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High Yield Bond Issuers Remain On Sidelines; Better-Rated Leveraged Loans Eye Market

The U.S. leveraged finance market continues to plod along, with a slim $4.5 billion in leveraged loan issuance this week and one lone deal totaling $400 million in the troubled high yield bond space, according to S&P Capital IQ LCD.

leveraged finance issuance

In the loan market, issuers and arranges are making an effort to kick-start 2016 though they are battling supply/demand fundamentals and watching high-profile deals already in syndication for an idea of which way the market winds are blowing.

“Several new loan issues crossed the tape this week, but evidence of a bifurcated market remains,” says LCD’s Chris Donnelly, in his weekly market wrap-up.

Indeed, issuers of the single-B rated, $2.5 billion loan backing the LBO of Petco Animal Supplies by CVC Capital and Canada Pension Plan had to sweeten the interest rate and make other investor-friendly changes to complete syndication, Donnelly says.

Higher-rated credits seem to be having an easier time. Fiber-optics concernZayo Group during syndication decreased the interest rate on a $400 million credit which backs an M&A deal. The Zayo loan is rated BB-/B2. Year to date, U.S. leveraged loan issuance totals $10.5 billion, compared to $13.3 billion at this point last year. These syndications maneuverings come as

investors continue to retreat from the loan space. U.S. loan funds last week saw their 25th straight outflow, as investors withdrew $461 million, according to Lipper. The high yield bond market continues to struggle. 

Pinnacle Foods was the sole issuer last week, with a $400 million deal backing an acquisition of Boulder Brands. The global economic turmoil is roiling this often volatile market.

“It was too choppy for even high-quality names [to issue], despite the U.S. Treasury Market strength, which sent yields to three-month lows,” says LCD’s Matt Fuller.

As with the loan market, it’s risk-off for high yield. U.S. high yield funds and ETFs saw a whopping $2.1 billion withdrawal last week, thanks largely to the ETF sector, which comprised nearly 75% of that amount, says Lipper.

Year to date, U.S. high yield issuance totals $1.2 billion, compared to $8.6 billion in 2015. - Tim Cross

Check out www.lcdcomps.com, LCD's subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here

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