The U.S. leveraged finance market returned from the Labor Day break ready to do business, with some $25.6 billion in new deals last week, the most since the middle of June, according to LCD, an offering of S&P Global Market Intelligence.
Leading the charge was the leveraged loan segment, which saw a healthy $17.4 billion in issuance via 23 credits. Of note, it’s not just issuers looking to take advantage of the increasingly low rates on offer to opportunistically refinance existing debt.
“Roughly half the deals last week backed LBOs and other M&A transactions,” according to LCD’s Jon Hemingway, in his weekly market analysis.
This will be a welcome development to institutional loan investors, of course, as the riskier M&A/LBO transactions offer higher spreads and fees than do plain-vanilla deals (such as refinancings). As well, they add new money to an asset class that is increasingly hungry for paper.
Indeed, investors last week poured a net $318 million into U.S. loan funds.That’s the largest cash inflow in 17 months.
With the recent activity, 2016 U.S. leveraged loan volume totaled $299 billion as of Sept. 9, down only 4.2% from the same period last year.
The high yield bond segment also returned from a two-week hiatus, pricing $8.2 billion in deals, the most since the week of June 10. Unlike the loan market, high yield issuers seemed focused on lowering borrowing costs.
“Opportunistic refinancing was the major theme this week as the market returned to life following the Labor Day break,” said LCD’s Jakema Lewis, in her weekly market wrap, published Sept. 8. “A significant portion of [offerings] this week has come from issuers looking to take out or repay existing debt.”
As with the loan market, investors returned to high yield funds last week,pumping a net $610 million into the asset class. That’s the fifth week out of the last six that the asset class has seen an inflow.
U.S. high yield issuance through Sept. 9 totaled $158.6 billion, down 26% from the same period a year ago, according to LCD.
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.