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Pre-holiday bank loan activity muted; market eyes big early 2016 supply; outflows continue
By Paul A. Harris
Portland, Ore., Dec. 24 – The bank loan market passed a quiet Christmas Eve, as expected, according to a trader.
“Of our regular sellside contacts, just one was around today,” the trader remarked.
“There was just nothing going on.”
Amid outflow, big Q1 looms
The primary market generated no news on Christmas Eve.
The most recent news, the trader recalled, was that Kraton Polymers LLC pushed its $1.35 billion six-year senior secured term loan B (Ba3/B+) into the new year.
As reported, price talk on the term loan was Libor plus 500 basis points with a 1% Libor floor and an original issue discount of 92, following revisions last week from talk of Libor plus 475 bps to 500 bps with a 1% Libor floor and a discount of 98.
Credit Suisse, Nomura and Deutsche Bank are leading, with proceeds going to help fund the $1.37 billion acquisition of Arizona Chemical Holdings Corp. from American Securities LLC and to refinance existing debt.
The financing also includes $425 million senior notes due 2023 (B3/CCC+) from the same syndicate of banks, the trader recounted, adding that the junk has also been pushed into 2016.
Looking past Kraton into the year ahead, the technical picture is getting interesting, the trader said.
“There are a lot of big deals coming in the next quarter a lot of M&A deals are in the pipeline scheduled to roll out.
“Those deals are coming at a time when we are seeing a lot of outflows.
“So who is going to buy all of this paper?”
By the trader’s own count, dedicated loan funds sustained about $4.3 billion of outflows in December, to the Dec. 23 close.
The most recent news, on the fund flows front, was that the loan funds saw $205 million of daily outflows on Wednesday, the most recent session for which data was available.
“Right now CLOs are the big gorillas in the loan market,” the trader said.
“But CLOs can’t take all of the paper.”
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