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Leveraged Loan Break Prices Near 100 After Impressive Run-Up

leveraged loan break prices

After dipping to nearly 97 cents on the dollar in February, the average price at which U.S. leveraged loans entered the trading market neared par in July – at 99.99 cents on the dollar – marking an impressive rebound for the asset class, according to LCD, an offering of S&P Global Market Intelligence.

Full disclosure: Credit quality is playing a role in the increased break price of late, as more higher-rated leveraged credits – those at BB- or better – have made their way through market. Still, the 99.99 break price is as high as it’s been since July 2015, according to LCD.

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This chart is part was taken from a longer piece of analysis, by LCD’s Richard Kellerhals. It first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. www.lcdcomps.com 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 Issuance Totals $26B in August

US leveraged loan issuance

Leveraged loan issuance in the U.S. totaled $26.2 billion in August, down from the $39.4 billion seen in July, according to LCD.

As with other financial markets, August is usually a quiet time for leveraged loans, and last month was no exception, as it was the slowest month volume-wise since the $11.1 billion seen in December 2015. Issuance last month was up from the year-ago period, however.

Through August, 2016 leveraged loan issuance totals $283 billion, down roughly 9% from the $312 billion during the same period in 2015. – Staff reports

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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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After Blemish-Free August, US Leveraged Loan Default Rate Eases to 1.98%

US leveraged loan default rate

In August, there were no new defaults among the U.S. issuers included in the S&P/LSTA Leveraged Loan Index. As a result, the lagging-12-month leveraged loan default rate eased to 1.98% by principal amount from a 16-month high of 2.17% in July, according to LCD, an offering of S&P Global Capital MarketsStaff reports

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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 Issuance Tops $26B in August

us leveraged loan issuance

Leveraged loan issuance in the U.S. totaled $26.2 billion in the traditionally sleepy month of August, according to LCD. While that’s down from the $39.4 billion in July, it’s well up from the $14.7 billion tallied in August of 2015.

Year to date, U.S. leveraged loan issuance totals $284.1 billion. That’s down from $312.3 billion through the first eight months of 2015, according to LCD. – Staff reports

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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 CLO Issuance Totals $5.86B in August, Unchanged from July

US CLO issuance

Issuance of U.S. collateralized loan obligation vehicles in August clocked in at $5.86 billion, in line with the $5.76 billion during the previous month, according to LCD, an offering of S&G Global Market Intelligence.

Year-to-date, CLO issuance totals $37.84 billion, down noticeably from the $73.3 billion at this point last year and from the $85.7 billion at this point in 2014 (there was a record $124 billion in issuance that year).

CLOs, of course, are a major source of leveraged loan demand. CLO issuance has declined in recent months as stricter capital requirements are set to take effect at year-end. (You can read more about how CLOs work here.) – Staff reports

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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 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

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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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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

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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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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

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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 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%.

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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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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

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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.