The leveraged loan market experiences the biggest hiccups since the first wave of the pandemic

(Bloomberg) – Sounds scary: Three leveraged loan deals have just been made in the United States, the biggest setback since things went haywire at the start of the pandemic.

Still, this doesn’t seem to be a harbinger of major problems and the withdrawals don’t seem to reflect general market weakness.

Taco Bell franchise operator Luihn VantEdge Partners LLC closed a loan sale this week. Marketing company CM Group Inc. and American Physician Partners LLC, which supplies doctors to emergency rooms, did the same last week. All were trying, in part, to finance acquisitions.

No month has seen many deals have been postponed since March 2020, when 10 deals valued at $ 14.3 billion were canceled, according to data compiled by Bloomberg. But December 2021 pales in comparison so far, with just $ 1.46 billion withdrawn.

Other companies, meanwhile, are capitalizing on continued strong demand as the leveraged loan market continues to buzz even as omicron fears rocked other asset classes.

Southwestern Energy Co. saw prices tighten on its $ 550 million loan, an indicator of strong investor interest. He also sells a junk bond to help finance his acquisition of GEP Haynesville LLC. And the S & P / LSTA loan price index, which measures the performance of the US leveraged loan market, rose the most since June Tuesday.

“The loan market has been quite hot this year,” said Christian Hoffmann, portfolio manager at Thornburg Investment Management. “Usually, the new emitting machine works like a high-efficiency factory that pumps stuff.”

There are signs, however, that investors are moving money out of space. U.S. leveraged loan funds recorded outflows of around $ 93 million between Thursday and Tuesday, the first four days of the reporting week that ends Dec. 8, according to JPMorgan Chase & Co., on the basis of Refinitiv Lipper estimates. If the cash outflows persist on Wednesday, it will be the second straight week of cash withdrawals after an outflow of $ 495 million the previous week, the largest in more than a year.

Elsewhere in the credit markets:

Americas

Billionaire fund manager Jeffrey Gundlach sees “rough waters” for financial markets and advises keeping an eye on the high yield bond market, a potential “canary in the coal mine” for risky assets.

  • U.S. high yield bonds have suffered one of their worst months since the pandemic began in November, but junk bonds have already reversed most of the rout and borrowers are benefiting with at least five new deals announced Wednesday
  • Clinical research firm WCH Purchaser has set pricing guidance on an additional $ 200 million loan offer that will help it pay off a gun and cash-fund its balance sheet. Yahoo and Camping World, meanwhile, each announced an additional $ 300 million in additional general corporate loans on Wednesday, another sign that the market is resisting as borrowers continue to close deals in the few days left this week. year to do so.
  • Rogers Communications Assessing Investor Appetite For A Hybrid Stock, A Fundraising Strategy That Combines The Characteristics Of Debt And Equity And Could Help The Company Maintain Its Credit Rating After Recent Spending Frenzy
  • For offering updates, click here for the New Issues Monitor
  • To find out more, click here for the Credit Daybook Americas

EMEA

Denmark, France and the European Stability Mechanism / European Financial Stability Facility have drawn up plans for next year to increase debt.

  • High-quality European primary market remains calm, seeing just two listed deals on Wednesday, including a € 1.75 billion covered bond for the Bank of Nova Scotia
  • Further sales of European Union bonds could help push issues by supranational corporations and agencies to new record highs, HSBC says
  • The European Stability Mechanism / European Financial Stability Facility group plans to raise € 27.5 billion in long-term funding in 2022, according to an investor newsletter posted on its website.

Asia

Asian dollar bonds continued their rally on Wednesday after measures taken by Chinese authorities to limit the fallout from distress in the housing market relieved investors.

  • Spreads on high-quality Asian dollar banknotes narrowed by 3 to 4 basis points, according to credit traders. It would be the third day in a row that spreads tighten and the sharpest contraction since November 12, according to a Bloomberg index.
    • Chinese dollar high yield bonds rose about 2 cents

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Priscilla C. Carnegie