Leveraged Loan Casualty List Grows After Three Pulled Deals
(Bloomberg) -- Three leveraged loan sales languishing in the U.S. market for weeks have been pulled amid a flight to quality from investors worried about relentless fund outflows, rising trade tensions, volatile oil prices and a potential recession.
The three deals in question -- for Golden Hippo, Glass Mountain Pipeline Holdings LLC and Chief Power Finance LLC -- were launched back in June and early July and commitment deadlines ranged from one to six weeks ago, according to data compiled by Bloomberg.
All three deals, which total around $700 million, have been pulled, according to people with knowledge of the matter who aren’t authorized to speak publicly.
The pushback coincided with a busy primary market. Bankers have launched $9.8 billion of loans this month, looking to price deals before the typical late summer slowdown kicks in and ahead of another expected pick-up in supply after the Labor Day holiday.
But CLOs, the biggest buyers of leveraged loans, have shown a preference for double B rated paper lately and shied away from riskier deals.
Five borrowers, for example, were forced to sweeten terms on riskier deals last week, including one for Total Safety, which offered one of the biggest discounts this year. Higher rated borrowers such as US Foods and Invenergy LLC lowered yields on their loans around the same time.
Read more: Goldman Slaps Steep Discount on Total Safety Acquisition Loan
Market volatility hasn’t helped.
Weak international data, trade uncertainty, and an inverted U.S. Treasury curve have sparked growth concerns. The leveraged loan market has been more resilient than stocks and high-yield bonds, but the S&P/LSTA Leveraged Loan Price Index still fell to a six-month low of 96.26 Friday.
Leveraged loan funds are also still leaking cash, creating a tougher backdrop for borrowers.
Barclays Plc was the lead arranger on all three deals, which were carried out on a best-efforts basis. While that means the bank doesn’t have to lend the money to the issuer, some of the borrowers have had to find the cash elsewhere.
U.S. oil pipeline company Glass Mountain, a joint venture between an affiliate of BlackRock Inc. and Navigator Energy Services LLC, will use equity instead of debt to build out its network and storage capacity after its plans for a $129 million loan increase hit a roadblock, according to a report from Moody’s Investors Service.
Golden Hippo had intended to use its $250 million loan to help finance the purchase of a minority stake in the business by employees. Chief Power, a vehicle created by private equity firm ArcLight Capital Partners LLC to acquire stakes in two coal power plants, was borrowing $335 million to refinance existing credit facilities and partially finance acquisitions.
Representatives for Barclays, BlackRock, Navigator and ArcLight declined to comment. Golden Hippo did not respond to requests for comment.
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