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Investors Pour $2B into High Yield Bond Funds

U.S. high-yield funds recorded an inflow of $2.01 billion for the week ended Sept. 28, according to weekly reporters to Lipper only. This is the first inflow in three weeks and the largest since the week ended July 13.

US high yield fund flowsThe inflow was largely driven by ETFs, which accounted for 87% of the total, or $1.75 billion.

Despite the large injection of cash this week, the four-week trailing average remains slightly negative at $26.2 million, although that narrowed from negative $625.7 million last week.

The year-to-date total inflow is now $9.27 billion, with 30% ETF-related. A year ago at this juncture, the measure was an outflow of $5 billion, with 35% ETF-related.

The change due to market conditions this past week was positive $1.04 billion. That is the largest increase in seven weeks and represents roughly 0.53% of total assets. Total assets at the end of the observation period were $199.9 billion. ETFs account for about 21% of the total, at $41.6 billion. — Jon Hemingway

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inVentiv Health Prices $675M High Yield Bond Offering

inVentiv Health today priced its downsized $675 million offering of eight-year senior notes at the tight end of talk, sources said. Bookrunners for the notes, which were trimmed down from an initial $720 million, were Credit Suisse, Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley, Barclays, and Jefferies. The amount removed from the bond deal was placed towards the issuer’s seven-year B term loan. Proceeds from both the notes and the loan will be used to fund the purchase of an equity stake in the company by Advent International and to refinance debt. Advent will become an equal owner of inVentiv alongside current owner Thomas H. Lee Partners. Burlington, Mass.–based inVentiv Health provides clinical, communications, and patient assistance services to the life sciences, biotech, and pharmaceutical industries. Terms:

Issuer inVentiv Health
Ratings CCC+/Caa2
Amount $675 million
Issue senior (144A)
Coupon 7.5%
Price 100
Yield 7.5%
Spread T+600
Maturity Oct. 1, 2024
Call nc3 (@ par +50 coupon)
Trade Sept. 29 2016
Settle Oct. 14, 2016 (T+10)
Bookrunners CS/BAML/GS/MS/BARC/JEF
Price talk 7.5–7.75%
Notes Downsized from $720 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.

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Brexit Worries? Europe Poised to Wrap Busiest High Yield Bond Month Ever

The third quarter got underway with the U.K.’s Brexit vote ringing in the ears, and back then few would have forecast that high-yield issuance numbers — and market conditions generally — would be as strong as they are now.

Once all this week’s deals get done September is set to host the largest high-yield monthly volume in the market’s history, at €13 billion, beating April 2014′s total of €12.8 billion, while the third-quarter supply will be the fifth-largest quarterly volume on record, according to LCD.

“The tone since the Brexit vote has been remarkable,” confirms a banker. “We felt like we were going to have a good run provided we didn’t get a Brexit result, and when that happened we all thought supply would be curtailed for some time, but the market rebounded very fast. And we are pleasantly surprised by the volume we have been able to put into the market without moving pricing that much.”

This pick-up in supply also means 2016 has started to catch up with 2015’s issuance numbers. Not including this week’s supply, the market is now running 27% behind last year’s volume, which is a big pick-up on the 48% lag seen at the end of the second quarter, and 72% deficit at the end of the first quarter.

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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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CBS Radio Rolls Out $460M High Yield Bond Offering

CBS Radio is shopping $460 million of eight-year (non-call three) notes via lead bookrunner Deutsche Bank and joint bookrunners J.P. Morgan, Citi, Bank of America Merrill Lynch, Credit Suisse, and Wells Fargo, sources said. Roadshows will run from Sept. 28 to Oct. 6, with pricing to follow thereafter.

Ratings for the 144A-for-life notes are B–/B3. The deal includes a first call premium at par plus 75% of the finalized coupon and an equity claw of up to 35% of the notes at par plus coupon for the first three years.

Proceeds will be used for general corporate purposes and to fund a dividend to parent company CBS Corp. in connection with a planned spin-off of the radio broadcasting business.

Earlier this week, CBS Radio also launched a $1 billion, seven-year B term loan through arranger J.P. Morgan in connection with the spin-off.

