Leveraged loans return 0.58% in June; YTD return is 2.60%

Loan prices inched higher in June as the CLO market set a record for new-issue volume.

The S&P/LSTA Leveraged Loan Index was up 0.58% during the month after advancing 0.69% in May – though the difference between the two months vanishes when Energy Future Holdings’ outsized May increase is accounted for (excluding EFH, May’s Index return was 0.57%). The largest loans that comprise the S&P/LSTA Loan 100 lagged slightly in June, with a 0.55% gain.

 LCD subscribers can click here to access full story, analysis and the following charts:

  • Annual returns of the S&P/LSTA Leveraged Loan Index
  • Annual returns of the S&P/LSTA Loan 100 Index
  • Returns by type of debt
  • Average bid of S&P/LSTA Index
  • Institutional M&A forward calendar
  • Big movers

– Steve Miller


Leveraged loans: U.S. 2nd-lien volume hits post credit-crunch record

2nd lien loan volume

Junior-claim loans remained hot during the second quarter, with $12.4 billion of new-issue volume, up from the first quarter’s post-credit-crunch high of $11.7 billion. In the year to date, second-lien volume totals $24.1 billion, which is the second-highest six-month total on record, behind only the first half of 2007 ($25.2 billion)

For a complete description of how second-lien loans work check out LCD’s free Loan Market Primer.


CLO roundup: June marks banner month for Europe, US CLO issuance

It has been quite the month for the CLO markets in June with issuance in both the U.S. and Europe breaking records and global volume pushing up to $69.66 billion. The summer’s onset could see supply tail off over the coming weeks, but pipelines are still bulging with arrangers booking new managers through to 2015.

CLO roundup 2014-06-30 chart 1










LCD subscribers can click here to access full story and analysis, including charts:

  • CLOs prices in US last week
  • US arbitrage CLO issuance and institutional loan volume
  • YTD European CLO issuance, deals and details
  • Deal pipleline
  • European arbitrage CLO issuance and institutional loan volume

. – Sarah Husband




Rabinowitz joins Highbridge as PM for CLOs and BSL funds

Jonathan Rabinowitz has joined Highbridge Principal Strategies as a portfolio manager for the Highbridge broadly syndicated loan and CLO portfolios, according to sources. He started in April, and reports into portfolio manager David Frey.

Prior to joining Highbridge, Rabinowitz was a co-portfolio manager at Invesco Senior Secured Management, and was previously a co-portfolio manager in Morgan Stanley Asset Management’s Senior Loan Group. – Sarah Husband


Europe: Managers seek debut credits for portfolio diversity

Approaching the halfway point of the year, vigorous investor demand continues to offer excellent conditions for borrowers in the European loan market – but companies still seem reluctant to take full advantage, to the frustration of managers who are seeking diversity.

To date this year, LCD counts 11 buyout financings in the loan market derived from corporate divestitures, making up a 35.5% share of buyout deal flow. At this level, corporate buyouts are relatively active compared with previous full years, but secondary/tertiary buyouts continue to make up the bulk of the buyout market, providing just over half the year’s deal count.

LCD subscribers can click here for full story — analysis including charts:

  • Debut loan issuance
  • Senior & mezzanine forward volume
  • Debut high-yield issuance (deal count)
  • Volume of HY bond issuance for institutional loan takeout (rolling 3M total)

– Ruth McGavin


Bankruptcy: EFIH first-lien lawsuit opens new front in make-whole claims fight


The indenture trustee for first-lien notes issued by Energy Future Holdings‘ unit Energy Future Intermediate Holdings (EFIH) has filed an adversary action against the company’s second-lien creditors, opening yet another front in the battle over whether make-whole payments are required in connection with the repurchase of EFIH’s senior debt.

There are already pending adversary actions pending in the case between the company and both the first-lien and second-lien noteholders over the make-whole payments – roughly $700 million asserted for each tranche of debt.

The second-lien debt is comprised of about $1.75 billion of 11.75% second-lien notes due 2022 and about $406.4 million of 11% second-lien notes due 2021.

