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Leveraged Loan Issuance Surges To $15B As Market Remains Hot

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Leveraged loan issuance in the U.S. surged to $15 billion this week from $7.7 billion last week as the market continues upward, even as equities slump sharply. Year to date (through yesterday), leveraged loan issuance totals $48.8 billion, according to S&P Capital IQ.

Once again there was a handful of more richly priced LBO loans among the roughly 20 deals brought to market during the week. The largest was a $1.5 billion credit backing KKR’s acquisition of insurance concern Sedgwick Claims Management Services. That deal, like many of late, includes a second-lien tranche. The growing number of second-lien credits is another indicator – along with covenant-lite loans – of just how much investor demand there is.

Also this week, private equity concern Carlyle launched a $435 million loan backing its LBO of Vogue International, a hair-care and personal products manufacturer.

Again, the market remains hot. Reverse-flexes continue, and new opportunistic transactions – aka refinancings – have emerged despite the fact that the broader markets are supposedly down, writes LCD’s Chris Donnelly.

Indeed, leveraged loan yields continue to fall. The average single-B yield on a U.S. leveraged loan slipped to 4.61% this week from 4.85% a week ago. Double-B new-issue loan yields inched to 3.33% from 3.4%, according to Donnelly.

Why the sustained market pressure? Institutional investors continue to sit atop an ever-growing mountain of cash. This week saw a $460 million net inflow to U.S. loan funds, according to Lipper. That makes 85 straight weeks of cash flowing into market, totaling a whopping $63 billion. Year-to-date loan fund inflows total $3.4 billion, says Lipper.

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