New-issue leveraged loan activity pushed further into record territory during the month. The S&P/LSTA Index posted a 0.49%. The universe of S&P/LSTA Index loans grew by $22 billion, to a record $674 billion. Inflows accelerated. The loan default rate eased.
Looking ahead, the calendar of new M&A-driven transactions remains light.
This month LCD looks at:
Leveraged loan volume; M&A loan volume
Average Bid of S&P/LSTA Loan Index
S&P/LSTA Index Loans Outstanding
Average New-Issue Clearing Yield of First Lien Loans
The union representing drivers for Atlantic Express on Wednesday night rejected a proposal from the company that would have reduced employee wages, according to a Dec. 6 online report from School Transportation News. The company has said it needs to lower its wages in order to compete for contracts in New York City.
The rejection of the proposal by the Amalgamated Transit Union 1181-1061, AFL-CIO means that Atlantic Express will cease operations and move forward with its planned asset sales.
At the time the company filed for Chapter 11 on Nov. 5, Atlantic Express said it would “use the Chapter 11 process to explore the availability of additional debt or equity financing, market its assets for sale and continue its challenging labor negotiations for a new collective bargaining agreement,” adding that it would pursue an asset sale if it was “unable to reach agreement with [the union representing its employees] on a new collective-bargaining agreement and obtain additional financing.”
The bankruptcy court overseeing the company’s Chapter 11 case approved bidding and sale procedures for the company’s assets in late November that set a deadline of today for submitting qualified bids. Under those procedures, if an auction is required, it is slated to be held on Dec. 11, while a hearing to approve a sale was set for Dec. 16 (see “Atlantic Express nets OK for asset sale process; bids due by Dec. 6,” LCD, Nov. 25, 2013).
As reported, the company has also said it was “confident” that some of the potential bidders currently conducting due diligence on its assets would become qualified bidders and participate in an auction. According to court filings, the company’s financial advisors have contacted more than 120 potential strategic and financial buyers, 40 of which have signed confidentiality agreements (see “Atlantic Express ‘confident’ it will see bids for its assets,” LCD, Nov. 20, 2013).
According to School Transportation News, about 2,000 Atlantic Express employees in New York City will lose their jobs as a result of the rejection of the proposal, but the majority would be eligible to be hired by other unionized companies based on seniority. –Alan Zimmerman
With market technicals running strong in November, the average price at which first-lien institutional loans broke into the secondary market for trading advanced to a six-month high of 100.24% of par during the month, from 99.92 in October. The higher break prices also reflect the narrower issue prices on offer, with the average issue price thinning to 99.55% of par – the tightest level since May – from 99.18 in October.
Moelis & Co. plans to launch a CLO business in the U.S. during the first quarter of next year, according to market sources. The new platform will be run by subsidiary Steele Creek Investment Management, an institutional-fixed-income manager specializing in leveraged corporate debt and structured-product investments.
Glenn Duffy is co-founder and CIO of Steele Creek. He is joined by managing director Matt Stouffer.
Duffy was previously a founding partner at Columbus Nova Credit Investments Management, where he headed up research and trading efforts from 2006-2012. The firm was acquired by Deerfield Capital Management in June 2010 and merged with CIFC Corp. in April 2011. Prior to that Duffy was an MD at Babson Capital Management.
Stouffer previously served as a relationship manager in Credit Suisse’s private-banking division. Prior to that he was an MD and loan portfolio manager at Deerfield Capital Management.
Moelis & Company is a global investment bank that provides financial-advisory, capital-raising, and asset-management services to a broad client base, including corporations, institutions, and governments. – Sarah Husband
J.P. Morgan is launching an all-first-lien refinancing for Cumulus Media Holdings with a lender call at 2:00 p.m. EST today.
The deal will repay first- and second-lien debt, resetting first-lien leverage at roughly 5x, sources said.
The new deal includes a $2.025 billion, seven-year term loan and a $200 million, five-year revolving credit.
Cumulus a year ago repriced its $1.317 billion covenant-lite first-lien term loan due September 2018 to L+350, with a 1% LIBOR floor, via J.P. Morgan and UBS. The 101 soft call rolls off this month.
The issuer in 2011 put in place a first- and second-lien deal to back its $2.4 billion acquisition of Citadel Broadcasting. In addition to the first-lien term loan, the financing included a $790 million, 7.5-year second-lien term loan priced at L+600, with a 1.5% LIBOR floor. It was non-callable in the first year, then callable at 103, 102, and 101.
The Atlanta-based broadcaster controls more than 525 radio stations in 110 U.S. media markets. – Chris Donnelly
Debt backing J.C. Penney perked up late this afternoon, while the cost of default protection contracted, after the struggling retailer reported a 10.1% increase in same-store sales for November.
The issuer’s covenant-lite term loan due 2018 (L+500, 1% LIBOR floor) popped up roughly a point on the news, to 98.625/99.125, sources said. For reference, the loan, originally $2.25 billion, was issued at 99.5 in May.
In the bond market, the 5.65% notes due 2020 gained roughly two points, to 81/83, for a net four-point gain week over week, while the 5.75% notes due 2018 followed a similar trajectory, to 86/87, according to sources.
As for default protection in the name, five-year CDS contracted almost 9% on the news, to 18.688/20.188 points upfront, according to Markit. All securities are now well off record lows in the 60s and record wides around 31 points upfront reached in late October amid liquidity jitters.
“We are pleased with our performance over the Thanksgiving holiday weekend, particularly in light of the continued spending pressures on consumers,” CEO Myron E. Ullman, III, said in a statement.
As reported, the company’s debt and shares advanced last month after the company posted its third-quarter results. While J.C. Penney reported a 4.8% drop in same-store sales for the quarter, investors were encouraged by the 0.9% same-store sales increase during the month of October. – Kerry Kantin/Matt Fuller