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Leveraged Loan Issuance Rebounds, High Yield Bonds Emerge As Post-Brexit Markets Heat Up

There is life in the new-issue U.S. leveraged finance market for the first time since the U.K. Brexit vote, thanks largely to a rapidly accelerating leveraged loan segment that is seeing opportunistic issuers come off the sidelines.

U.S. syndicated loan issuance last week totaled a relatively hearty $14.3 billion, up noticeably from $3.4 billion the previous week, according to LCD, an offering of S&P Global Market Intelligence. US leveraged finance issuance

“Summer’s here, and a technically driven loan market is heating up,” writes LCD’s Chris Donnelly, in his weekly market wrap-up. “Accounts that fretted about repricing activity in recent weeks saw a slew of mark-to-market deals and refinancings, all poised to capture investor demand.”

Indeed, there was a handful of sizeable credits last week, including a $2.2 billion refinancing from New Zealand-based packaging concern Reynolds Group and a $1.8 billion loan backing Revlon’s acquisition of Elizabeth Arden.

There was also a jumbo $4.25 billion loan backing the bankruptcy exit/DIP loan refinancing of Texas Competitive Electric Holdings, the largest leveraged loan bankruptcy ever (as TXU).

Year to date, U.S. leveraged loan issuance now totals $239 billion, compared to $247 billion at this point in 2015.

Along with increased issuance, U.S. loan funds last week saw their first inflow of investor cash in a month, according to Lipper.

The U.S. high yield bond market was less active, though it too saw its best week of issuance since the Brexit vote, logging $3.9 billion in deals, according to LCD. More might be in store.

“Investors have a significant amount of money to put to work on the heels of a five-week slowdown, big inflows to the asset class, and large coupon-payment dates having passed in June,” says Matthew Fuller, who covers the high yield bond market for LCD.

About those inflows: They totaled a whopping $4.35 billion last week, the second-largest weekly sum ever, according to Lipper. Year to date U.S. high yield issuance totals $124 billion, down significantly from the $189 billion at this point last year.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers 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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