The U.S. CLO market is wrapping up its busiest month ever, with more than $14 billion in issuance during March, according to S&P Capital IQ/LCD. March tops off a record first quarter, which has seen $28.62 billion of activity (so far). – Sarah Husband
Sycamore Partners this morning announced that Paul Fossati has joined the firm as a managing director and Director of Capital Markets.
In this newly created role, Fossati will be responsible for all financings for the firm’s new investments and its existing portfolio companies. He will also be responsible for managing Sycamore’s relationships with financing sources.
Fossati was previously at Morgan Stanley, where he was a managing director in the firm’s Leveraged & Acquisition Finance Group and head of both the consumer-retail and financial sponsor verticals.
New York-based Sycamore Partners is a private equity firm specializing in consumer and retail investments. The firm has more than $3.5 billion in capital under management. Its portfolio currently includes Aeropostale, Coldwater Creek, Hot Topic, Jones New York, the Kasper Group, Kurt Geiger, MGF Sourcing, Nine West Holdings, Pathlight Capital, Stuart Weitzman, and Talbots. – Kerry Kantin
Citigroup today priced an $856.75 million CLO for Guggenheim Partners Investment Management, which was upsized for a second time, according to sources.
The transaction is structured as follows:
Recall the transaction was initially outlined as $654.55 million, though it had previously been increased to $805.4 million.
The deal has a two-year non-call period, a four-year reinvestment period and a 12-year legal final maturity.
The asset manager yesterday also priced its $558.9 million Kitty Hawk CLO 2015-1 deal via Mitsubishi UFJ Securities, though note this is Guggenheim’s third print in the U.S. this year.
CLO issuance in the year to date now stands at $28.11 billion from 52 deals, according to LCD. March issuance is $13.58 billion from 25 deals. Though there are still a couple more days left in the month, issuance thus far in March is the highest since June 2014, when $13.78 billion of deals priced. – Kerry Kantin
Bolstered by a troika of large, well-rated, corporate M&A loans – Dollar Tree ($6.2 billion), Valeant Pharmaceuticals, ($5.15 billion), and Ball Corp. ($3 billion revolver) – new-issue volume has risen in the first quarter, to $80.7 billion, including $53.9 billion of institutional tranches, from a three-year low of $66.6 billion/$43.4 billion over the prior three months.
Still, participants are not exactly breaking out the cigars and champagne. The primary market is off to a flat-footed start versus the liquidity-heavy/regulation-light first quarter of 2014, when arrangers placed $168 billion of new issues, including $129 billion of institutional facilities. In fact, 2015 is off to the slowest start for any year since 2010. – Steve Miller
This analysis is taken from a longer LCD News story, available to subscribers here, that details first-quarter leveraged loan activity in full.
Business-development company Capitala Finance Corp. has formed a new investment joint venture with Trinity Universal Insurance Company, a subsidiary of Kemper Corp. The new venture, Capitala Senior Liquid Loan Fund I, will focus on investments in broadly syndicated loans beginning in the second quarter.
The initial equity contribution is $25 million, of which Capitala is funding $20 million and Trinity is providing $5 million. In addition to that the new fund secured third-party asset-level financing.
Capitala Finance, a BDC that trades on the Nasdaq under the ticker CPTA, traditionally targets debt and equity investments in middle-market companies generating EBITDA of $5-30 million. The firm focuses on mezzanine and subordinated deals but also invests in first-lien, second-lien and unitranche debt. Capitala’s portfolio as of Dec. 31 consisted of 52 portfolio companies with a fair market value of $480.3 million. Of that total, 31% was senior secured debt investments, 46% was subordinated debt, and 23% was equity and warrants. – Jon Hemingway
California Resources disclosed today that its lender group has approved amendment provisions to its credit facility to provide the company with flexibility under its leverage and interest covenants during a challenging commodities market.
The company’s 6% notes due 2024 gained a point, to 87.50, to yield 7.85%, on the amendment news, while its 5% notes due 2021 were up about seven eighths of a point, to 89.5%, to yield 7.58%.
Under the terms of the amendment, California Resources is now allowed to maintain a leverage ratio based on the schedule below. Previously, the leverage ratio was set at 4.5x.
The interest expense ratio, meanwhile, has been set at 2.5x through the third quarter of 2015 and then at 2.25x in the fourth quarter of 2015, and then back to 2.5x in the first quarter of 2016 and thereafter. The interest expense ratio was previously set at 2.5x.
Also, the lien basket has been reduced to 5%, from 15%. The asset coverage ratio has also been set at 1.05x through Dec. 31, 2016 and at 1.5x thereafter.
The company’s pro rata credit facility is split between a $2 billion revolver and a $1 billion A term loan, both due 2019. Pricing is based on a leverage-based grid, ranging from L+150-225, with commitment fees ranging from 30-50 bps.