According to the June 20 adversary action filed by CSC Trust Co. of Delaware, the trustee for $3.48 billion of 10% first-lien notes due 2020 issued by EFIH, agreements among the company’s first- and second-lien noteholders governing the treatment of collateral require the second-lien noteholders to make good on $432 million of make-whole claims asserted in the case by the 10% first-lien lenders.

According to CSC, the collateral agreements require the second-lien lenders to turn over any amounts paid to them on account of shared collateral to first-lien lenders, until first-lien claims, including the make-whole claims, are satisfied in full – regardless of whether those make-whole claims are ultimately allowed or enforceable against the company in the Chapter 11 case.

Indeed, according to the CSC lawsuit, the second-lien note indenture trustee, Computershare, has filed an adversary action in the case arguing that make-whole payments are due on the second-lien debt as well as on the first-lien debt. Noting that the second-lien debt indenture contains identical make-whole language to that of the first-lien indenture, CSC’s adversary action contends that second-lien noteholders cannot now argue in this case that the first-lien lenders are not entitled to the make-whole payment, after arguing in their own adversary action that the same language entitles them to receive a make-whole payment.

The named defendants in the suit are Computershare, the indenture trustee for the second-lien debt, and Epiq Systems, DTC, and Cede & Co., the depository agents for second-lien noteholders.

As reported, the company offered holders of the first-lien debt a settlement of the make-whole claims via a tender offer launched in early May, shortly after the company’s Chapter 11 filing, that closed on June 10.

According to the CSC adversary action, the $432 million in damages represents the portion of the make-whole payment that is due to those noteholders who did not agree to the company’s proposed settlement (while the company has not yet announced final participation rates for the settlement, the company had previously said that 42% of first-lien lenders agreed to early participation in the settlement, which paid holders an additional premium, comprised of about 34% of holders of the 10% notes and about 97.2% of holders of the $507.7 million of 6.875% first-lien notes due 2017).

As for those note holders who did not agree to the settlement, a three-day trial on the matter is scheduled to begin Sept. 10.

Meanwhile, the company’s plan also contemplates the roll up of the company’s second-lien debt, and the company has also offered holders a settlement of their asserted make-whole claim. The contemplated repurchase of the second-lien debt, however, which was also launched via a tender offer in early May, is wrapped up in a dispute over which lenders will provide the $1.9 billion DIP that is to fund the repurchase and the implementation of the tender offer, as well as the aforementioned dispute over the make-whole amounts

Those matters are scheduled for a hearing on June 30, and the tender offer is slated to expire on July 3. – Alan Zimmerman




Leveraged loans: 2Q US CLO issuance on track to top 2007 record

The U.S. CLO market continues to break through previous records as supply just keeps on rolling.

With two weeks left to go, managers have inked $32.7 billion of new vehicles so far in the second quarter. At this rate, the current period will surpass the second quarter of 2007, which saw $32.8 billion of CLO formation, on the all-time leaderboard, making it the largest quarter ever, according to LCD. – Sarah Husband

To read full article and analysis,which includes CLO issuance forecasts from market pros, LCD subscribers can click here.


Fortress plans European CLO as US managers eye market

Global investment-management firm Fortress Investment Group is planning a possible move into the European CLO market, according to sources, who add that the manager has signed a European warehouse facility with Natixis.

In the U.S., Fortress has issued both middle-market and broadly syndicated loan CLOs, and at the start of April printed Fortress Credit Opportunities 2014-3 via Natixis.

The manager has a London office and has invested in the European market since 2002, building exposure to European loans via its U.S. funds.

Fortress is among a number of U.S. managers, including Onex, eyeing a European CLO transaction, with arrangers across the market saying they are speaking with U.S. CLO managers about European opportunities. But if European investors welcome the opportunity to invest in a more diverse manager base, additional demand for European loans threatens to further intensify the current technical imbalance.

It’s not the first time U.S. managers have assessed the European opportunity, and the desire among fund managers in Europe and the U.S. to create truly global investment platforms will ensure managers in each region will assess the pros and cons of making a move. But as LCD reported in April (see “In pursuit of the European opportunity – or is it?”), while there are many reasons to view Europe as an attractive investment play, there are also still reason to be cautious. – Sarah Husband