uploads/2015/03/US-Leveraged-Loan-Market-Volumes51.jpg

Half of Recent Leveraged Loan Issues Are for Refinancing

By

Updated

Primary market activity in leveraged loans

According to data from S&P Capital IQ/LCD, the US leveraged loans market saw an allocation of $5.5 billion worth of senior loans across 12 transactions in the week leading to March 27. This was 56.7% higher than the $3.5 billion priced in the week ended March 20. The deal flow was higher, with 12 transactions in the week compared to eight in the previous week. The Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN) track senior loans.

Article continues below advertisement

Last week’s issuance was the second-highest in March 2015. With clear indications of a rate hike in 2015—though there’s no timing set—junk bond issuers came back to the market after a week of subdued activity. Issuers wanted to make use of the time before interest rates begin to tighten in the US. This applied to both junk bond issuers (JNK)(HYG) and the leveraged loans space, specifically for refinancing and leveraged buyout purposes.

Purpose of issuance

The proceeds from new issues priced in the week were earmarked for refinancing (six transactions), leveraged buyouts (three transactions), dividend and recapitalization (two transactions), and acquisition (one transaction).

Noteworthy transactions

Regal Cinemas Corporation, a wholly owned subsidiary of Regal Entertainment Group (RGC), was the highest issuer of leveraged loans in the week ended March 27. The parent company operates movie theaters in the US under several brands, including Regal Cinemas. The company raised loans worth $966 million—the largest of the week. The Cov-lite Term Loan B was rated Ba1/BB. The loan was issued at LIBOR (the London Interbank Offered Rate) + 300 basis points with a LIBOR floor of 0.75% and an OID (original issue discount) of 99.75.

The company will use the proceeds of this sale to refinance its existing credit facility. HSBC (HSBC) was the lead arranger of the issue.

The United Kingdom–based Hyperion Insurance Group issued a Term Loan B worth $750 million. The facility was rated B1/B and the loan was issued at LIBOR + 450 basis points with a LIBOR floor of 1.00% and an OID (original issue discount) of 99.5.

Cereal maker Post Holdings (POST) issued leveraged loans worth $700 million. The Ba2/BB- rated Add-on Term Loan B was issued at LIBOR + 300 basis points with a LIBOR floor of 0.75% and an OID of 99.5. The proceeds from the loan will be used to finance POST’s $1.15 billion acquisition of MOM Brands.

SeaWorld Parks & Entertainment (SEAS) issued a loan of $280 million for refinancing purposes. The B1/BB rated Add-on Term Loan B was issued at LIBOR + 325 basis points with a LIBOR floor of 0.75% and an OID of 99.75.

Advertisement

More From Market Realist