Junk Bond Issuance Rose after Thanksgiving Weekend
Activity in leveraged loans
According to data from S&P Capital IQ’s LCD, the US leveraged loans market saw an allocation of $3.1 billion worth of dollar-denominated senior loans in the week to December 4. This was higher than the $0.5 billion priced in the week ended November 27. The deal flow was up from two transactions being priced in the prior week to five transactions priced last week. Senior loans are tracked by mutual funds such as the Oppenheimer Senior Floating Rate Fund – A (OOSAX) and the Fidelity Advisor Floating Rate High Income Fund – Class A (FFRAX).
Like leveraged loans, the primary high-yield bond market also saw increased activity last week. Issuances were seen from Ball Corporation (BLL), Mednax (MD), HCA (HCA), Aramark (ARMK), and Group 1 Automotive (GPI).
Noteworthy transactions
Cable & Wireless Communications Plc is a full-service telecommunications company headquartered in London, United Kingdom. It issued Ba2/BB- rated leveraged loans worth $1.4 billion last week in three tranches:
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a $570 million five-year Revolving Credit Facility (or RCF)
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a $440 million seven-year covenant-lite Term Loan B-1, issued at LIBOR + 475 basis points with a LIBOR floor of 0.75% and an OID (original issue discount) of 98
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a $360 million seven-year covenant-lite Term Loan B-2, issued at LIBOR + 475 basis points with a LIBOR floor of 0.75% and an OID (original issue discount) of 98
Cable & Wireless Communications will be acquired by Liberty Global Plc (LBTYA). Cable & Wireless Communications will use the proceeds of the loan to refinance its existing loan and to fund a special dividend to its shareholders.
Ascensus Inc is the largest independent retirement and college savings services provider in the United States. It issued leveraged loans worth $645 million last week in four tranches:
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a $50 million B2/B rated five-year RCF
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a $400 million B2/B rated seven-year covenant-lite first lien Term Loan, issued at LIBOR + 450 basis points with a LIBOR floor of 0.75% and an OID of 94
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a $25 million B2/B rated seven-year DD covenant-lite first lien Term Loan, issued at LIBOR + 450 basis points with a LIBOR floor of 0.75% and an OID of 94
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a $170 million seven-year second lien Term Loan
Ascensus will use the proceeds to back Genstar Capital, and the Aquiline Capital Partners LBO (leveraged buyout) from J.C. Flowers & Co.
Additionally, Cowlitz Tribal Gaming Authority issued B3/B rated leveraged loans worth $418 million last week in two tranches:
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a $75 million 4.75-year RCF
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a $343 million five-year Term Loan B, issued at LIBOR + 1050 basis points with a LIBOR floor of 1.0% and an OID of 93