IFR - 07.07.2018

LOANS NORTH AMERICA

GRADEûCREDITûPROlLEûONûCOMPLETIONûANDûTOûBEû
highly cash generative, meaning a faster
DELEVERAGINGûPROlLE

NORTH AMERICA

UNITED STATES

BRUNSWICK DETAILS FINANCING

Boat maker BRUNSWICKûDETAILEDûlNANCINGû
commitments it has secured to support the
US$910m purchase of the global marine and
mobile business of Power Products.
Morgan Stanley is providing a 364-day
US$1.1bn senior unsecured bridge facility,
comprising a US$300m tranche A and a
US$800m tranche B.
The larger tranche, along with cash on
HAND ûWILLûBEûAVAILABLEûTOûlNANCEûTHEû
acquisition and repay Power Products’ debt.
The smaller tranche can be used to
RElNANCEû"RUNSWICKSûEXISTINGûREVOLVINGû
credit facility if the company is unable to get
an amendment or waiver to allow the larger
tranche and any term loans that ultimately
replace that bridge. Tranche A can also be
used for general corporate purposes.
Permanent acquisition funding is
EXPECTEDûTOûINCLUDEûSENIORûUNSECUREDûNOTES û
unsecured term loans and cash on hand.
The acquisition will add 11 brands to
Brunswick’s roster, including Procaine, Blue
Sea Systems and Ancor.
Power Products, owned by private equity
lRMû'ENTSû#APITAL ûPROVIDESûBRANDEDû
electrical products including battery and
power management and digital switching,
to marine and other recreational vehicles.
Brunswick said it remains committed to
maintaining its investment-grade credit
RATING ûANDûEXPECTSûTOûREPORTûAûDEBT
TO
%BITDAû
ratio below 1.5 times by the end of 2019.
The company’s long-term debt is rated BB-
by S&P and Baa2 by Moody’s.

INTERPUBLIC LINES UP BRIDGE

Global advertising and marketing company
INTERPUBLIC GROUP said that Citigroup and JP
Morgan are providing committed debt
lNANCINGûTOûBACKûITSû53BNûACQUISITIONûOFû
DATAûMININGûCOMPANYû!CXIOMû#ORP
)0'ûEXPECTSûTOûREPLACEûTHEûBRIDGEûWITHû
LONG
TERMûlNANCINGûBEFOREûTHEûDEALûCLOSES û
EXPECTEDûBEFOREûTHEûENDûOFûTHEûYEAR
IPG said it is committed to maintaining solid
investment-grade credit ratings, and that share
repurchases will be suspended temporarily.
The company is rated BBB by S&P and
Baa2 by Moody’s.

CASTLETON NETS REFINANCING

Global commodity merchant CASTLETON

COMMODITIES INTERNATIONAL has closed credit

FACILITIESûTOTALLINGû53BNûTOûRElNANCEû

ITSûEXISTINGû53BNûBORROWINGûBASEû

facility and US$350m revolving credit

facility.

The facilities fund general corporate

purposes and provide letters of credit for the

Castleton’s merchant activities in multiple

countries.

4HEûNEWûlNANCINGûINCLUDESûAû53BNû

borrowing base facility comprising a

US$1.15bn three-year tranche and a US$2bn

364-day tranche. The facility includes a

US$1bn accordion facility available to

support future growth.

There is also a US$375m 364-day revolving

credit facility.

Lending hits all-time high

US Record US$1.45trn of loans issued in the first six months

Reduced corporate tax rates and a push

to borrow before interest rates rise further

propelled US syndicated lending for mergers

and refinancings to a record high for any half-

year period, with heated deal flow seen at least

through year-end.

The record US$1.45trn of loans issued in

the first six months of 2018 to companies for

acquisitions, leveraged buyouts, dividends and

refinancings beat the prior high of US$1.31trn

set in the same period last year by nearly 11%,

according to Thomson Reuters LPC.

Some of the deals were building in the queue

waiting for the corporate tax rate cut to 21% from

35% that a new US tax system ushered in this

year.

Companies also have the incentive to tap

credit markets now before borrowing costs

increase. The Federal Reserve, which has raised

interest rates seven times since late 2015 as the

economy expands, said it expects two more hikes

this year and three next year.

“With the uptick in interest rates, with the Fed

signaling two more rate hikes this year, and with

people waiting for the bogeyman around the

corner, there is real worry that the loan market

may be starting to turn,” said Ellen Snare, a

partner at King & Spalding.

“Borrowers are getting a sense that if that

happens they’re going to have to pay more, so

they want to get into the market sooner rather

than later,” she said. “I think the next six months

will be as busy as the first six months of this year

for new offers and refinancings.”

Total lending rose to a record US$821bn in

the second quarter from US$624bn in the first

quarter, smashing the prior quarterly high of

US$704bn set in last year’s second quarter.

“For most of 2018, demand for loans has

outpaced loan issuance,” said Gretchen Lam,

senior portfolio manager at Octagon. “Leveraged

loans, in the face of increasing Libor and interest

rates, have become all the more attractive to a

number of different investors globally.”

Leveraged loans are floating-rate assets,

typically gaining appeal to investors as interest

rates rise.

For the first six months, about US$737bn of

leveraged loans was issued to highly indebted

companies, second only to US$770.4bn in the

same half last year.

Around US$551bn of loans, the highest

half-year volume on record, were extended to

blue-chip companies.

On the demand side, issuance of CLO funds,

the biggest buyers of leveraged loans, is on track

to set an annual record, while retail bank loan

funds have already pulled in around US$8bn in

net investment this year, Lam said. Separately

managed accounts, including insurance

companies, have also had “meaningful inflows.”

Borrowers in the first half included WALT DISNEY

CO, MGM GROWTH PROPERTIES, CIGNA CORP, CROWN

CASTLE INTERNATIONAL CORP, 24 HOUR FITNESS,

VALEANT PHARMACEUTICALS, DOLLAR TREE STORES,

MOHEGAN TRIBAL GAMING and MAVIS TIRE SUPPLY.

WEDDING BELLS

Lending to companies embarking on corporate

marriages has jumped in recent months, and

appears likely to escalate after a key US ruling

approving the long-pursued AT&T/TIME WARNER

tie-up.

A federal judge last month said the US$85bn

deal, first announced in October 2016, could go

forward without conditions.

“Everyone was laser-focused on the AT&T

decision, and that decision’s impact on future

M&A and concern about monopolies,” said a

senior banker. “We think we’re now going to

see more financing activity, and that there are

better prospects for growing businesses both

organically and with M&A.”

M&A lending reached US$194bn in the

second quarter, the highest quarterly tally

ever. The quarter’s rush pulled M&A volume to

US$363.5bn for the first half, second only to the

record-setting US$338bn in the second half of

2015.

In the forefront now are Disney and COMCAST,

competing to buy TWENTY-FIRST CENTURY FOX’s

media assets, with banks lining up to provide

each with large loans.

Lynn Adler