Loan-l.com – It feels like summer has come early for European debt markets, with loan and junk bond issuance down in May, before the summer lull typically kicks in. And obviously, the Euro-zone debt crisis is to blame.
Here in the U.S., markets weren’t affected as much, though prices for financing deals did get higher. So far in the second quarter, about $7.57 billion loans were issued to finance leveraged buyouts. That number was up from both the first quarter, when $1.84 billion LBO loans were issued, and the year-ago period, when $320 million such loans were floated, according to Standard & Poor’s Leveraged Commentary and Data.
Loans for refinancing and dividend recaps – two other types of transactions that are important to private equity firms – were also up from the year-ago period, S&P LCD said.
But the deals came at a higher price. Since May 1, 17 new loan deals were closed at higher spreads than their original price talks, representing an average of 113-basis-point increase, S&P Managing Director Steven Miller said in a recent note.
In 12 of the 17 deals, issuers had to sweeten the deals with the addition of prepayment fees, Miller said. One reason is that the volume of high-yield bonds issued to take out bridge loans was down – the high-yield bond market is “limping along,” Miller said – funneling fewer recycled dollars into the loan market.
“For this reason, the market is operating under the same rules as last fall, when raising new-money deals was expensive,” Miller said. “Only issuers with a strong story that includes ratings, yield, size and purpose will want to test the market right now, and that could make for a slow and choppy summer.”
source : http://blogs.wsj.com
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