Loan market anticipates rising tide from Fed's bond facility; Landry's trades above par

By Paul A. Harris

Portland, Ore., April 9 – The Federal Reserve Bank's latest action, aimed at bond issuers whose investment-grade credit ratings hang in the balance due to the economic impact of coronavirus, is expected to create a rising tide throughout the credit markets, a loan syndicate banker said on Thursday.

The badly beaten-up leveraged loan market is expected to be lifted on that tide, the syndicate official added.

On Thursday the Fed announced of the creation of the $75 billion special purpose vehicle, part of its previously announced primary market corporate credit facility, which will target bonds that had investment-grade ratings of at least Baa3/BBB- on March 20, but have since slipped, owing to economic circumstances related to Covid-19, to no lower than speculative grade Ba3/BB-.

The move had an immediate and massive impact in the junk bond market, sources said.

It was also felt in leveraged loans, the syndicate banker said.

Par loans got a decent bump on Thursday, according to the banker who added that lower credit quality loans that did not benefit from earlier Fed actions, got a nice lift as well.

The new Landry’s Finance Acquisition Co. Libor plus 1,200 basis points term loan due October 2023 traded north of par on Friday, the source said.

The $250 million deal printed earlier in the week at 96, coming 200 bps below the 1,400 bps spread talk.

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