Primary market activity in leveraged loans
According to data from S&P Capital IQ/LCD, the US leveraged loans market saw an allocation of $20.8 billion worth of dollar-denominated senior loans in the week ended May 27, 2016. This was the highest recorded allocation since May 22, 2015. In the previous week, issuance was $5.0 billion. The deal flow increased significantly from six transactions priced in the previous week to 17 priced in the week ended May 27.
Leveraged loans issuance skyrocketed last week as opportunistic issuers were in a rush to seal deals before the June FOMC (Federal Open Market Committee) meeting.
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 PowerShares Senior Loan ETF (BKLN), and the Highland/iBoxx Senior Loan ETF (SNLN).
MultiPlan provides healthcare cost management solutions. It issued covenant-lite Term Loan B worth $3.5 billion on May 25, 2016. The B1/B+ rated loan was issued for seven years at LIBOR (London Interbank Offered Rate) + 400 basis points with a LIBOR floor of 1%, an OID (original-issue discount) of 99.5. The company expects to use the proceeds of the loan for its leveraged buyout by Hellman & Friedman.
Station Casinos is a gaming, development, and management company. It issued Ba3/BB- rated leveraged loans worth $2.4 billion in the following three tranches on May 25, 2016:
- $660 million five-year revolving credit facility
- $175 million five-year first-lien Term Loan A
- $1.6 billion seven-year Term Loan B, issued at LIBOR + 300 basis points with a LIBOR floor of 0.75%, an OID of 99.5
The proceeds from the offering will be used for refinancing purposes.
B/E Aerospace (BEAV) manufactures aircraft cabin interior products for both
commercial airliners and business jets. It repriced a Term Loan B worth $2.1 billion on May 26, 2016. The Ba2/BB+ rated loan was issued for five years at LIBOR + 300 basis points with a LIBOR floor of 0.75% and an OID of 100.
Zebra Technologies (ZBRA) provides enterprise asset intelligence, designing and marketing specialty printers, mobile computing, data capture, radio frequency identification products, and real-time locating systems. It repriced a covenant-lite Term Loan B worth $2.0 billion on May 27, 2016. The Ba2/BB+ rated loan was issued for five years at LIBOR + 325 basis points with a LIBOR floor of 0.75% and an OID of 99.8.
In the final part of this series, we’ll look at leveraged loan fund flows.