CBS Radio is a national media company with 117 radio stations and digital properties in 26 radio markets as of June 30, according to the company’s S-1 filing. The company has filed for an IPO of its common stock. — Jakema Lewis/Jon Hemingway

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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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Bankruptcy: Caesars Announces Reorg Deal; 2nd-Lien Lenders to Get 66 Cents on Dollar

Caesars Entertainment Operating Co. (CEOC) said that its “major creditor groups” have agreed to support the key economic terms of a restructuring proposal that would, among other things, provide second-lien noteholders with a recovery valued at 66 cents on the dollar, the company announced.

According to a statement issued this morning, the company said that ad hoc groups in the case representing first-lien bank lenders, first-lien noteholders, and subsidiary guarantee noteholders, as well as the official committee representing second-lien noteholders, “have confirmed those creditors’ support for the [restructuring] term sheet, subject to the negotiation of and entry into definitive support agreements and the revised plan of reorganization.” The company added that it was “optimistic” that this support would translate into creditor votes sufficient to confirm the company’s reorganization plan.

According to the term sheet, the parties have committed to agreeing upon documentation, including a revised reorganization plan, by Sept. 30.

The company said that it would emerge from Chapter 11 in 2017. A reorganization plan confirmation hearing is currently set for Dec. 1.

Moving on to the terms of the transaction, the company said that its equity sponsors, Apollo Global Management and TPG Capital, would contribute their entire 14% equity stake in the reorganized company that they would have received (by virtue of their ownership in the company’s parent, Caesars Entertainment Corp., or CEC) under the transactions contemplated in the company’s reorganization plan. The company valued the sponsors’ equity contribution at about $950 million (the company noted, however, that public stockholders of CEC would continue to receive a 6% equity interest in the reorganized company).

As a result of the distributions contemplated under the revised plan, and relying upon the valuation contained in the company’s most recent disclosure statement, the company said creditor recoveries would be affected as follows:

  • First-lien bank lenders would now recover roughly 115 cents on the dollar, a decline of approximately one cent from the previous plan on a pro rata basis, due to a $66 million reduction in cash distributed under the plan. Equity distributed to bank lenders would be slightly increased.
  • First-lien noteholder recoveries would remain at about 109 cents on the dollar, but in exchange for, among other things, a fixed cash payment of $142 million, the first-lien noteholders agreed to waive their right to certain excess cash sweeps, resulting in a $79 million net reduction in cash based on the company’s projections.
  • Second-lien noteholder recoveries, as noted above, would be roughly 66 cents on the dollar, an increase of about 27 cents from the previous plan on a pro rata basis due to the addition of $345 million of cash, a 14.6% increase in fully diluted equity in the reorganized company (bringing the total equity directly distributed to second lien noteholders to 32.022% of the new stock), and an increase of about $108 million in convertible notes.
  • Subsidiary guaranteed noteholders would see recoveries reduced by one cent, to about 83 cents on the dollar, due to a slight reduction in the equity distribution.
  • Unsecured creditors (unsecured notes and undisputed and disputed unsecured claims) would receive an increase in recoveries to roughly 66 cents on the dollar, consisting of a combination of cash, an increase in the equity distribution in the reorganized company, and an increase in the allocation of convertible notes.

The company further said that under the transactions and exchange ratios contemplated under the revised reorganization plan, CEOC creditors would own roughly 70% of the equity in the new company, while shareholders of Caesars Acquisition would own about 24%. — Alan Zimmerman

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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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William Blair Hires High-Yield Finance Team from Imperial Capital

William Blair has hired a high-yield finance team from Imperial Capital in the firm’s bid to become the leading leveraged finance platform focused on middle market companies.

Jeff Zolkin joined William Blair as managing director, head of high-yield finance. He will be based in Los Angeles. At Imperial Capital, Zolkin was head of leveraged finance. Prior to six years at Imperial Capital, Zolkin also worked at Global Hunter Securities, where he was co-head of financial advisory services. He also worked at Jefferies.

Jonathan Lee joined William Blair as director, high-yield finance. He will be based in Los Angeles. Lee had been at Imperial Capital since early 2011. Prior to Imperial, he also worked at Trinity Capital and Jefferies, both based in Los Angeles.

