U.S. leveraged loan repricings, which flourished in the first half of 2018, then disappeared as the market supply/demand equation turned in favor of investors and as new-issue spreads widened, are back.
In the last week of September there were four repricings, and there were four more the first week in October (Fogo de Chao, EmployBridge, ProQuest, and Red Ventures). Of course, this surge follows a repricing-free July and an August where repricings tallied just $3.6 billion. A still-light $8.9 billion of repricings were posted in all of September, according to LCD. Note that a spate of big-ticket LBOs kept syndication desks busy last month.
The absence of repricings in the summer is not surprising.
New-issue spreads have widened since the middle of the second quarter. The average new-issue TLB spread on borrowers rated B/B+ reached an intrayear high of L+386 in September, up 50 bps from the 2018 low in March. Likewise, borrowers rated BB/BB– saw spreads rise to roughly L+275, from just over L+200 in May. – Marina Lukatsky