IFR International - 20.10.2018

LOANS LEVERAGED LOANS

LEVERAGED LOANS

UNITED STATES

UNIFRAX SHOPS US$1.3bn LBO DEAL

Insulation maker UNIFRAX has launched
53BNûOFûLOANSûTHATûWILLûSUPPORTûITSû
BUYOUTûBYû#LEARLAKEû#APITAL
Morgan Stanley leads. Credit Suisse, UBS,
Royal Bank of Canada and Stifel are joint lead
arrangers and bookrunners.
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DOLLAR
DENOMINATEDûlRST
LIENûLOANûAû
53M
EQUIVALENTûEURO
DENOMINATEDû
lRST
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LIENûLOANû
ANDûAû53MûREVOLVINGûCREDITûFACILITY
'UIDANCEûONûTHEûDOLLAR
DENOMINATEDûlRST
LIENûTERMûLOANûOPENEDûINûTHEûBP
BPû
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DENOMINATEDû
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BPû
OVERû%URIBORûRANGEûWITHûAûûmOORûANDûAû
DISCOUNTûOFû
The second-lien loan is expected to price
BETWEENûBPûANDûBPûOVERû,IBORûWITHûAû
ûmOORûANDûAûDISCOUNTûOFû
4HEûlRST
LIENûDEBTûINCLUDESûSIXûMONTHSûOFû
SOFTûCALLûPROTECTIONûATûû4HEûSECOND
LIENû
DEBTûWILLûHAVEûHARDûCALLûPROTECTIONûOFû
The term loans are being issued on a
covenant-lite basis. The revolving credit
facility includes a springing leverage
covenant.
4HEûBORROWERûISûRATEDû"û4HEûlRST
LIENû
LOANSûAREûRATEDû"ûWHILEûTHEûSECOND
LIENû
LOANûISûRATEDû#AA
#LEARLAKEûISûBUYINGûTHEûCOMPANYûFROMû
American Securities.
ATHLETICO PHYSICAL THERAPY has set price talk
ONûAû53MûSEVEN
YEARûTERMûLOANûTOû
RElNANCEûEXISTINGûSENIORûSECUREDûCREDITû
facilities.
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BPûOVERû,IBORûFORûTHEûLOANûWITHûAûûmOORû
ANDûAûûDISCOUNT
4HEûLOANûWILLûHAVEûûSOFTûCALLûPROTECTIONû
for six months.
Bank of America Merrill Lynch, BMO, JP
Morgan and PNC AREûARRANGINGûTHEûlNANCING
There are expected corporate family
RATINGSûOFû""ûANDûSECUREDûRATINGSûOFû""
#YBERSECURITYûCOMPANYûMCAFEE has
LAUNCHEDûAûREPRICINGûOFû53BNûOFûCROSS
border loans.
Morgan Stanley is leading with JP Morgan,
BAML, Goldman Sachs, Barclays, Citigroup,
Deutsche Bank, Royal Bank of Canada, UBS and
Mizuho.
The proposed repricing comprises a
53BNûLOANûANDûAûõMûLOANûWHICHû
MATUREûINû3EPTEMBERû

The company is looking to lower the

SPREADûTOûBPûOVERûTHEIRûRESPECTIVEû

BENCHMARKSûWITHûûmOORS

The dollar-denominated loan originally

PRICEDûATûBPûOVERû,IBORûWITHûAûûmOORû

while the euro-denominated loan priced at

BPûOVERû%URIBORûWITHûAûûmOOR

McAfee originally arranged a US$2.555bn

TERMûLOANûANDûAûõMûTERMûLOANûINû

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Networks.

The transaction will refresh soft call

PROTECTIONûOFûûFORûSIXûMONTHS

4HEûCOMPANYûISûRATEDû""ûWHILEûTHEû

LOANSûAREûRATEDû""

FOREST CITY SEEKS US$1.25bn TL

2EALûESTATEûCOMPANYûFOREST CITY is seeking a

53BNûTERMûLOANûTOûBACKûITSûACQUISITIONû

BYû"ROOKlELDû!SSETû-ANAGEMENT

Little room for improvement

in credit outlook

„ US 58% of IACPM poll expect corporate defaults to rise

More corporate debt defaults and wider credit

spreads are expected, though gauging how

quickly this erosion will occur is difficult with the

US economy still expanding late in the long-

running cycle, according to a quarterly survey by

the International Association of Credit Portfolio

Managers.

There is little room for improvement, the

group said in its global survey, although there

is disagreement about the timing of the US

economic turnaround.

“The real question has never been whether

economic expansion would end but rather when

conditions would change,” Som-lok Leung,

IACPM’s executive director, said in a statement.

Despite more volatile debt and stock markets,

the portfolio managers said they are not seeing

a widespread pick-up in the number of US credit

impairments or workouts they would typically

encounter when conditions broadly deteriorate.

When the poll was conducted earlier in

October, US Treasury bond yields had leapt to

their highest levels since 2011 and equity markets

were swinging widely.

Although there are clear concerns about

worsening credit market conditions across

regions, evidence of a serious shift is currently

lacking.

“People are not as negative as you might

expect them to be this late in the cycle,” Leung

said. “It’s unusual, but as long as indicators,

especially forward-looking ones, are benign, a

number of market participants are unwilling to

put on the brakes.”

The US Federal Reserve, in response to

ongoing economic expansion and rising inflation,

hiked interest rates in September - for the eighth

time since December 2015. The Fed expects to

raise rates again in December, and three more

times next year.

Higher interest rates pose a particular threat

to highly indebted companies, and those needing

to access capital markets as borrowing costs

increase.

In addition to rising interest rates and

heightened volatility, portfolio managers are on

high alert for problems resulting from a range of

issues including trade tariffs and Brexit.

LESS CLARITY NEARBY

There is more of a consensus about the default

picture than for credit spreads, as IACPM’s

surveys for default expectations take a longer-

term view.

IACPM’s 12-month credit default outlook index

was minus 47.2 in the third quarter, slightly

improving from minus 51.1 in the second quarter

and matching the first-quarter level.

The second quarter was the most negative

reading since minus 52.8 in the same quarter

two years ago.

Negative numbers indicate an expectation

that defaults will increase and credit spreads will

widen.

58% of those surveyed expect corporate

defaults to rise globally over the next 12 months,

while 34% see them unchanged and just 8% feel

defaults will decline.

The shorter-term outlook is less negative,

without imminent signs of global fallout from

trade wars or rising interest rates.

IACPM’s shorter-term three-month credit

spread outlook improved to a reading of minus

38.2 from minus 66 in the second quarter, which

had been the most negative since minus 69.1 in

the second quarter of 2008 during the financial

crisis.

Forecasts, however, are almost equally split

between those calling for wider spreads and

those looking for them to be unchanged. A large

minority expect credit spreads to tighten.

IACPM is an association of more than 100

financial institutions in 20 countries.

Lynn Adler