance loan and bond markets to remain favourable for borrowers since the need for new funding — driven by mergers and acquisitions (M&A) activity — remains lower than investor demand. This is largely the result of trade buyers continuing to dominate the M&A playing field, making it tough for private equity sponsors to compete with them on valuations and thereby reducing the need for new finance, the report adds.

S&P goes on to say that while borrowers have taken this opportunity to refinance expensive subordinated debt with cheaper senior secured issuance, the result has been an increase in the amount of senior leverage in loan-funded transactions. This move is reflected in the reduction S&P has observed in the percentage of deals with ‘6’ recovery ratings and an increase in those with ‘2’, ‘3’, and ‘4’ recovery ratings this year.

Improvements in borrowing conditions could result in a new wave of refinancings, repricings, and maturity extensions, but this could also enable private equity sponsors to achieve less-stringent transaction terms, S&P warns. Companies’ leverage could also increase, S&P says, and although overall debt-to-EBITDA multiples haven’t risen in 2016, senior leverage has continued to climb to its highest level since 2007.

However, rather than the borrower-friendly conditions extending to companies further down the credit scale, S&P predicts investors will remain focused on issuers’ credit quality, and will continue to push back selectively on terms they deem too generous or risky.

The report is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280, or sending an e-mail to [email protected]. — Luke Millar

Follow Luke and LCD News on Twitter.

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.

content

US Leveraged Finance Issuance: Leveraged Loans vs High Yield Bonds

US leveraged finance issuance

U.S. leveraged finance issuance – leveraged loans and high yield bonds – totaled $21.5 billion last week, the most since the week of June 10.

Loans comprised the bulk of the total, with $14.2 billion in deals launched last week. High yield bond issuance totaled $7.3 billion.

Year to date (through Aug. 5), U.S. leveraged loan issuance totals $272 billion, down some 11% from this point in 2015, according to LCD, an offering of S&P Global Market Intelligence.

U.S. high yield bond issuance through Aug. 5 totals $140 billion, down a hefty 30% from the same period in 2015.  – Tim Cross

Follow  LCD News on Twitter.

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.

content

European Leveraged Loans Gain 0.02% Yesterday; YTD Return: 3.54%

The European Leveraged Loan Index (ELLI) gained 0.02% yesterday (excluding currency).

The ELLI has returned 0.21% thus far in August. The total return for the ELLI in the year to date is 3.54%. — Staff reports

Follow LCD News on Twitter.

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.

content

European Leveraged Loans See Post-Brexit Rebound in July

european leveraged loan returns

European leveraged loans tracked by the S&P European Leveraged Loan Index (ELLI) gained 1.41% in July, not only recovering from the 0.6% Brexit-related loss in June, but producing the strongest return in four months.

This is the second time in 2016 that the loan market has demonstrated its resilience with a swift bounce-back — the Index gained 1.7% in March following a 1.22% loss in February, driven by spell of volatility across capital markets. – Staff reports

Follow LCD News on Twitter.

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.

content

US Leveraged Loans Gain 0.03% Today; YTD Return: 6.07%

Loans gained 0.03% today after gaining 0.01% yesterday, according to the LCD Daily Loan Index.

The S&P/LSTA US Leveraged Loan 100, which tracks the 100 largest loans in the broader Index, gained 0.05% today.

In the year to date, loans overall have gained 6.07%.

Follow LCD News on Twitter.

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.

content

LSTA Unveils Revisions to Delayed Compensation Regime

The Loan Syndications and Trading Association (LSTA) today unveiled revisions to its proposed new delayed compensation regime, which is designed to reduce settlement times in the secondary loan market. The new regime will be implemented in two phases, with the first phase effective Sept. 1.

LSTA logoAs it currently stands, delayed compensation begins accruing to a buyer at T+7 in most circumstances in which a trade doesn’t close in that time frame. The LSTA is revising delayed compensation from a “no-fault” regime to a requirements-based regime. In short, the buyer will only receive delayed comp if it has taken certain steps and is ready to pay once the administrative agent is ready to close the trade, subject to certain exceptions.

The LSTA last month delayed the launch of the new regime until Sept. 1 to guarantee ample opportunity for stakeholder input. As before, the new regime targets a minimum of T+7 settlement for loans that trade on par documentation, but now the buyer will be required to execute the confirmation and assignment agreement by T+5 in order to receive delayed comp, which is a day earlier than originally proposed. The change is designed to accommodate some market participants who need a one-day lead time—the time between when the agent is ready to close and when the buyer can make funds available—to settle some trades, said the LSTA’s General Counsel, Elliot Ganz.

To provide market participants with time to adjust to the change, the new regime will be implemented in two phases. In the first phase, which will be effective Sept. 1, the buyer will be required to execute the confirmation and assignment agreement by T+6 and select a settlement date of T+7 or earlier to receive delayed comp; buyers won’t be penalized for longer designated lead times on their electronic settlement platforms.

In the second phase, which begins Nov. 1, the confirmation and assignment agreement will need to be executed by T+5 and lead times longer than one day will not be permissible.

For additional details, please see the LSTA’s memorandum, which is attached. — Staff reports

Follow LCD News on Twitter.

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.