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WR Grace launches bankruptcy exit loan as BBB-/Ba2 ratings emerge

wr grace logoBookrunners Goldman Sachs, Deutsche Bank, Bank of America, and HSBC launched their $1.15 billion, cross-border term debt package backing W.R. Grace & Co.’s exit from Chapter 11.

With loan and issuer ratings emerging at BBB-/Ba2, arrangers are talking the debt package at L+250, with a 0.75% LIBOR floor, at 99.5, with the euros 25 bps wider on the spread. The seven-year loans would include six months of 101 soft call protection.

The financing will include a $400 million, five-year revolving credit, and a $900 million funded term loan and a $250 million delayed-draw term loan, both with seven-year durations. Roughly $200 million of the funded term loan will be carved out in euros and distributed separately, while U.S. investors are asked to commit to a strip of the funded dollar and delayed-draw term loans, sources said. The delayed draw loan would be available for one year.

Citi, Commerzbank, Key Bank, PNC, and SMBC are senior managing agents for the exit financing.

The exit deal comes to market 12 years after Grace filed for bankruptcy and nearly five years after the company awarded the financing mandate.

The long-running bankruptcy case was precipitated by a nearly doubling of asbestos injury claims in 2000. The chemical company last month cleared the remaining hurdle to its exit plan, settling on a $1.1 billion payout for principal and accrued interest on its $500 million of pre-petition loans, rather than the higher sum that was sought by some investors. – Chris Donnelly

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Leveraged loan returns lag high yield and equities (of course) in 4Q, 2013

loan returns vs other asset classes

Leveraged loan returns were in the middle of the pack, compared to other major asset classes LCD tracks, both during the fourth quarter and for all of 2013. During the last three months of the year U.S. leveraged loans returned 0.47%, with a full-year return of 5.29%. That’s down from the 9.38% recorded in 2012.

High yield bonds returned 0.55% in the fourth quarter and 7.42% in 2013, making it the second-strongest asset class, per returns, tracked by LCD. Equities were in an entirely different orbit, of course, returning a relatively modest 2.53% in the fourth quarter and a whopping 32.41% during the year.

Treasuries and investment grade corporate bonds continued to fund tough markets, returning negative 2.01% and negative 0.18%, respectively, in the fourth quarter and negative 7.83%/negative 1.46% in 2013.

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Leveraged loans return 0.03% today; YTD return is 3.23%

Loans gained 0.03% today after gaining 0.02% 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 0.03% today.

In the year to date, loans overall have gained 3.23%.

LCD Daily Loan Index – May 22, 2013

TOTAL RETURNS

All

Perf. Loans

L100

BB

B

CCC

For 5/22/13

      0.03%

      0.02%

      0.03%

  0.01%

  0.02%

     0.13%

For 5/21/13

     0.02%

      0.02%

      0.03%

  0.01%

  0.00%

     0.19%

 

 

 

 

 

 

 

 

Month-To-Date 5/22/13

 0.50%

      0.46%

  0.57%

0.27%

0.37%

    2.09%

12/31/12 – 5/22/13

3.23%

      3.31%

  3.32%

2.02%

3.30%

  10.25%

12/31/11 – 5/22/12

4.14%

      4.24%

  4.19%

2.94%

5.28%

    3.92%

Source: S&P/LSTA Leveraged Loan Index.

 

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Helped by high yield, leveraged finance volume totals $27B

U.S. leveraged finance volume for the week ended May 9 totaled $27 billion, the most since the third week of March, according to LCD, a unit of S&P Capital IQ. Leveraged finance volume comprises leveraged loan activity plus high yield bond issuance.

The rebound was largely due to the high yield bond market, which this week priced a hefty $11.3 billion in deals (through today), the most since March and roughly twice the amount seen in each of the last three weeks.

The reason for the surge is simple. Issuers are rushing to take advantage of record-low financing costs. (As you’ve likely seen, the high yield bond market made news this week when the average new-issue yield dipped below 5%.). Indeed, there were 30 unique tranches priced this week. That’s one shy of the all-time record, from August 2010, according to Jon Hemingway, who writes about the market for LCD News.

Of note this week are a pair of billion-dollar offerings, one backing an acquisition by GM Financial, the other a refinancing by metals and mining concern Ball BLL +0.02% Corp. Also of note: Two relatively small PIK-toggle deals backing recaps for BWAY Corp. (mining) and Tops Markets (grocery). PIK-toggle transactions often are indicators of a heated market, as the deals can be repaid in-kind (as in more bonds), as opposed to cash (you can read about how PIK toggle bonds work here).

The leveraged loan market was characteristically busy, with $15.7 billion of activity through yesterday. The reason for the frenetic pace: Cash continues to pour into loan mutual funds, with investors looking to put that money to work. That activity shows no signs of slowing. There were some 33 deals launched to investors this week alone, including M&A, recaps and repricings, according to LCD’s Chris Donnelly.

With this week’s issuance, year-to-date U.S. leveraged finance volume totals $397 billion.

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Amid flood of investor cash, leveraged loan yields hit lowest point in decade

As the U.S. leveraged loan market continues to see a steady stream of investor cash inflow, yields on new-issue leveraged loans have reach their lowest point since before the 2008 market meltdown. Indeed, yields (to maturity) on double-B rated new issues neared 3% at  the end of April while single-B loans were yielding roughly 5%.

About that buyside demand. Loan mutual funds have seen 46 straight weeks of investor cash inflows totaling $25.3 billion, putting issuers firmly in the drivers seat. In April alone visible capital – those inflows and CLO formation – exceeded net issuance by a hefty $7.8 billion.

This analysis is part of an LCD News story, available to subscribers, that also details

  • Supply vs demand (change in inflows/outstandings)
  • Historical secondary bid of leveraged loans
  • Repricing volume – leveraged loans
  • M&A volume – leveraged loans
  • Institutional M&A forward calendar
  • “Repricings 2.0″

 

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Leveraged loans return 0.01% today; YTD return is 1.21%

Loans gained 0.01% today after gaining 0.03% 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 0.01% today.

In the year to date, loans overall have gained 1.21%.

LCD Daily Loan Index – February 21, 2013

TOTAL RETURNS

All

Perf. Loans

L100

BB

B

CCC

For 2/21/13

      0.01%

      0.01%

      0.01%

  0.01%

 0.01%

    0.03%

For 2/20/13

       0.03%

      0.03%

      0.02%

  -0.01%

 0.01%

   0.39%

 

 

 

 

 

 

 

Month-To-Date 2/21/13

 0.15%

    0.16%

0.05%

0.00%

0.14%

   1.01%

12/31/12 – 2/21/13

1.21%

     1.29%

1.26%

0.77%

1.54%

 2.17%

12/31/11 – 2/21/12

2.66%

     2.69%

3.23%

2.03%

3.73%

    0.08%

Source: S&P/LSTA Leveraged Loan Index.