| NEW YORK
NEW YORK Dec 7 The leveraged loan pipeline
through year-end is rife with new-money deals, providing some
good news for asset-starved investors. The institutional
pipeline stands at $36 billion as of December 6, with about
$17.8 billion, or about 50 percent of total deals, representing
leveraged buyout (LBO) or M&A transactions.
From October through the end of November, approximately $55
billion of institutional new-money deals were completed or in
market. This is about double the $28 billion of new-money deals
in the full third quarter.
A low-rate environment for growth-enhancing transactions,
today's strong demand from loan investors, and a push of deals
that need to close before year-end are all driving a barrage of
M&A and LBO deals in the pipeline.
Only about 25 percent of deals in the institutional calendar
are pure refinancings/repricing transactions. By contrast,
refinancing comprised 47 percent of institutional volume in
3Q12, 59 percent in 2Q12, and 63 percent in 1Q12.
"For traditional refinancing, a lot of deals have already
taken place," said one buyside investor. "That's why you're
seeing the 2014 maturities erode."
In the place of refinancing, M&A, LBO and dividend recap
deals are the major contributors to expected issuance through
"We're expecting heavy volumes the first two weeks of
December," said a buyside investor.
PVH Corp is marketing a $1.875 billion term loan B
to back the acquisition of Warnaco. On December 6, USI
Insurance Services launched a $1.025 billion covenant-lite term
loan B to back Onex Corp's buyout of USI.
With issuance flowing to the market in droves, investors can
afford to be choosier. While demand technicals remain strong,
hefty supply allows investors to lean toward higher-quality
deals, and to require higher compensation and stricter terms for
"We've seen this the past couple Decembers," said one
buyside investor. "Issuers have been concerned every year for
the past few years about changes in tax rates. As a result, the
supply calendar gets crowded. Terms and conditions tend to get a
little bit better for investors in December, versus the October
or November timeframe."
The week of December 3, ContourGlobal pulled a $350 million
first-lien term loan. Patheon sweetened terms on its
$565 million term loan B by increasing the spread, decreasing
the loan's accordion feature and removing the sunset provision
on the loan's MFN protection. And RedPrairie raised
pricing on its new $2.2 billion covenant-lite acquisition loan.
No rest for the weary
Some 2013 new-money launches are already on deck.
DigitalGlobe is prepping for a $1.2 billion credit to
back the company's acquisition of Geoeye. That will
likely launch next year, sources said. Financing for GenCorp's
$550 million acquisition of Pratt & Whitney Rocketdyne may also
spill into next year.
"Deals related to transactions that aren't going to close to
March, April, or May will not want to come to market now," said
one investment strategist. "If you get commitments today you
have to pay a ticking fee." Along with the new deals, investors
will contend with macroeconomic issues and 4Q12 earnings results
"Key issues include the resolution of the fiscal cliff,
which is positive if resolved, and whether interest rates remain
low, which is positive if they do," said one credit analyst.