Berry moves up commitment deadline; loans unchanged in ultra-thin holiday trading

By Paul A. Harris

Portland, Ore., Sept. 14 – Cash loans were unchanged in ultra-thin holiday trading on Monday, as numerous participants were away from their desks to celebrate the opening day of Rosh Hashanah, according to a trader.

The LCDX 22 bank loan index was also unchanged at 100 7/8 bid, 101 7/8 offered, according to a hedge fund manager.

Berry moves up deadline

Primary market activity was also muted.

Berry Plastics Corp. LLC moved up the deadline on its $1.9 billion first-lien term loan (Ba3/BB-) to 5 p.m. ET Tuesday.

The previous timeline had the deal in the market until Sept. 22.

As reported, the loan is in the market with price talk of Libor plus 325 basis points to 350 bps with a 1% Libor floor and an original issue discount of 99, according to a market source.

It has 101 soft call protection for six months.

Credit Suisse, Goldman Sachs, Bank of America Merrill Lynch, Barclays, Citigroup, Deutsche Bank and Wells Fargo are the lead banks on the acquisition deal.

Amid outflows, loans perform

Although the dedicated bank loan funds have seen steady outflows, bank loans are the top-performer among the main asset classes, a bank loan portfolio manager said on Monday.

Loans returned 2.27% during the year to last Friday, the manager said, referring to the Standard & Poor’s loan index.

Double B rated loans, having returned 3.6% year-to-date, have done even better.

The double B sector was badly beaten up early in the year, in the risk-off trade that accompanied market volatility related to the phenomenal fall in oil prices, the manager explained.

Outflows from the bank loan funds have been consistent, and not tiny, the manager said.

That money should be shifting away from bank loans is somewhat counter-intuitive, the manager admitted. Given the volatility in the global capital markets, bank loans, which are mostly secured, should seem relatively safe. And since bank loan interest rates float they should look attractive to investors who believe that a positive move in central bank rates is nigh.

However the loan asset class may have fallen victim to bargain hunting, especially among retail investors, the portfolio manager said on Monday.

Bargain hunters may be seeing stocks and high yield as oversold, the manager said.

And bank loan investors tend to be comfortable with high yield.

Also with volatility in equities some people expect the Fed to hold off on a rate increase.

“When the Fed waits there tends to be outflows,” the portfolio manager said.

However CLOs are going fine.

And retail returns are going well.

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