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High Yield Bond Funds See Cash Outflow as ETFs Take Hit

high yield fund flows

U.S. high-yield funds recorded an outflow of $175 million for the week ended July 27, according to the weekly reporters to Lipper only. This was the first net outflow after three weeks of inflows totaling $6.5 billion.

The influence of ETFs was again significant this week. The net outflow figure was based on inflows of $336 million to mutual funds buffeted by outflows of $512 million from ETFs. Last week featured a similar pattern, but ETF outflows of $518 million didn’t technically overflow the mutual fund inflow of $839 million.

The net outflow doesn’t ratchet the four-week-trailing figure because a large outflow five weeks ago falls out of the calculation. The figure rises to positive $1.6 billion per week—the largest in 18 weeks—from positive $1.2 billion last week.

The year-to-date total inflow is now $9.5 billion, with 39% ETF-related. A year ago at this juncture, the inflow was just $849 million and 39% ETF-related.

The change due to market conditions this past week was negative $417 million, which is negligible against the $198 billion of total assets at the end of the observation period. The ETFs account for about 21% of the total, at $41.8 billion. — Matt Fuller

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Europe: Adient Launches $2B Cross-Border Bond Offering

Adient Global Holdings has launched an offering of cross-border senior unsecured notes, sized at up to $2 billion, to support its spin-off from Johnson Controls. The offering is split into euro-denominated eight-year (non-call life) notes, and dollar-denominated 10-year (non-call five) notes.

Citi is the global coordinator on the transaction, and also lead left on the dollar-denominated notes. Bank of America Merrill Lynch, Goldman Sachs, J.P. Morgan, MUFJ, USB, and Wells Fargo are also bookrunners on the dollars. Barclays (B&D and active), Credit Agricole CIB (active), UniCredit (active), Banca IMI, Commerzbank, ING, and Citi are bookrunners on the euro notes.

Roadshows will be held in Europe and the U.S. on Aug. 1–4, with pricing expected thereafter.

The euro notes will have no equity clawback, while the dollar notes have up to 40% at par plus the coupon within the first three years.

The issue is expected to be rated BB/Ba3, according to sources, with corporate ratings of BB+/Ba2.

Adient is an automotive seating and interiors business being spun off from Johnson Controls in a new publicly traded company to be listed later this year. The issuer recently launched a $3 billion pro rata credit facility to support the spin-off.

Earlier this year, Tyco International obtained a $4 billion, 3.5-year A term loan that was used in connection with the company’s merger with Johnson Controls. The merged JCI/TYC entity is expected to have roughly $32 billion of pro forma revenue and $4.5 billion of EBITDA on an annual basis, before synergies. The Adient spin-off will result in a distribution to JCI of $2.5–3.5 billion, with JCI and TYC shareholders expected to receive shares of Adient after the merger. — Nina Flitman/Richard Kellerhals

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Exco Resources Taps Loan to Fund Distressed Exchange; Warns of Covenant Breach

Exco Resources today launched a cash tender offer to repurchase its unsecured debt at a significant discount to par, which will primarily be funded with borrowings under its revolving credit facility.

exco resourcesIn a form 8-K filed with the SEC, the U.S.-based oil-and-gas exploration and production company also warned that the prolonged depressed oil and natural gas price environment and its level of indebtedness may lead it to bust its financial covenants within the next year. Its current required ratio of at least 1.0 to 1.0 will be negatively impacted by further reductions to the company’s borrowing base, the company said, citing the next redetermination that is scheduled to occur on or around Sept.1.

With respect to the debt exchange, Exco is offering to repurchase the 7.5% senior notes due 2018, of which there is $131.6 million outstanding, and the $171.4 million 8.5% senior notes due 2022, with a maximum cap of $40 million on the price paid for the combined series of notes.

Exco’s credit agreement only permits repurchases of the notes to the extent Exco maintains a minimum liquidity of at least $150 million. The maximum tender cap is based on an amount calculated by Exco to comply with such limitations, filings show.

At the first priority level, holders of the 8.5% notes due 2022 are offered $400 per $1,000 tendered at the early tender deadline. The total consideration includes an early tender payment of $45. Holders who tender their 2022 notes are also deemed to consent to the company’s proposed amendment to the 2022 notes indenture permitting additional secured indebtedness.

At the second priority level, holders of 2018 notes are offered $500 per $1,000 tendered.

The tender offer will expire at 11:59 p.m. EDT on Aug. 23. The early tender and consent solicitation deadline expires Aug. 9.

The distressed exchange comes in the wake of Exco’s disclosure in May that it had hired advisors to assist in evaluating restructuring alternatives, and follows a series of distressed exchange transactions undertaken late last year.

Exco Resources, Inc. is an oil and natural gas exploration, exploitation, acquisition, development, and production company headquartered in Dallas, Texas, with principal operations in Texas, North Louisiana, and the Appalachia region. — Rachelle Kakouris

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NXP Drives By High Yield Bond Mart with $500M Offering

NXP Semiconductor has launched a $500 million add-on to its 4.125% senior notes due 2021, which will be immediately fungible. Barclays is sole bookrunner. Pricing will take place today, and there will be no investor call.

Proceeds from the 144A-for-life deal will be used to refinance the remaining $200 million of senior notes due 2016, and for general corporate purposes.