Paul Majeski joined as vice president, high-yield finance. He will be based in New York. He had been at Imperial Capital since 2010 in investment banking. Prior to Imperial Capital, he worked at FTI Consulting.

Kelly Martin is head of leveraged finance at William Blair.

Since 2011, Zolkin’s team has built a high-yield finance business targeting the middle market, with over $5 billion of lead-managed financings over 30 transactions.

William Blair, based in Chicago, is a global investment banking and asset management firm. — Abby Latour

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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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After Huge Withdrawal, High Yield Fund Outflows Ease to $274M

high yield funds

U.S. high-yield funds recorded an outflow of $273.5 million for the week ended Sept. 21, according to the weekly reporters to Lipper only. This is the second straight outflow following $2.45 billion last week, which was the second largest of the year.

Whereas ETFs drove last week’s outflow, this time around the asset class represented just 5% of the total, or $14.4 million.

While moderate compared to last week’s number, this is the third outflow in four weeks and thus the four-week trailing average pushed further into negative territory, at $625.7 million, wider than $516.9 million last week.

The year-to-date total inflow is now $7.26 billion, with 14% ETF-related. A year ago at this juncture, the measure was an outflow of $2.8 billion, with 29% ETF-related.

The change due to market conditions this past week was positive $393.5 million, representing roughly 0.2% of total assets. Total assets at the end of the observation period were $196.4 billion. ETFs account for about 20% of the total, at $39.6 billion. — Jon Hemingway

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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: 5 Defaults This Week Brings 2016 Total to 127

global corporate defaults

There were five global corporate defaults over the past week, bringing the year-to-date total to 127, compared to 79 at this point in 2015, according to S&P Global Fixed Income Research.

Defaulting over the past week:

  • Golfsmith International – retail golf equipment
  • Basic Energy Services – oil & gas
  • Chesapeake Energy – natural gas
  • Claire’s Stores – retail/teen accessories

The other issuer to default during the week is termed confidential by S&P.

This analysis is part of S&P Global Fixed Income’s weekly default analysis, which also details default by sector, a list/xls of 2016 defaults, and other analysis. It is available to S&P Global Credit Portal subscribers here.

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Steak n Shake Lines Up $400M High Yield Deal Backing Dividend

Steak n Shake is serving up a $400 million secured offering of seven-year (non-call three) bonds. Jefferies is sole bookrunner on the deal. A roadshow will run from today through next Wednesday, for pricing thereafter.

Proceeds will refinance the borrower’s credit facility and finance a dividend.

The new paper does not have registration rights, while the first call is at par plus 50% coupon.

This appears to be the company’s first bond issue, while its last visit to the loan market was in 2014, when it issued a $220 million B term loan arranged by Jefferies. The covenant-lite loan was non-callable for one year, and then at par. The financing also included a $30 million, five-year revolver. Proceeds from that deal were earmarked to refinance existing debt and fund a dividend to owner Biglari Holdings.

The issuer operates and franchises the Steak n Shake brand of restaurants, with a classic American diner design and a full menu featuring burgers, sandwiches, and milkshakes. — Luke Millar

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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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Fridson: High Yield Bond Overvaluation Reaches 8-Year High

From Marty Fridson‘s latest weekly high yield market analysis for LCD News:

On Sept. 16, the option-adjusted spread on the BAML High Yield Index, 527 bps, stood at -234 bps versus our Fair Value estimate of 761 bps. The Aug. 31 divergence of –251 bps (based on an actual OAS of 510 bps) represented the biggest month-end overvaluation since May 2008’s –321 bps.

On Sept. 8 the spread dipped to 499 bps for a gap of –262 bps, more than a two-standard-deviation disparity (one standard deviation = 126.3 bps). A divergence of just one standard deviation qualifies as extreme overvaluation in our analysis.

Fridson 09 20 chart 1
By way of background, our basis for determining whether the U.S. high-yield market is fairly valued is the methodology introduced in “Determining fair value for the high-yield market.” (This report is available at highyieldbond.com.) We are now using an updated analysis to reflect revisions to originally reported economic data, based on a historical observation period of December 1996 to December 2012.

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This story, part of a longer piece of high yield analysis by Marty, 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.