Gladstone restructures loans in Galaxy Tool, Tread; sells Funko

Gladstone Investment Corporation has restructured investments in Galaxy Tool and Tread Corp. in the recent fiscal quarter, exchanging debt holdings for equity, an SEC filing showed.

Gladstone Investment booked a realized loss of $10.5 million when the lender restructured its investment in Galaxy Tool. Debt to Galaxy Tool with a cost basis of $10.5 million was converted into preferred equity with a cost basis and fair value of zero through the restructuring transaction, the SEC filing showed.

Galaxy Tool, based in Winfield, Kan., manufactures tooling, precision components, and molds for the aerospace and plastics industries.

An investment in Tread included debt with a cost basis of $9.26 million. This was also converted into preferred equity. Gladstone Investment realized a loss of $8.6 million through the transaction.

Tread was Gladstone Investment’s sole non-accrual investment as of Sept. 30. As of Dec. 31, 2015, a revolving line of credit to Tread remained on non-accrual. Tread remains Gladstone Investment’s sole non-accrual investment.

Based in Roanoke, Va., Tread manufactures explosives-handling equipment including bulk loading trucks, storage bids, and aftermarket parts.

Also in the quarter, Gladstone Investment sold an investment in bobblehead and toy maker Funko, realizing a gain of $17 million. Gladstone Investment received cash of $14.8 million and full repayment of $9.5 million in debt as part of the sale.

Gladstone Investment Corporation, based in McLean, Va., is an externally managed business development company that trades on the Nasdaq under the ticker GAIN. The BDC aims for significant equity investments, alongside debt, of small and mid-sized U.S. companies as part of acquisitions, changes in control, and recapitalizations. — Abby Latour

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


European Leveraged Loans See Weakest January Since 2008 (Though They’re Positive)

january leveraged loan returns - europe

Although the European leveraged loan market remained relatively isolated from the broad volatility that hit the U.S. market and European high-yield bonds, leveraged loans tracked by the S&P European Leveraged Loan Index (ELLI) endured the worst opening month of any year since 2008, gaining just 0.12% in January (excluding currency).

Of course, everything’s relative. While loan returns in Europe are lagging vs years prior, they soaring compared to in the U.S.

Leveraged loans in the States lost 0.65% in January, the eighth straight decline for that market. That’s a record, surpassing even the six months spent in the red during the very dark days of 2008. – Staff reports

This story first appeared on, 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


Leveraged Loans: Europe-US Yield Differential Widens; Traders Eye Relative-Value Play

secondary loan yields, US v Europe

The yield differential between the U.S. and European leveraged loan markets continues to widen as the U.S. is hit by growing concerns about the credit cycle, as well as exposure to sectors under pressure (energy).

For the week ended Jan. 29, the discounted yield to maturity on the S&P/LSTA Leveraged Loan Index reached 6.88%, versus 5.17% on the S&P European Leveraged Loan Index (ELLI) – a 172 bps difference. At the end of December the differential was 151 bps, and at the end of November it was 117 bps.

Although secondary yields have started to rise slightly at the start of this year in Europe, the loan market on this side of the Pond remains relatively isolated from the broad volatility that hit secondary bonds, and which resulted in a near-silent high-yield bond primary during January. – Isabell Witt

This story first appeared on, 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


US Leveraged Loan Market Sees Busiest Default Month Since 2010. But …

us leveraged loan defaults

Leveraged loan default activity in the U.S. kicked up in January as four issuers—Sports Authority, Arch Coal, RCS Capital, and NewPage—defaulted on $3.57 billion of S&P/LSTA Index loans.

The lagging 12-month default rate trend, however, was mixed. With Caesars Entertainment Operating Company’s $5.6 billion default in January 2014 falling from the rolls, the rate by amount eased to 1.33%, from 2015’s final read of 1.54%. Though last month’s tally of four defaults was the highest monthly total since January 2010, when six Index issuers defaulted, default rates remain inside the historical average of 3.1% by amount and 2.8% by number.-

Looking ahead, managers judge that (1) the credit cycle is now in the second half, if not the fourth quarter, but (2) the game is not over yet, and, therefore, the loan default rate will remain below trend for at least the next twelve months.

According to LCD’s latest quarterly buyside survey conducted in early December, managers on average estimated the default rate by amount will end 2016 at 2.35%, before climbing to 3.24% by year-end 2017. For the record, results were tightly clustered at 1.65–3.00% for 2016 and 2.50–4.00% for 2017.– Steve Miller

Follow Steve on Twitter for an early look at LCD analysis on the leveraged loan market.

