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Leveraged Loan Volume Totals $7.2B As Market Heats To 'Absurd' Levels

U.S. leveraged loan volume totaled $7.2 billion during the week via a relatively modest 20 new issues, as cash-rich institutional investors step up for seemingly every credit that comes into view, shifting the market into high gear.

Indeed, “market conditions for leveraged loans have pushed into the absurd,” writes LCD’s Chris Donnelly. “Buyers of various stripes have stepped forward to oversubscribe virtually every transaction with nary a thought given to credit-related concerns. “

There are a number of reasons for the rapidly heating market, which has made price flexes – where issuers reduce the interest rate offered on a loan while the credit is still in the syndications process – commonplace. Chief among them is the ever-growing mountain of cash on which institutional investors sit.

This week, in fact, U.S. loan funds saw another $804 million flow into investor coffers, according to Lipper. That makes 84 straight weeks of net inflows – the last outflow was June 2012 – totaling $62.3 billion.

As for deals, there were loans backing LBOs amid the usual surge of refinancings (LBO loans, of course, pay higher fees and interest rates to investors and arrangers, so these credits a highly prized). Private equity concern Madison Dearborn this week launched $1.3 billion in credits backing its buyout of Ikaria Holdings, a biotech concern. As well, Bain Capital launched $300 million in loans supporting its acquisition of Bob’s Discount Furniture.

Regarding those refinancings. There were 11 more this week, as leveraged loan issuers continue to take advantage of accommodating institutional investors to decrease borrowing costs. Most visible was a $1.9 billion loan for Dunkin’ Brands, owner of Dunkin’ Donuts. With the refinancing the company reduces its current interest rate by at least 25 bps.

Year to date the U.S. leveraged loan market has seen some $34.3 billion in issuance, according to S&P Capital IQ/LCD.

Continued here:
Leveraged Loan Volume Totals $7.2B As Market Heats To 'Absurd' Levels

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