High-profile transactions in the leveraged loans primary market last week (Source: S&P Capital IQ/LCD)
Similar to trends in the high-yield (HYG) debt market, many of the deals involved acquisition-related financing. Major deals in the leveraged loans market (SRLN) included the $590 million term loan issued by Custom Sensors & Technologies. The B2 and B rated issue was issued at LIBOR + 350 bps with the floor at 1% LIBOR. The purpose of the loan is financing the leveraged buyout (or LBO) of the company by the Carlyle Group L.P. (CG) and PAI Partners. The Carlyle Group L.P. (CG) is a major private-equity player specializing in management-led and leveraged buyouts. The Invesco PowerShares Listed Private Equity ETF (PSP) has holdings in the Carlyle Group L.P. (CG).
Another major transaction in the week ending June 20, was Shearer Food’s $515 million, two-tranche covenant-lite loan. The company is in the process of acquiring the private-label snack business of Snyder’s-Lance Inc. for $430 billion and will use the proceeds of the loan to fund the transaction.
Secondary market activity: Outflows continue from leveraged loan mutual funds (Source: Lipper)
Similar to high-yield (JNK) debt, leveraged loan mutual funds had net outflows last week. Outflows from leveraged loan mutual funds slowed to c. $369 million from $1.22 billion the previous week. This marked the sixth consecutive week of net outflows for leveraged loans mutual funds, bringing the total year-to-date (or YTD) net inflows to c. $2 billion. However, there have been net outflows in nine out of the 12 weeks in this quarter. To date, outflows have totaled c. $4.3 billion, while inflows have been estimated at c. $0.9 billion in 2Q14.
YTD returns on the S&P/LSTA U.S. Leveraged Loan 100 Index have come in at 2.38% (as on June 20). For the week ending June 20, the index increased by 0.09%.
In the next section, we’ll analyze the key trends in corporate investment-grade bond issuance in the week ending June 20. Please continue reading the next section in this series.