This story first appeared on, 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



Amid Market Turmoil, Buyout Loans Buoy Europe at Levels not Seen Since 2008

europe sponsored leveraged loan volume

Despite upheaval in the in the global economic markets and turmoil in the European leveraged loan secondary, this year’s buyout loan market is off to a swift start, with 16 deals launching to syndication in January, according to S&P Capital IQ and SNL.

By the end of the month, loan issuance to support these buyouts amounted to €5.9 billion of paper hitting the European market – the highest monthly reading since July 2008. For reference, buyout-related volume totalled just €3.2 billion from 10 transactions at this time in 2015.

All of January’s new-issue activity came from private equity backed borrowers. – Luke Millar

Follow Luke on Twitter for news and insight on the European leveraged finance market.

This story first appeared on, 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


LCD’s Free Online US Loan Primer/Almanac Updated with 4Q charts

LCD’s popular online Loan Market Primer/Almanac has been updated to include fourth-quarter 2015, full-year, and historical volume and trend charts.

The Primer can be found at, LCD’s free website promoting the leveraged loan asset class. features select stories from LCD news, as well as loan market trends, stats, job postings, and analysis.

We’ll update the Primer charts regularly, and add more as the market dictates.

Some of the charts included with this release of the Primer:

The Loan Market Primer is one of the most popular pieces LCD has published. Updated annually (print) and quarterly (online) to include emerging trends, it is widely used by originating banks, institutional investors, private equity shops, law firms and business schools worldwide.

Check it out, and please share it with anyone wanting an excellent round-up of or introduction to the leveraged loan market.

Here’s the Primer table of contents (go online to see the submenus for each category):

  • What is a Leveraged Loan?
  • Market background
  • Leveraged Loan Purposes
  • How are Loans Syndicated?
  • Types of Syndications
  • The Bank Book
  • Leveraged Loan Investor Market
  • Public vs. Private Markets
  • Credit Risk – Overview
  • Syndicating a Loan – by Facility
  • Pricing a Loan – Primary Market
  • Types of Syndicated Loan Facilities
  • Second-Lien Loans
  • Covenant-Lite Loans
  • Lender Titles
  • Secondary Sales
  • Loan Derivatives
  • Pricing Terms/Rates
  • Fees
  • Original-Issue Discounts
  • Voting Rights
  • Covenants
  • Mandatory Prepayments
  • Collateral
  • Spread Calculation
  • Default/Restructuring
  • Amend-to-Extend

This story first appeared on, 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


S&P Upgrades 80 Tranches on 24 CLOs in 4Q as Defaults, Exposure to Energy, Remain Low

Standard & Poor’s Ratings upgraded 80 tranches on 24 CLOs in the fourth quarter of 2015 as the issues have minimal exposure to defaulting and distressed issuers.

Analysts did not downgrade any CLOs during the quarter, but placed one tranche on CreditWatch negative due to its above-average exposure to the Oil and Gas and Metals and Mining sectors.

S&P Ratings analysts calculated the trailing 12-month non-investment grade default rate at the end of December rose to 2.8%, from 2.5% at the end of of the third quarter, the highest level seen since 2012. Analysts are projecting the rate will rise to 3.3% at the end of the third quarter of 2016. Still, these levels are below the 4.4% long-term average between 1981–2013. The trailing 12-month default rate of leveraged loans was 1.33% at the end of January, according to LCD data.

If you are not a RatingsDirect subscriber, you may purchase a copy of the report, available to S&P subscribers here, by calling (212) 438-7280, or sending an e-mail to — Staff reports


Starbucks to buy back more shares with bond-sale proceeds

Starbucks (NASDAQ: SBUX) today completed a $500 million offering of 2.10% notes due Feb. 4, 2021 at T+75, or 2.112%, sources said. The issue was printed at the firm end of guidance in the T+80 area, and through early whispers in the T+95 area.

Proceeds will be used for general corporate purposes, including the repurchase of common stock under the company’s ongoing share-repurchase program, business expansion, payment of cash dividends, and/or financing possible acquisitions, according to regulatory filings.

As of Dec. 27, 2015, the company had bought back an equivalent of $5.86 billion of common stock, or nearly 252 million shares, under its share-buyback program dating to August 2006. When the program was initiated, the board authorized the repurchase of 25 million shares, and that has since grown to 300 million shares when the authorization was last increased on July 23 of last year, according to S&P Capital IQ.

The company spent roughly $1.5 billion on share buybacks over the 12 months through Dec. 27, 2015, the most in the company’s history after expenditures of $935 million in 2014 and $202 million in 2013, according to S&P Capital IQ.

Even so, the company’s free cash position remained constructive as Starbucks generated roughly $4 billion of operating cash flow last year, or more than the $3.8 billion of combined spending across share buybacks, capital expenditures ($1.34 billion), and common dividends ($986 million).

