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US Leveraged Loan Default Rate Increases to 1.97% in Second Quarter

US leveraged loan default rate

The default rate spike in 2014-15 is courtesy TXU/Energy Future Holding, the largest leveraged loan default ever.

After a hectic first quarter in the bankruptcy courts, default activity slowed in the second, though it was elevated relative to several other recent quarters.

All told, there were five defaults among S&P/LSTA Index issuers totaling some $3.6 billion in the second quarter. This is up from three defaults totaling $1.9 billion in the second quarter of 2015, but down from 10/$7.4 billion in the first quarter.

In turn, the default rate by principal amount rose to 1.97%, from 1.75% at the end of the first quarter. By number, it rose to 2.22%, from 1.93%, according to LCD, an offering of S&P Global Market Intelligence.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Investors Withdraw $525M from US Leveraged Loan Funds; Largest Outflow in 4 Months

U.S. leveraged loan funds recorded a net outflow of $525 million in the week ended June 29, according to the Lipper weekly reporters only. This is the largest one-week redemption in 18 weeks and it builds on two weeks of outflows, for a combined redemption of $682 million over the three-week span.

US leveraged loan fundsToday’s reading reflected an outflow of $589 million from mutual funds filled in a bit by inflows of $64 million to ETFs, or inverse 12%. Last week it was similar, but larger, at inverse 24%.

With a fresh redemption this week, the trailing four-week average slips into the red, at negative $145 million, from just positive $2 million last week. The current observation is the first in the red in nine weeks.

Year-to-date outflows from leveraged loan funds are now $5.6 billion, with $6 billion of mutual fund withdrawals countered by $477 million of ETF inflows. A year ago at this juncture, there had been $4.1 billion of outflows, with 4% tied to ETFs.

The change due to market conditions this past week was minimally negative, at $248 million, or roughly 0.4% against total assets, which were $60.9 billion at the end of the observation period. ETFs represent about 10% of the total, at $6.2 billion. — Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Better, but not Good: US 2Q CLO Issuance Jumps to $18B

 

quarterly CLO issuance

U.S. CLO issuance totaled $17.99 billion via 42 vehicles in the second quarter.

While that’s more than a two-fold increase from the $8.2 billion of issuance in the first quarter, it’s at the very low end of the recent range over the past three years, according to LCD, an offering of S&P Global Market Intelligence.

Year to date, U.S. CLO issuance totals $26.23 billion via 62 vehicles.

As was the case in the broader leveraged loan market, sentiment improved in CLOs in the second quarter, but the market was still far from robust. Issuance remained heavily biased towards seasoned managers, with a few exceptions.

Keeping the market in check: The upcoming Dec. 24 deadline to comply with risk retention, challenging arbitrage, and difficulty sourcing collateral, loan managers say. And, of course, macroeconomic risk surrounding Brexit presents a new challenge. – Kerry Kantin

You can read more about how CLOs work here.

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This story is part of analysis which first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Leveraged Loans: Lions Gate Eyes $4.6B Of Financing Backing Starz Acquisition

J.P. Morgan, Bank of America Merrill Lynch, and Deutsche Bank have committed debt financing in connection with Lions Gate’s planned $4.4 billion acquisition of Starz, which is expected to close by the end of the year.

starzThe total committed financing package totals $4.6 billion and includes $3.6 billion of secured and unsecured financing and a $1 billion revolver. Lions Gate also plans to refinance roughly $1.7–1.9 billion of debt at Lions Gate and at Starz and fund the cash portion of the deal with bank and bond financing. Pro forma leverage, excluding synergies, is expected to be roughly 5–5.5x as of Dec. 31, 2016. Lions Gate’s existing convertible notes and Starz capital leases will remain in place.

In the secondary market, the Lions Gate 5% fixed-rate second-lien term loan due 2022 popped up to a 101/102 market, from 99/99.5 yesterday, sources said. There is $400 million outstanding under the loan, which is currently callable at 102. J.P. Morgan is administrative agent.

Starz, meanwhile, has a $1 billion revolver due April 2020 that, as of March 31, had a borrowing capacity of $609 million. Pricing on the revolver is tied to a leverage-based grid, at L+150–225. Bank of Nova Scotia is administrative agent.

Santa Monica, Calif.–based Lions Gate is rated BB–/Ba3 and trades on the New York Stock Exchange under the ticker LGF. Englewood, Colo.–based Starz is rated BB/Ba2 and trades on the Nasdaq under the symbol STRZA. — Richard Kellerhals/Kerry Kantin

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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CVC Credit Partners Raises €650M for Stressed/Distressed Fund

CVC Credit Partners today announced the final close of its Global Special Situations Fund, which focuses on stressed and distressed corporate credit, predominantly across Europe.

cvc credit partners logoRoughly €650 million was raised, which exceeds the €600 million target. The fund received commitments from investors in North America, Latin America, Asia, Europe, and the Middle East.

With more than €1.86 billion already committed to the strategy via separately managed accounts and its credit opportunities vehicles, CVC Credit Partners’ credit opportunities and special situations strategies now have total commitments of more than €2.5 billion.

CVC Credit Partners is the credit management business of CVC. — Luke Millar

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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After Brexit Slide, European Leveraged Loans Gain 0.09%; YTD Return: 1.82%

The European Leveraged Loan Index (ELLI) gained 0.09% yesterday (excluding currency).

The ELLI has returned -0.66% thus far in June. The total return for the ELLI in the year to date is 1.82%. — Staff reports


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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.