Primary market activity in leveraged loans
According to data from S&P Capital IQ/LCD, the US leveraged loans market saw an allocation of ~$14.0 billion worth of senior loans across 15 transactions in the week ended May 1. This was 38.3% higher than the $10.1 billion priced in the week ended April 24. The deal flow was higher with 15 transactions priced in the week compared to ten in the previous week. Senior loans are tracked by the Invesco PowerShares Senior Loan Portfolio (BKLN) and the Highland iBoxx Senior Loan ETF (SNLN).
Standing alone, last week’s issuance is the highest so far in 2015. The previous week matched the previous highest issuance of 2015. Last week was also the second successive week for more than $10 billion or above issuance of leveraged loans. Activity weakened in the junk bond space (JNK) (HYG), but it strengthened in the leveraged loans space.
Purpose of issuance
Of the proceeds from new issues priced in the week, five transactions were earmarked for repricing, four for refinancing, three for leveraged buyout, two for acquisitions, and one for dividend-recapitalization.
Avaya Inc., a subsidiary of Avaya Holdings Corporation, provides business communication solutions. It was the highest issuer of leveraged loans in the week to May 1. It raised $2.125 billion in B1/B rated loans. The single-tranche Term Loan B-7 loan was issued for five years. It was issued at LIBOR + 525 basis points with a LIBOR floor of 1.00% and an OID (original issue discount) of 99. Avaya will use the proceeds of the sale to refinance older debt.
Zayo Group Holdings (ZAYO) provides bandwidth infrastructure services. It raised $1.995 billion worth of Ba2/BB- rated loans. The Covenant-lite Term Loan B was issued for seven years at LIBOR + 275 basis points with a LIBOR floor of 1.00% and an OID of 99.75. Zayo brought this loan to the market for repricing.
Hanesbrands Inc. (HBI) is an apparel manufacturer. It issued leveraged loans worth $1.85 billion in the following three-part package:
- $1.0 billion five-year Revolving Credit Facility, rated Baa3/BBB-
- $425 million five-year Term Loan A, rated Baa3/BBB-, and issued at LIBOR + 150 basis points
- $425 million seven-year Term Loan B, rated Baa3/BBB-, and issued at LIBOR + 250 basis points with a LIBOR floor of 0.75% and an OID of 100
Hanesbrands will use the proceeds of the loan to refinance older debt.
Trinseo S.A. (TSE) is a manufacturer of emulsion polymers and plastics. It raised $825 million in leveraged loans as the following two-part package:
- $325 million five-year Revolving Credit Facility, rated Ba3/BB-
- $500 million 6.5-year Covenant-lite Term Loan B, rated Ba3/BB-, and issued at LIBOR + 325 basis points with a LIBOR floor of 1.0% and an OID of 99.75
Trinseo will use the proceeds of the sale to refinance older debt.