Getty Images refinancing first-lien debt held by Barings BDC
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While the loan market has hit a plateau after rallying in the opening days of 2019, high-yield continued to pick up steam, generating a bifurcation between loans and bonds in both the primary and secondary markets. As such, issuers have flocked to the bond market—including the secured-bond market—to optimize executions as last week’s big-ticket transactions for Dun & Bradstreet and TransDigm exemplify.
D&B was the first to carve out $500 million of what was originally contemplated as a $3.13 billion TLB. CommScope followed suit with a $2 billion secured execution that reduces its institutional loan by the same amount, and TransDigm eschewed the loan market altogether, opting to place a slightly upsized $3.8 billion secured bond deal to fund its acquisition of Esterline Technologies that as recently as a few months ago it said it would finance in the loan market.
The high-yield market has come back to life in 2019 after shuttering for new business in the final weeks of 2018 due to the market volatility. Sentiment in loans, though certainly improved from December, remains tentative as mutual funds continue to experience meaningful outflows, albeit much less severe than December’s massive withdrawals. The new-issue CLO market, though back in business, is fragile after CLO liabilities fell into price discovery after December’s volatility.
As such, the loan secondary was largely range-bound last week, with the average bid of the Credit Suisse Leveraged Loan Index easing seven bps on the week ended Jan. 31. By comparison, the average bid price of the ICE BofAML U.S. HY index gained 73 bps during the same five-day period, to 96.05.
Portfolios in brief: Holds reflect most recent reporting period available
BBDC: Getty Images (B3/B-) — refi
J.P. Morgan launched a cross-border term loan for Getty Images that is part of a comprehensive refinancing effort, according to sources. The seven-year covenant-lite institutional loan is split between $1.085 billion and $360 million equivalent (~€315 million) tranches. Proceeds, along with those from $400 million of unsecured debt and $500 million of perpetual PIK preferred equity, would be used to refinance the issuer’s term loan and bonds ahead of their October 2019 and October 2020 maturities, respectively. The dollar tranche is talked at L+450-475, with a 1% floor and a 98 OID; guidance on the euro tranche is E+500-525, with a 0% floor, offered at 98, sources said. Commitments are due Wednesday, Feb. 13. Barings BDC holds $14M in principal amount of the company’s existing 1L debt (L+350, 0% floor) due October 2019. – Thomas Dunford
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