Loans ease on volatility, outflows; Microsemi trades higher; calendar pushes into 2016

By Paul A. Harris

Portland, Ore., Dec. 18 – Bank loans eased against a backdrop of continuing capital markets volatility and on news of ongoing outflows, a trader said late Friday.

Loan funds have sustained more than $3.4 billion of outflows since the beginning of December, and the pace of outflows seems to be accelerating, the source remarked, adding that these factors appear to be pushing the forward calendar into the new year.

“You’re starting to get the junior members picking up the phone when you call the syndicate desks, so it looks like we have wrapped things up for the year,” said the trader.

Kraton might get pushed

Kraton Polymers LLC’s $1.35 billion six-year senior secured term loan B (Ba3/B+) could be one deal that moves into the year ahead, according to the trader, who was watching for it to allocate heading into Friday's close.

The deal terms didn't show up, the source added, noting that the $425 million junk bond deal, which also launched earlier in December, is already 2016 business.

“They say the loan might come in pieces, but you hate to see it done that way,” the trader said.

The bank deal, via Credit Suisse, Nomura and Deutsche Bank, is coming at Libor plus 500 basis points, the high end of the Libor plus 475 bps to 500 bps talk. The original issue discount deepened to 92 from 98.

Meanwhile bank deals from Western Refining Logistics, LP and Dell, Inc. are also expected to surface in January, the trader said.

Look for some double B deals to surface early in 2016, the source added.

Dexter prices, trades higher

Dexter Axle Co. priced a downsized $310 million Libor plus 525 bps seven-year covenant-light term loan B at 99.

The deal traded up a quarter of a point on the break, the source added.

The Libor spread came on top of revised spread talk; earlier talk had it pricing at 450 bps to 475 bps. The reoffer price came on top of price talk.

The loan, which was downsized from $420 million, features a 1% Libor floor and 101 soft call protection for one year.

Call protection was increased from six months.

The company is also in the market with a similarly structured €135 million seven-year covenant-light term loan B that is talked at Euribor plus 525 bps at 99.

Talk on the euro-denominated tranches was also increased to 475 bps from 450 bps.

BNP Paribas Securities Corp. and Deutsche Bank Securities Inc. are leading the debt.

Proceeds will be used to help finance the purchase of AL-KO Vehicle Technology from AL-KO Kober SE. The combined company will be named DexKo Global Inc. and majority owned by funds managed by the Sterling Group, Dexter’s current majority owners.

To make up for the lost term loan funds, the company added a $65 million mezzanine tranche to its acquisition financing package and additional equity is being invested, the source remarked.

Microsemi trades higher

Microsemi Corp.’s term loan, which broke for trading on Thursday, traded up to 99 bid, 99½ offered on Friday, the trader said.

The $1.7 billion seven-year covenant-light term loan B was quoted at 98 bid, 98½ offered on Thursday.

Pricing on the term loan B is Libor plus 450 bps with a 0.75% Libor floor, and it was sold at an original issue discount of 97. The debt has 101 soft call protection for one year.

During syndication, the loan was upsized from $1,425,000,000, pricing was raised from talk of Libor plus 375 bps to 400 bps, the discount was changed from guidance of 98 to 98.5, and the call protection was extended from six months, a source said.

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