uploads/2016/05/US-Leveraged-Loan-Market-Volumes-2016-05-121.jpg

Why Did Leveraged Loan Issuance Gain Traction Last Week?

By

Updated

Primary market activity in leveraged loans

According to data from S&P Capital IQ/LCD, the US leveraged loan market saw an allocation of $5.9 billion worth of dollar-denominated senior loans in the week to May 6. In the previous week, the issuance was at $4.8 billion. The deal flow went up from six transactions being priced in the previous week to eight being priced in the last week.

Leverage loans issuance gained traction last week. The primary market sentiment remained positive. There was limited supply of well-rated issuers.

Senior loans are tracked by mutual funds and ETFs such as the Hartford Floating Rate Fund – Class A (HFLAX), the Fidelity Advisor Floating Rate High Income Fund – Class A (FFRAX), the Invesco PowerShares Senior Loan Portfolio (BKLN), and the Highland/iBoxx Senior Loan ETF (SNLN).

Article continues below advertisement

Noteworthy transactions

McGraw-Hill is a global publishing, financial information, and media services company. It issued Ba3/B+ rated leveraged loans worth $1.9 billion in two tranches on May 2:

  • a $350 million five-year RCF (Revolving Credit Facility)
  • a $1.6 billion six-year Term Loan B, issued at LIBOR + 400 basis points with a LIBOR floor of 1.0% an OID (original issue discount) of 99.5

The proceeds from the offerings will be used for refinancing purposes.

ATI Physical Therapy provides research-based physical therapy and rehabilitation services. It issued leveraged loans worth $955 million in three tranches on May 6:

  • a $70 million B1/B rated five-year RCF
  • a $660 million B1/B rated seven-year first-lien Term Loan, issued at LIBOR + 450 basis points with a LIBOR floor of 1.0% an OID of 99
  • a $225 million eight-year second-lien Term Loan

The proceeds from the offerings will be used for the leveraged buyout of ATI Physical Therapy from KRG Capital Partners by Advent International.

Telent is a British telecommunication company. It issued Term Loan B worth $850 million on May 5. The B1/B+ rated loan was issued for eight years at LIBOR + 350 basis points with a LIBOR floor of 0.75% and an OID of 99.5. The company expects to use the proceeds of the loan for refinancing purposes.

Premiere Global Services (PGI) provides collaboration and web meeting technology. It issued B1/B rated leveraged loans worth $600 million in two tranches on May 5:

  • a $50 million five-year RCF
  • a $550 million six-year first-lien Term Loan, issued at LIBOR + 650 basis points with a LIBOR floor of 1.0% an OID of 90

The proceeds from the offerings will be used for the leveraged buyout of Premiere Global Services by Siris Capital Group, LLC.

In the next part, we’ll look at leveraged loan funds’ flows.

Advertisement

More From Market Realist