Earlier today, Standard & Poor’s and Fitch assigned A–/A ratings to the proposed 2021 issue. “Pro forma for the proposed debt issuance, adjusted debt to EBITDA will increase to 1.1x from 1.0x at Dec. 27, 2015,” S&P stated.

According to Fitch—which upgraded Starbucks’ rating to A, from A– in November—for the year ended Sept. 27, 2015, lease-adjusted leverage was 2.0x, down from 2.2x at the end of fiscal 2013. “Cash flow priorities are to invest in its business and return cash to shareholders. The company has maintained a dividend pay out to earnings in line with its 35–45% target and has been prudent with share repurchases, funding buybacks mainly with internally generated cash,” Fitch said.

In September 2015, Moody’s upgraded Starbucks’ senior unsecured rating to A2, from A3. “”The upgrade reflects Moody’s view that Starbucks measured growth strategy, product pipeline, digital initiatives and balanced financial policy will continue to drive operating earnings, credit metrics, liquidity and scale that is more reflective of an A2 rating,” Moody’s said at the time.

The ratings outlook is now stable on all three sides.

On Thursday, Starbucks announced quarterly earnings that beat analysts’ expectations on profits; however, its stock took a hit on that day, when its forecast for the current quarter lagged expectations.

The Seattle-based specialty coffee company last tapped the market in June 2015, when it completed an $850 million, two-part offering, including 2.7% notes due 2022 at T+78, or 2.703%, and 4.3% notes due 2045 at T+138, or 4.32%.

An infrequent issuer in the market, Starbucks in December 2013 completed a $750 million, two-part offering, including 0.875% three-year notes due 2016 at T+38, and 2% five-year notes due 2018 at T+63, or 2.04%. For reference, the 2018 issue changed hands a week ago at a G-spread equivalent of 36 bps, according to MarketAxess. Terms:

Issuer Starbucks Corp.
Ratings A-/A2/A
Amount $500 million
Issue SEC-registered senior notes
Coupon 2.10%
Price 99.943
Yield 2.112%
Spread T+75
Maturity Feb. 4, 2021
Call Make-whole T+15 until notes are callable at par from one month prior to maturity
Trade Feb. 1, 2016
Settle Feb. 4, 2016
Px Talk guidance T+80 area (+/– 5 bps); IPT T+95 area
Notes Proceeds will be used for general corporate purposes

U.S. Leveraged Loans Fall 0.65% in Jan; 8th Straight Loss for Asset Class

leveraged loan returns

After briefly stabilizing in the opening days of 2016, U.S. leveraged loan prices slumped anew in January amid weak technical conditions and negative investor sentiment.

As a result, the S&P/LSTA Loan Index was down 0.65% in January after falling 1.05% in December. The largest loans, which constitute the S&P/LSTA Loan 100, slightly outperformed in January, returning negative 0.43%, after lagging behind in December at negative 1.23%.

January extended the S&P/LSTA Index’s run of red ink to eight months and counting. That is the longest losing streak on record, surpassing the prior mark of six months from the second half of 2008. Of course, the scale of the loss in 2H08 was far steeper at negative 28.32%, versus negative 4.45% between May 2015 and January of this year. – Steve Miller

Follow Steve on Twitter for an early look at LCD analysis on the leveraged loan market.

This story first appeared on, 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


27 Weeks and Counting: US Leveraged Loan Funds See $784M Cash Outflow

U.S. leveraged loan funds saw a net outflow of $784 million for the week ended Jan. 27, according to Lipper. This expands upon an outflow of $694 million last week and an outflow of $451 million the week prior. Moreover, it’s the 27th-consecutive one-week outflow for a combined withdrawal of $15 billion over that span.

US loan fund flows

The net redemption for the fourth week of the year was mostly from mutual funds, with just 8%, or $59 million, linked to the ETF segment. Last week, 60% was linked to ETF redemptions.

Amid a modestly larger week-over-week outflow, the trailing-four-week average deepens to negative $622 million per week, from negative $615 million last week but it was negative $762 million two weeks ago. Recall that a negative $1.2 billion observation three weeks ago was the deepest reading in roughly a full year, or since a slightly wider negative $1.3 billion reading in the last week of 2014.

Year-to-date outflows from leveraged loan funds are now $2.5 billion, with 7% ETF-related. The full-year 2015 reading closed deeply in the red, at negative $16.4 billion, with likewise approximately 7% tied to ETF redemption.

The change due to market conditions this past week was little moved, at negative $95 million, or essentially nil against total assets, which were $73.7 billion at the end of the observation period.

Just as with the close of 2015, the ETF segment currently accounts for $5.3 billion of total assets, or roughly 7% of the sum. — Matt Fuller

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

This story first appeared on, 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