Good news for companies hoping to tap the syndicated leveraged finance market as it reopens – at least for a few weeks before the August blackout period. Some issuers who hit the syndication stage in the past couple of weeks have managed to tighten pricing from initial launch levels and upsize debt packages.

While debt pricing is still above those seen at the start of the year when the market was red hot, strong credits are being given a good reception from the buy-side.

Businesses that have suffered through the COVID-19 lockdown are having to pay above and beyond, as seen with cruise operator Carnival’s recent euro and US dollar issuance, priced at Euribor+/Libor+ 7.50% and 96 original issue discount (OID).

On average, first-lien institutional loan margins were around 500bps in June, compared to 360bps in February. The cost of borrowing for B rated (B-/B/B+) high yield issuers were on average 5.39% in June compared to 4.1% in February, while BB (BB-/BB/BB+) bonds were issued with an average 3% yield in June, compared to 2.39% in February.

More good news: banks are considering underwrites again, particularly for stronger credits, and the direct lending market is also keen to find new opportunities. In fact, the largest ever unitranche was issued by insurance broker Ardonagh this month. It raised a GBP 1.875bn unitranche (including delayed-draw facility) from investors led by Ares Capital, paying L+ 7.5%, with a USD 500m payment-in-kind (PIK) toggle note priced at 11.5% cash/12.75% PIK.

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Colm (C.J.) Doherty Global Head of Primary Market Analysis Debtwire

Colm Doherty is Debtwire’s Global Head of Primary Market Analysis. He is responsible for leading the production of primary market analysis and reports focused on the leveraged loan and high yield bond markets. Prior to joining Debtwire, Colm was Director of Analysis at Thomson Reuters LPC covering leveraged loans, CLOs and high yield bonds.

Colm has a B.A. in Economics & Legal Science from National University of Ireland Galway and an MSc. in Accounting & Finance from Ulster University.