Leveraged loan transaction numbers up in week ending February 27



Primary market activity in leveraged loans

According to data from S&P Capital IQ/LCD, the US leveraged loans market saw an allocation of $4.4 billion worth of senior loans across ten transactions in the week ending February 27. This was 36.5% lower than the $6.9 billion priced in the week ending February 20, which saw issuance of loans worth $4.3 billion by PetSmart (PETM), the largest transaction in 2015 so far.

However, deal flow was higher and saw ten transactions in the week, compared to five in the previous week. Senior loans are tracked by the Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

The leveraged loans market has seen heightened activity in February after a dull January due to the favorable market environment in recent weeks. There was no primary market activity in the leveraged loans market in the first two weeks of this year.

A decline in yields (TLT) encouraged issuers to take advantage of improved market conditions, both in junk bonds (JNK) (HYG) and leveraged loans.

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Purpose of issuance

The proceeds from new issues priced in the week were earmarked for leveraged buyouts (five transactions), acquisitions and refinancing (two transactions each), and dividend/recapitalization (one transaction).

Noteworthy transactions

Riverbed Technology (RVBD) is a manufacturer of appliances that connect computers in a wide-area network. It issued leveraged loans worth $1.725 million in two tranches:

  • a $100 million Revolving Credit Facility (or RCF), rated B1/B
  • a $1.625 billion Cov-lite Term Loan B rated B1/B and issued at LIBOR (London Interbank Offered Rate) + 500 basis points with a LIBOR floor of 1.00% and an OID (Original Issue Discount) of 98.00

The loan was arranged by Credit Suisse (CS), Citigroup (C), and Barclays (BCS), among others. The company will use the proceeds to fund its buyout by private equity firm Thoma Bravo and Ontario Teachers’ Pension Plan’s investment arm Teachers’ Private Capital.

Veresen Midstream LP, a joint venture of Veresen Inc. and US private equity firm Kohlberg Kravis Roberts (KKR), issued loans worth $650 million—last week’s second largest deal. The company’s two-part loan package included:

  • a $75 million Revolving Credit Facility (or RCF), rated Ba3/BB-
  • a $575 million Term Loan B rated Ba3/BB- and issued at LIBOR + 500 basis points with a LIBOR floor of 1.00% and an OID of 98.50

The company plans to use the proceeds to back its asset acquisition from Encana Corp. (ECA).


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