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Leveraged Loans Issuance Reaches Its Highest 2015 Level

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Primary market activity in leveraged loans

According to data from S&P Capital IQ/LCD, the US leveraged loans market saw an allocation of ~$19.0 billion worth of senior loans across 22 transactions in the week to May 8. This was 35.8% higher than the ~$14.0 billion priced in the week ended May 1. The deal flow was higher with 22 transactions priced in the week, compared to 15 in the previous week. Senior loans are tracked by the Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Last week’s issuance is the highest in 2015 yet. Last week also makes the third successive week with over $10 billion or above in leveraged loans issuance. Activity was strong in both the junk bond space (JNK) (HYG) and in the leveraged loans space.

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Purpose of issuance

The proceeds from new issues priced in the week were earmarked for the following:

  • nine repricing transactions
  • four transactions each for refinancing and leveraged buyout
  • three acquisition transactions
  • one transaction each for dividend/recapitalization and spin-off

Noteworthy transactions

The Chemours Company, a supplier of titanium technologies, is a subsidiary of E. I. du Pont de Nemours and Company, or DuPont (DD). It was the highest issuer of leveraged loans in the week to May 8. The company issued leveraged loans worth $2.5 billion in a two-part package, including:

  • A $1.0 billion five-year RCF (revolving credit facility), rated Ba1/BBB- issued at LIBOR + 200 basis points
  • A $1.5 billion seven-year Covenant-lite Term Loan B, rated Ba1/BBB- issued at LIBOR + 300 basis points with a LIBOR floor of 0.75% and an OID (original-issue discount) of 99.5

The Chemours Company will use the proceeds from the sale to spin off from its parent.

Level 3 Financing operates as a subsidiary of Level 3 Communications (LVLT). It raised $2.0 billion in Ba2/BB-rated loans. The single-tranche Covenant-lite Term Loan B was issued for 6.75 years. It was issued at LIBOR + 275 basis points with a LIBOR floor of 0.75% and an OID of 99.75. Level 3 Financing brought this loan to the market for repricing.

Quintiles Transnational, a subsidiary of Quintiles Transnational Holdings (Q), provides biopharmaceutical development and commercial outsourcing services. It issued leveraged loans worth $1.95 billion in a three-part Ba1/BB+ rated package, including:

  • A $500 million five-year revolving credit facility
  • An $850 million five-year Term Loan A
  • A $600 million seven-year Covenant-lite Term Loan B, issued at LIBOR + 250 basis points with a LIBOR floor of 0.75% and an OID of 99.75

Quintiles will use the proceeds of the loan to refinance older debt.

Metaldyne Performance Group (MPG) is a component maker for powertrain and safety-critical platforms. It raised dollar-denominated $1.072 billion worth of Ba3/BB+ rated loans. The Covenant-lite Term Loan B was issued for 6.5 years at LIBOR + 275 basis points with a LIBOR floor of 1.00% and an OID of 100. Metaldyne brought this loan to the market for repricing.

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