Cashed up investors take stock of US loan pipeline

NEW YORK, Jan 9 (LPC) - Investors in leveraged loans, buoyed by a market rally in December and a low interest-rate policy in the US, are waiting in the wings for new opportunities to put money to work as they gear up to be repaid by transactions that come due in the first quarter of the year.

The strong start to 2020 comes after the asset class posted returns of about 9% in 2019, a significant jump from the year prior, which barely registered returns above zero, according to S&P and the Loan Syndications Trading Association’s (LSTA) leveraged loan index.

“Last year was a good year for any asset class and now there isn’t the tough start to the year that we had in 2019,” said Jonathan Insull, a managing director at Crescent Capital Group.

In December, the US Federal Reserve signaled it would leave interest rates unchanged in 2020, after three 25bp cuts in 2019, a sign that the central bank hopes to maintain economic expansion in the US.

A large chunk of the pipeline, however, has been reserved for reductions on the cost of debt of existing transactions such as a repricing on a US$3.03bn term loan for nuclear power company Westinghouse or a US$3.5bn financing for hospital operator LifePoint, which are currently in the market.

Data and content services provider Refinitiv, which owns LPC, is also back in the market, this time looking to shave up to 50bp off a €2.33bn (US$2.6bn) loan, according to sources. In December, Refinitiv reduced the interest rate of its US$6.45bn dollar loan by 50bp to 325bp over Libor.

Both loans backed the US$20bn purchase of a majority stake in Refinitiv by a consortium led by private equity firm Blackstone in September 2018.


While the US bond market may have sprinted into 2020, the US leveraged loan space has been slower to take off. The refinancing wave that dominated the last quarter is expected to continue as market players determine a price benchmark for new-money transactions.

“There was a risk-off strategy post October…(and) as a result there was a tremendous flow of refinancings,” Art de Peña, managing director and head of loan syndications at MUFG, said at an event hosted by the bank in December. “I anticipate that will continue in 2020.”

As market makers shake off the holiday cobwebs, new money opportunities are also emerging.

Media intelligence company Cision set out the terms for a US$1.56bn, dual-currency financing on Tuesday that will support its acquisition by Platinum Equity. The seven-year deal, split between a US$1bn loan and €500m tranche, is being offered to investors at 375bp-400bp over Libor.

Also on Tuesday, cybersecurity firm Sophos launched a US$1.43bn, dual-currency transaction to fund its acquisition by Thoma Bravo. The deal also comprises a US$520m second-lien loan that will be placed privately, banking sources said.

“It’s important to see where deals price to set a marker for new money, which will in turn drive secondary prices,” said Frank Ossino, a managing director at Newfleet Asset Management. “We’ve now taken the holiday crud out of our eyes as the calendar is starting to build.” (Reporting by Aaron Weinman. Editing by Michelle Sierra and Kristen Haunss.)