With stocks rallying yesterday on hopes that Congress will reach a deal to avoid the fiscal cliff, the tone in the secondary loan market improved after modest losses last week. In turn, the average bid of LCD’s flow-name composite ticked up six basis points in today’s reading, to 98.25% of par, from 98.19 on Nov. 15.
Among the 15 names in the sample, five advanced, three declined and seven were unchanged from the previous reading. Caesars Entertainment’s B-6 term loan due 2018 (L+525) posted the largest increase, with bid rising three quarters of a point, to 88.75. Certain high-beta names like Caesars have recovered from recent lows as the market has stabilized.
Overall, trading has been light ahead of the Thanksgiving holiday, with much of the focus on wrapping new-issue executions, a handful of which have seen investor-friendly revisions in the wake of last week’s softer market conditions. By press time, arrangers had allocated some 18 transactions over the past three days, and more are possible before the end of the week.
The post-Thanksgiving calendar is shaping up to be busy, with bank meetings announced for billion-dollar-plus executions for RedPrairie and Hamilton Sundstrand. PVH’s M&A financing is also expected to launch after the holiday, sources say.
Given the recent softening in the market, new issues could command slightly higher pricing, however. Yields – particularly for single-B executions – have widened over the past couple of days.
With the average flow-name bid climbing six basis points, the average spread to maturity ticked down one basis point, to L+468.
By ratings, here’s how bids and the discounted spreads stand:
- 100.44/L+379 to a four-year call for the 10 flow names rated B+ or higher by S&P or Moody’s; STM in this category is L+388.
- 93.88/L+614 for the five loans rated B or lower by one of the agencies; STM in this category is L+627.
- November: The average flow-name loan bid is down 43 bps from the final October reading of 98.68.
- Year to date: The average flow-name loan bid has gained 465 bps from the final 2011 reading of 93.60.
- Bids higher: The average bid of the 15 flow names rose six basis points, to 98.25.
- Bid/ask spread lower: The average bid/ask spread dropped 10 bps, to 44 bps.
- Spreads slip: The average spread to maturity – based on axe levels and stated amortization schedules – eased one basis point, to L+468.