Primary leveraged loan market
A leveraged loan new issue calendar is slowly beginning to take form with the rollout of several more deals on Tuesday.
Dun & Bradstreet Holdings Inc. plans to issue a $460 million term loan B due January 2029 through a BofA Securities-led arranger group. Price talk for the seven-year TLB was released today at the secured overnight financing rate plus 325, with a 0% floor and an original issue discount in the range of 99-99.25. There is no credit spread adjustment on the loan. As with its existing facility, there is a 25 basis points margin step-down when corporate credit ratings are at least B+/B1. Proceeds from the deal will be used to redeem the company's $420 million of 6.875% senior secured notes due August 2026, to pay the related call premium and add cash to the balance sheet for general corporate purposes. The company also has outstanding $460 million of 5% senior unsecured notes due December 2029 that were placed last month to repay its 10.25% notes due 2027. Its existing $2.76 billion covenant-lite TLB due February 2026 was repriced a year ago to L+325 with a 0% Libor floor and with the 25 bps ratings-based step-down. Current corporate ratings are B+/B2/BB-, with stable outlooks.
KKR Capital Markets and Credit Suisse have scheduled a lender call for Jan. 6 to launch a $525 million first-lien term loan for Addison Group LLC that will be used to finance the buyout of the company by Trilantic North America. In addition to the term loan the issuer will have a $65 million asset-based loan facility. Addison is being acquired by Trilantic and co-investors that include funds managed by Neuberger Berman. Trilantic previously acquired the professional service business in 2013 and held it until 2016 when it was sold to Odyssey Investment Partners, which will be exiting its investment in this latest transaction.
Virtu Financial is in the market with a $1.8 billion, seven-year covenant-lite TLB to refinance its $1.6 billion TLB due March 2026 (L+300, 0% floor), to fund share repurchases, and for general corporate purposes. Pro forma total leverage is 1.4x and net leverage is 0.9x, based on adjusted EBITDA of $1.317 billion for the 12 months ended Sept. 30. The company is also refinancing its existing $50 million revolver maturing in 2022 with a new $250 million facility due 2025. Nasdaq-listed Virtu is rated B+/Ba2/BB-.
Hudson River Trading LLC is approaching the market with a $100 million fungible incremental first-lien term loan alongside an amendment to its existing facility. Proceeds from the Goldman Sachs-led add-on will be used for general corporate purposes, including additional trading capital. For reference, the BB-/Ba1 rated issuer placed the original $1.725 billion first-lien term loan due March 2028 last year at a pricing of L+300, with a 0% floor. The company subsequently returned to market last summer to tack on another $225 million.
Primary leveraged loan stories/links
LBO/M&A
Addison Group to launch $525M term loan for buyout by Trilantic North America
Refinancing/Recap
Dun & Bradstreet sets price talk for $460M term loan; commitments due Jan. 7
Other news
Hudson River Trading to launch $100M add-on term loan, amendment
Secondary leveraged loan market
The secondary market retained a firmer tone in today's session after the S&P/LSTA Leveraged Loan Index started off the new year with a strong performance, returning 0.07% yesterday. That is the best daily return for the index in the first trading day of a new year since it returned 0.11% in the first trading session of 2011. The lower-rated triple-C portion of the index outperformed its higher-rated counterparts yesterday on both a total return and market return basis at 0.15% and 0.13%, respectively.
Company-specific news was limited today amid the firmer market conditions. However, JAGGAER LLC recently obtained a $50 million incremental term loan that is fungible with the issuer's existing covenant-lite first-lien term loan due August 2026, which is priced at L+400, with a 0% Libor floor. The loan includes a step-down to L+375 when first-lien net leverage is less than 4.2x. The term loan is quoted at a 99.75/100.25. The issuer was last in the loan market in February 2021 when it placed a $75 million incremental term loan. The facility now totals $624 million pro forma for the most recent add-on.
Secondary leveraged loan stories/links
Jaggaer obtains $50M incremental term loan
Primary high-yield market
An offering for Royal Caribbean Cruises Ltd. was slated to serve as the first new money print of 2022. The cruise line operator proposed new 5.5-year senior notes to target debt maturing in 2022. Elsewhere, Covanta Holding Corp. reopened its 4.875% sustainability-linked senior notes due 2029, also seeking to refinance existing debt.
Royal Caribbean's effort follows on the company's Dec. 30 statement providing an update on the status of its business and the impact of the coronavirus omicron variant. While the company noted it was experiencing service disruptions at selected destinations and had canceled or significantly modified 16 destination calls out of 331 at that point, chairman and CEO Richard Fain noted there would a "negative impact in the short term" but remained "optimistic they will lead us to a more pervasive but less severe health environment," with expectations for the company to "produce a strong transitional year in 2022 and a very strong 2023."
