Think

The sellside’s steady messaging that there’s a lack of a meaningful calendar behind current loan activity is resonating with investors, although LFI continues to track $38.2 billion of volume that’s still to come, including $25.5 billion of new money. The big early M&A deals, Refinitiv, AkzoNobel Specialty Chemicals and Web.com, have indeed set the tone for the market moving forward; investor appetite seems practically endless for all but the most challenging credit stories.

Hot market conditions are readily on display in last week’s flex ratio, which favored issuers by a margin of nine to one. Moreover, launched volume last week remained relatively light, reinforcing the impression of a slowdown in deal flow. Thirteen issuers launched $8.7 billion last week, for net new money of $6 billion. M&A again was the emphasis with $7 billion launching. However, last week’s string of successful executions and tight prints likely means the mix will soon shift back toward opportunistic transactions—including repricings.

LBOS TO TAKE OUT RESTAURANT TECHNOLOGIES DEBT HELD BY ARCC, BAIN, AUDAX AND CSWC, ALONG WITH QUORUM SOFTWARE CREDIT HELD BY SUNS

Download: LFI BDC Portfolio News 9-17-18

The big three LBO deals that kicked off the post-Labor Day rush have all drawn significant oversubscription from loan investors, driven not only by strong market conditions but also nagging concerns among investors that volume will ease once the current calendar is put to bed. The solid response to these large transactions suggests that most of the deals in market will find firm footing and that arrangers will begin testing tighter pricing levels than the relatively conservative efforts represented by this first batch of September business.

Download: LFI BDC Portfolio News 9-10-18

As promised, loan arrangers rolled out a big September calendar of M&A deals brimming with new money seeking to take advantage of the late-August lull and a favorable funds flow picture following the busiest month for CLO issuance since March 2015. High-yield, too, kicked back into high gear, driven in part by coordinated cross-border deals for some of the same issuers currently being reviewed by loan accounts, while restructurings drove some of last week’s lively secondary action.

Loan investors are kicking the tires on a trio of large M&A deals that will set the tone for the market in the coming weeks not only for the other transactions already launched but also for those to come later this month. Traders, too, are awaiting clearing levels on these jumbo deals—which are being talked wide of where single-B executions printed earlier in the year—as well as to see how the market absorbs the supply once these deals allocate.

Repricings return, aiming for lower margins at BJ's (ACSF, Hancock Park, CCT), Compass Power (FS Energy) and Travel Leaders (Bain, Triton Pacific)

The first week of the new month was dominated by reactive trading and repositioning in the wake of quarterly reports, even as the new-issue market kept rolling out loans and bonds. In bonds, highlights included $1.25 billion short-term-fix from Intelsat just as the identically sized BMC Software buyout bonds got going on international roadshows for next week’s business following June’s completed loan financing.

After a somewhat sleepy start last week, loan arrangers piled it on. M&A deals peeled off the calendar late in the week included the long-awaited deal for Penn National Gaming, Cetera, Travel Leaders and Del Frisco Restaurant Group as gross launched volume jumped to $15.6 billion in the busiest week since June 15. M&A volume was a healthy $7.9 billion.