J.P. Morgan is administrative agent. The lender group also consists of Bank of America Merrill Lynch, Citigroup, Bank of Tokyo-Mitsubishi UFJ, U.S. Bank, Morgan Stanley, HSBC, Goldman Sachs, Bank of Nova Scotia, Societe Generale, PNC Bank, BB&T, Bank of New York Mellon, Sumitomo Mitsui, Intesa Sanpaolo, and KeyBank.
The U.S. Trustee for the bankruptcy court in Chicago has named Richard J. Davis as the examiner in the Chapter 11 case of Caesars Entertainment Operating Co., court filings show.
The appointment is subject to approval by the bankruptcy court in Chicago that is overseeing CEOC’s Chapter 11.
As reported, the Chicago bankruptcy court on March 12 ordered the U.S. Trustee to appoint the examiner. In a setback for the company, the bankruptcy court appeared to set a wide scope for the contemplated investigation, and did not set specific limits on either the cost or length of the investigation, both of which were sought by the company (see “Caesars’ examiner probe to have broad scope, judge rules,” LCD, March 12, 2015 $).
The order does require the examiner to submit an interim report every 45 days, and to file a final report within 60 days of completing his investigation.
According to materials submitted to the bankruptcy court, Davis, 68, is in individual practice in New York City. From 1981 to 2012, he was a litigation partner at Weil, Gotshal & Manges, and from 1977 to 1981, during the administration of President Jimmy Carter, he was an Assistant Secretary of the Treasury for Enforcement and Operations.
Going back even further, Davis was a special prosecutor for the Watergate Special Prosecution Force, including serving as chief trial counsel in the trails of Dwight Chapin, an advisor to President Nixon, and Edward Reinecke, a former Lieutenant Governor of California. Both were convicted of perjury; Chapin served nine months in prison, while Reinecke, sentenced to 18 months, saw his conviction overturned on appeal.
A hearing on the U.S. Trustee’s emergency motion to name Davis as the examiner is scheduled for tomorrow. – Alan Zimmerman
It was another busy week of marketing and pricing in the U.S. CLO market, while Europe saw a single new print, with more expected shortly.
- Year-to-date, global volume rose to $27.58 billion.
- U.S. CLO volume totals $24.84 billion for 46 deals, versus $19.92 billion for 39 deals in the same period last year.
- European CLO volume stands at €2.44 billion from six transactions, versus €2.06 billion for five deals in the same period last year. – Sarah Husband
This story was taken from a longer piece of analysis available to LCD News subscribers also detailing
- March CLOs
- CLO pipeline
- Volume: CLO vs Inst’l loans (US and Europe)
Bank loan outflows were grew to $228 million for the week ended March 18, versus outflows of $31 million in the prior week, according to Lipper. The latest outflow was split between mutual funds and ETFs, with mutual funds recording $160 million of the full amount, while ETF outflows continued for the second week in a row following a six-week period where ETFs reported inflows against mostly outflows at mutual funds.
There has now been a total of $27.6 billion of outflows recorded over the last 49 weeks, with only three weeks seeing inflows over that span. The year-to-date outflow now sits at $3.1 billion, with 4% tied to ETFs, versus an inflow of $6.5 billion at this point last year, with 16% tied to ETFs.
The trailing four-week average fell to negative $143 million, from negative $54 million last week and negative $52 million two weeks ago. Recall that the negative four-week observation 12 weeks ago, at $1.3 billion, was the deepest in roughly 3.5 years, or since the week ended Aug. 31, 2011.
In today’s report, the change due to market conditions was negative $172.9 million, a change of 0.20% against total assets, which were $92.6 billion at the end of the observation period. The ETF segment comprises $6.7 billion of the total, or approximately 7%. – Joy Ferguson
Deutsche Bank, Goldman, Sachs, Jefferies, BMO Capital Markets, RBC Capital Markets, Macquarie Capital, and Nomura will provide debt financing for the acquisition of Life Time Fitness by Leonard Green & Partners and TPG.
The transaction announced earlier today is valued at more than $4 billion. Other key investors include LNK Partners and Life Time CEO Bahram Akradi, who will remain in his role and has committed to make a rollover investment of $125 million in Life Time common stock.
Under the terms of the merger agreement, the investors will acquire all of the outstanding shares of Life Time Fitness common stock for $72.10 per share in cash. This price represents a significant premium to Life Time’s closing share price of $41.60 on Aug. 22, 2014, the last trading day prior to the announcement that the issuer was exploring a potential conversion of real estate assets into a real estate investment trust.
Life Time had total debt of roughly $1.2 billion at year-end 2014, according to an SEC filing. EBITDA for the fourth quarter of 2014 was $86.8 million compared to $80.4 million in the year-ago equivalent period. For 2014, EBITDA was $374.3 million compared with $351.8 million in the prior-year period.
The merger is subject to approval from Life Time’s shareholders and other customary closing conditions. The transaction is currently expected to close in the third quarter of 2015. – Staff reports