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Primary Market Issuance Volume of Leveraged Loans Falls

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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 $10 billion worth of senior loans in the week to August 7. This was 38.40% lower than the $16.2 billion priced in the week ending July 31. Last week also marked the second successive week of double-digit leveraged loan issuance. The deal flow was lower with 12 transactions being priced in the week—compared to 16 in the previous week. Senior loans are tracked by the PowerShares Senior Loan Portfolio (BKLN) and the Highland/iBoxx Senior Loan ETF (SNLN).

Unlike leveraged loans, the high-yield bond (JNK) (HYG) primary market saw the deal volume rising last week.

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Noteworthy transactions

Contract research company Pharmaceutical Product Development was the highest issuer of leveraged loans in the week to August 7. It issued B1/B rated leveraged loans worth $2.875 billion through the following two tranches:

  • a $300 million RCF (revolving credit facility)
  • a $2.575 billion seven-year covenant-lite Term Loan B, issued at LIBOR + 325 basis points with a LIBOR floor of 1% and an OID (original issue discount) of 99.50%

Party City Holdco (PRTY) is a designer and manufacturer of party items. It issued B1/B rated leveraged loans worth $1.88 billion through the following two tranches:

  • a $540 million five-year ABL (asset-based loan)
  • a $1.34 billion covenant-lite Term Loan B, issued at LIBOR + 325 basis points with a LIBOR floor of 1% and an OID (original issue discount) of 99.75%

Navistar International (NAV) issued leveraged loans worth $1.04 billion last week. The Ba3/B- rated covenant-lite Term Loan B was issued for five years. The loan was issued at LIBOR + 550 basis points with a LIBOR floor of 1% and an OID of 98.50%. Navistar will use the proceeds of the sale to refinance older debt.

Industrial distributor HD Supply Holdings (HDS) raised B1/BB- rated leveraged loans worth $850 million. The Term Loan B’s tenor of issuance is to be decided. The loan was issued at LIBOR + 275 billion with a LIBOR floor of 1% and an OID of 99.50%.

Telecom network services company Lightower Fiber Networks is a former subsidiary of National Grid (NGG). It raised leveraged loans worth $829 million. The add-on first-lien Term Loan B’s tenor of issuance was 4.75 years. The loan was issued at LIBOR + 325 billion with a LIBOR floor of 0.75% and an OID of 99.50%.

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