NXPThe original $850 million of 2021 bonds were issued in May, alongside 4.625% senior notes due 2023. Both series priced at par, and closed last night at 103.5 yielding 3.35%, and 103.75 yielding 3.9%, respectively. Terms include an investment-grade covenant package consistent with the existing senior notes.

Current senior notes ratings are BB+/Ba2. When the company last issued in May, Moody’s weighed in with that same assignment after upgrading the NXP secured debt rating to Baa2, from Baa3, and affirming the Ba1 corporate credit rating, with a stable outlook.

NXP is based in the Netherlands, but its shares trade on the Nasdaq under the ticker NXPI. The firm has a market cap of roughly $30 billion. — Luke Millar

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SFX Entertainment Eyes Reorg Plan, Handing Equity to DIP Loan Lenders

SFX Entertainment on July 26 filed a proposed reorganization plan that would hand over the equity in the reorganized company to DIP lenders, the company announced.

sfx logoThe Wilmington, Del., bankruptcy court overseeing the company’s Chapter 11 proceedings scheduled a hearing on approval of the company’s proposed disclosure statement that backs the plan for Aug. 30, the company said.

As reported, the concert producer’s $115 million DIP is made up of first-out, tranche A term loans capped at $30 million and last-out, tranche B term loans capped at $85 million. SFX owes $83.2 million on the DIP, court records show.

Interest accrues at 12% per annum on the tranche A loans and at 10% per annum on the tranche B loans. The bankruptcy court approved the facility on a final basis on March 8.

Under the proposed reorganization plan, Series A preferred stock and common stock would be distributed to holders of tranche B DIP facility claims. The equity is subject to dilution, as 20% of it will be distributed to those tranche B DIP lenders that agree to participate in a contemplated $20 million new money delayed draw second-lien facility to be issued under the proposed reorganization plan.

Holders of the tranche A DIP loans, meanwhile, would receive either cash (to be funded via a new third party first-lien facility) or a pro rata share of a new first-lien facility to be funded through the conversion of the tranche A DIP facility.

Finally, unsecured creditors would receive a 100% recovery in cash, while existing equity would be cancelled.

The company filed for bankruptcy on Feb. 1 with plans to implement a restructuring support agreement that it ultimately scrapped on June 1 after the value of its business continued to decline in Chapter 11. — Kelsey Butler

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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S&P: $10.3T of Corporate Debt Set to Mature Over Next 5 years

rated debt schedule to mature

The wall of global corporate debt coming due is growing.

There is some $10.3 trillion in corporate rated debt worldwide scheduled to mature by 2021, according to S&P. That’s a 4% increase from the figure one year ago, when S&P estimated some $9.9 trillion that was scheduled to mature through 2020.

U.S. based corporates account for the biggest slice of the global debt pie, at 45%.

Of the $10.3 trillion maturing by 2021, 26% is speculative grade, S&P says. – Tim Cross

This analysis is taken from a longer piece of research, available to subscribers to S&P’s Global Credit Portal. It was written by Diane Vazza, Nick Kramer, Evan Gunter, and Andrew South.

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Diamond Resorts Launches $600M High Yield Bond Offering Backing Apollo LBO

Diamond Resorts is offering $600 million of eight-year (non-call three) unsecured notes, sources say. Bookrunners on the deal are RBC Capital Markets (left), Barclays, and Jefferies.

A roadshow for the offering will run Aug. 1–4, sources noted. The proceeds will be used to back Apollo Management’s $2.2 billion purchase of Diamond Resorts. Apollo in late June agreed to acquire the company for $30.25 per share. At the time the deal was announced, the company said closing was expected over the next few months.

Take note, the issuer is also shopping a $1.2 billion seven-year term loan B and a $100 million revolver to fund the buyout. Price talk for the loan has been set at L+500, with a 1% LIBOR floor and a 99 offer price.

Expected ratings for the notes are CCC+/Caa1. On July 25, S&P Global Ratings lowered its corporate credit rating for Diamond Resorts to B from B+, noting the incremental leverage and the company’s financial sponsor ownership.

Diamond Resorts International operates a network of more than 420 vacation destinations located in 35 countries throughout the continental U.S., Hawaii, Canada, Mexico, the Caribbean, South America, Central America, Europe, Asia, Australasia, and Africa. — Staff reports

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Post Holdings High Yield Bonds Price to Yield 5%

Post logoPost Holdings yesterday completed a drive-by offering of high yield bonds via bookrunners Barclays, Bank of America Merrill Lynch, Credit Suisse, and Goldman Sachs. Terms on the B/B3 transaction were finalized at the tight end of price talk after a $250 million upsizing, to $1.75 billion. Proceeds from the cereals icon’s return to market after one year will be used to refinance $1.375 billion of outstanding 7.375% notes due 2022 via a tender offer. Issuance is under Rule 144A for life, and also take note of a 40% equity clawback option. Terms:

  Issuer Post Holdings
Ratings B/B3
Amount $1.75 billion
Issue senior notes (144A-life)
Coupon 5%
Price 100
Yield 5%
Spread T+348
Maturity Aug. 15, 2026
Call nc5 @ par+50% coupon
Trade date July 25, 2016
Settlement date Aug. 3, 2016 (T+7)
Joint bookrunners BARC/BAML/CS/GS
Co-managers BMO, DB, JPM, MS, NOM, RABO, STRH, UBS, WFS
Price talk 5-5.25%
Notes upsized by $250 million.

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.