The realized hiccups resulting from reactions from the new variant — including the Centers for Disease Control and Prevention's advisement to avoid cruise travel — appeared to have little impact on investor appetite for the new issue. Originally pitched as $700 million in size, the tranche was boosted to $1 billion. Additionally, guidance was floated in the 5.5% area, tightened from initial price thoughts in the high-5% context. The bonds garnered a B grade at S&P Global Ratings, while Moody's has a B2 rating on the company's existing unsecured paper.
Covanta placed a $465 million tack-on to its sustainability-linked notes to fund a tender offer for its $400 million of 6% senior notes due 2027 and for general corporate purposes. The deal finalized at the tight end of guidance in the 100.5-101 range. The initial $300 million of the notes were placed in November 2021 to support the group's EQT Infrastructure-backed buyout. Issue ratings are B/B1.
Pro forma year-to-date volume currently totals $1.465 billion.
Primary high-yield stories/links
High-yield forward calendar
Refinancing
Covanta prices add-on 4.875% sustainability-linked notes due 2029 at 101; terms
Royal Caribbean circulates price guidance for upsized senior notes
Secondary high-yield market
Continued weakness in high yield took cash prices another quarter of a point lower on another sharp rise in U.S. rates. Higher-quality names extended generic losses, with bonds backing KHC and OXY shedding 0.5-1.5 points across the stack, while higher-yielding paper was flat to slightly lower on the day. The CDX HY 37 edged lower, slipping to the 109.07 area, from 109.125 at yesterday's close.
Borrowers began to venture forth and the developing pipeline sparked movement in associated issues. Royal Caribbean Cruises Ltd. hit the trail with a $700 million offering of 5.5-year senior unsecured notes (which has been upsized to $1 billion) to repay principal payments on debt maturing in 2022. The move boosted the borrower's 5.25% senior unsecured notes due 2022, which were up 1.375 points on the highs, at 102.75, from year-end trades just below 101. The rest of the RCL stack was 0.125-0.75 points lower on the day with the borrower's $2.32 billion 2020 print of 11.5% notes due 2025 logging the biggest decline to change hands at 111.875 for a yield of about 3.033%. Royal Caribbean had almost $20 billion of long-term debt as of Sept. 30.
Covanta Holding Corp.'s 4.875% sustainability-linked unsecured notes due December 2029 slipped 1.75 points in mixed trading after the company set out to sell another $465 million of bonds to fund a tender offer for its 6% senior notes due 2027. The 2029 bonds ended the session at 100.25 after establishing a new high of 102.375 during yesterday's session. The targeted 2027s were last quoted around 103.375 on Dec. 17.
Bonds backing beaten down drilling companies got another boost as oil markets turned bullish after OPEC+ opted to stick to its plan to add another 400,000 barrels per day to its total oil production in February. Leading the field in terms of gains were the Transocean Ltd. 11.5% senior notes due 2028, which were among the most actively traded bonds of the day. The notes garnered 3.5 points to close at a nine-week high of 101.5. Also at their highest level since November were PBF Energy Inc.'s 6% senior unsecured notes due 2028, which were almost 2 points higher on the day, at 68.25, for a yield of around 13.871%
High-grade market
A second straight deluge of financial-sector issuance drove a 12-deal, 29-trance docket totaling $22.1 billion for Tuesday (ex-SAS and hybrids), propelling the two-day total to $33.35 billion. That marks a rapid approach to the $38 billion midpoint syndicate projection for the full week, and it puts the week potentially on pace to test the high end of projections of $50 billion to $55 billion, as well as the $50.25 billion total for the first full week last year.
Today's offerings included prints for National Australia Bank Ltd. ($4.75 billion), UBS AG London Branch ($4.3 billion), Deutsche Bank AG - New York Branch ($3 billion), Nomura Holdings Inc. ($2.5 billion), John Deere Capital Corp. ($1.8 billion), Athene Holding Ltd.'s Athene Global Funding unit ($1.6 billion), Simon Property Group LP ($1.2 billion), Santander UK Group Holdings PLC ($1 billion), Principal Life Global Funding II ($600 million), Northwestern Mutual Global Funding ($550 million), Pacific Life Global Funding II ($400 million) and F&G Global Funding ($400 million).
After unprecedented volumes in December, cascading issuance continues into the teeth of rising rates. The 2.35% yield to maturity for the S&P U.S. Investment Grade Corporate Bond Index at the Jan. 3 close marked a rise of 17 bps month to month, and 62 bps year over year, leaving the index yield at a high since June 1, 2020.
Distressed stories/links
Amigo confirms early bond redemption
CLO market stories/links
Slower December issuance winds down record-setting 2021 CLO market
