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Issuance Jumps in the Primary Leveraged Loans Market

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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 $16.2 billion in senior loans in the week ending July 31. This was sharply higher than the $9.3 billion priced in the week ended July 24. Last week also marked the first week in five that saw double-digit leveraged loan issuance. The deal flow was also higher, with 16 transactions being priced in the week, compared with seven in the previous week. Senior loans are tracked by the PowerShares Senior Loan Portfolio ETF (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Unlike leveraged loans, the high yield bond (JNK) (HYG) primary market saw just $2.48 billion in deals pricing last week.

Charter Communications (CHTR) was the biggest issuer of leveraged loans last week while Japan’s SoftBank Group (SFTBY) was the biggest issuer of high yield bonds in that period.

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Noteworthy transactions

Asurion LLC, an insurance provider for wireless devices, was the highest issuer of leveraged loans in the week ending July 31. It issued $3.175 billion in leveraged loans via the following three tranches:

  • a Ba3/B rated RCF (Revolving Credit Facility)
  • a Ba3/B rated $2.725 billion seven-year covenant-lite first-lien Term Loan, issued at LIBOR + 400 basis points with a LIBOR floor of 1.0% and an OID (original issue discount) of 99.5
  • a Caa1/CCC+ rated $450 million 5.5-year add-on second-lien Term Loan, issued at LIBOR + 750 basis points with a LIBOR floor of 1.0% and an OID (original issue discount) of 99.5

Asurion will use the proceeds for dividend/recapitalization purpose.

Ascena Retail Group (ASNA) is an apparel retailer. It issued $2.4 billion in Ba2/BB+ rated leveraged loans via the following two tranches:

  • a $600 million five-year ABL (Asset-Based Loan)
  • a $1.8 billion seven-year covenant-lite Term Loan B, issued at LIBOR + 450 basis points with a LIBOR floor of 0.75% and an OID (original issue discount) of 98

Ascena intends to use the proceeds of the sale for its acquisition of Ann Inc. (ANN).

Medical technology company Hill-Rom Holdings (HRC) issued $2.3 billion in leveraged loans last week. The Ba2/BBB rated loan was issued via the following three tranches:

  • a $500 million RCF (Revolving Credit Facility)
  • a $1.0 billion Term Loan A
  • a $800 million seven-year Term Loan B, issued at LIBOR + 275 basis points with a LIBOR floor of 0.75% and an OID (original issue discount) of 99.75

Insurance provider Alliant Insurance raised $1.54 billion B2/B rated leveraged loans via the following two tranches:

  • a $200 million five-year RCF (Revolving Credit Facility)
  • a $1.34 billion seven-year covenant-lite Term Loan B, issued at LIBOR + 350 basis points with a LIBOR floor of 1.0% and an OID (original issue discount) of 99.75

Alliant will use the proceeds of the sale to finance its leveraged buyout by Stone Point Capital. KKR & Co. (KKR) is another major investor in the company.

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