Leveraged Finance Fights Melanoma: support yields FDA drug approval

melanoma_optProceeds of this year’s annual Leveraged Finance Fights Melanoma (LFFM) benefit to support the Melanoma Research Alliance (MRA) helped propel FDA approval of a key treatment for patients with advanced melanoma.

The FDA yesterday approved Keytruda, the trade name of an anti-PD-1 immunotherapy treatment developed by Merck for patients who are no longer responding to other drugs, according to an agency statement. Keytruda is the first approved drug that blocks a cellular pathway known as PD-1, which restricts the body’s immune system from attacking melanoma cells, according to the FDA.

The FDA action was taken under the agency’s accelerated approval program, which is tied to clinical data showing the drug has an effect “reasonably likely to predict clinical benefit to patients.”

Since the Leveraged Finance Fights Melanoma benefit was launched in 2012, the leveraged finance community has funded more than $3.5 million of cancer research, accelerating advances in immunotherapy treatments that have led to breakthroughs now being tested for melanoma, lung, kidney and other cancers.

A Team Science Award given by LFFM-MRA was given this year to Bert Vogelstein, M.D., and Drew Pardoll, M.D., Ph.D., at Johns Hopkins University for their studies developing the therapy.

Funds raised from last year’s Leveraged Finance Fights Melanoma’s event were used for the LFFM-MRA Academic Industry Partnership Award, which supported researchers at Memorial Sloan-Kettering and Johns Hopkins working on the combination of two cutting-edge immunotherapy cancer treatments. These therapies are part of a group of new drugs that appear to lead to long-term benefits – virtual cures.

MRA was founded in 2007 by Debra and Leon Black under the auspices of the Milken Institute. Every dollar donated to the MRA – including the millions raised from LFFM benefits in recent years – goes directly to support research programs working toward a cure for melanoma, the most deadly type of skin cancer.

For further information, please visit the MRA’s website . Those seeking information about donations and sponsorship opportunities can contact Lauren Leiman of the MRA at (202) 336-8938 or –Staff reports


Trump Taj Mahal could file Chapter 11 ‘within days’ – report

trumptajTrump Entertainment Resorts last remaining casino, Trump Taj Mahal, could be headed to Chapter 11, according to a report yesterday afternoon in the New York Post.

According to the report, which cites anonymous sources, the company recently violated some of its loan covenants, and negotiations with lenders have not produced a restructuring solution. The report said that the company had hoped that Carl Icahn, who holds a significant chunk of the debt, would agree to a debt-for-equity exchange, but hopes for that “have faded.”

The Post said the filing could come “within days.”

Meanwhile, online news site reported that the Taj Mahal said in a financial filing on Aug. 22 that it could run out of cash needed to pay its bills, and it needed to either find additional borrowings or restructure its existing debt. The report did not specifically identify the filing or provide further details.

As reported, Trump Entertainment Resorts exited Chapter 11 for the third time on July 16, 2010, with Avenue Capital as the company’s largest shareholder (see “Trump Entertainment exits Ch. 11; no A/C in Atlantic City,” LCD, July 16, 2010). The reorganization featured, among other things, a $225 million rights offering backstopped by second-lien lenders, and led by Avenue, to fund distributions under the plan. The company’s first-lien lenders at the time, Beal Bank and Icahn, received a combination of cash proceeds and new secured debt, after the court rejected their rival plan proposal that would have exchanged their first-lien debt for equity.

Several months after its emergence, the company sold its Trump Marina Hotel Casino for $38 million (see “Trump Entertainment in pact to sell Trump Marina for $38M,” LCD, Feb. 15, 2011) leaving it with the Taj and the Trump Plaza.

The Trump Plaza is slated to close down on Sept. 16.

The news, if true, is just the latest blow to Atlantic City, which has seen numerous casinos close down recently. – Alan Zimmerman


Momentive files amended plan to clear path to cram-down confirmation

Momentive Performance Materials filed an amended reorganization plan yesterday providing for an increased fixed interest rate on replacement debt to be distributed to holders of the company’s first-lien and 1.5-lien notes, according to court filings, clearing the way for confirmation of the company’s cram-down plan.

The revised rates are a fixed rate calculated at T+200 for first-lien noteholders, and T+275 for holders of the 1.5-lien notes.

That compares to the interest rate initially proposed in the company’s reorganization plan – which Bankruptcy Court Judge Robert Drain ruled was not sufficient for him to confirm the proposed plan via a cram-down process – of T+150 for first-lien holders and T+200 for the 1.5-lien holders, respectively.

According to court filings, the Treasury Rate to be used in the calculation would be based on the yield to maturity of U.S. securities with a constant maturity that becomes available in the two days prior to the effective date of the plan. Court filings have previously estimated this rate at 2.2%, meaning that the fixed rate of the replacement debt would equate to 4.2% for the first-lien notes and 4.95% for the 1.5-lien notes (versus all-in rates of 3.7% and 4.2%, respectively, in the earlier plan).

As reported, in a bench ruling last week, Drain ruled against holders of the company’s first-lien and 1.5-lien notes ($1.1 billion of 8.875% first-priority senior notes due 2020 and $250 million of 10% senior secured notes due 2020, respectively) with respect to their claim for make-whole payments. But he also refused to confirm the company’s cram-down plan on the grounds that the interest rate for the replacement debt to be issued to the senior noteholders was too low to constitute the requisite payment in full to support a cram-down.

But while requiring a higher rate for the replacement debt, Drain rejected arguments from noteholders that the rate on the replacement debt should equal the market rate that Momentive was otherwise willing to pay for a new exit facility under the plan.

As reported, had senior noteholders voted to accept the proposed plan, they would have received cash in the amount of 100% of their claims plus accrued and unpaid interest, but excluding the disputed make-whole claim. That and other distributions under the plan were to be funded, in part, by a new $1 billion exit facility comprised on new seven-year first-lien notes at L+400, with a 1% LIBOR floor, and for the 1.5-lien noteholders, a $250 million second-lien bridge facility at L+600, with the spread increasing 50 bps after three months and at each three-month interval thereafter.

In court filings seeking to block the cram-down, BOKF, the indenture trustee for the first-lien notes, had argued, “The [company’s] exit financing…constitutes indisputable evidence of the appropriate rate of interest, tenor, and other terms for the replacement first-lien notes. … It is indisputable that the cram-down rate is not fair and equitable and that the plan cannot be confirmed.”

But Drain, in essence, ruled that market rates included also included other elements, such as profits for lenders, that need not be included in determining whether the distribution was full payment of the noteholders’ claims. At the same time, Drain ruled that the rate offered by the company was too low to compensate noteholders for the additional risk of the new notes, leading to the amended plan.

Meanwhile, although the company’s amended plan addresses that aspect of Drain’s ruling, the company is not out of the woods yet.

As reported, both the first-lien and the 1.5-lien noteholders have filed motions with the bankruptcy court seeking to change their votes from rejecting the proposed plan to accepting it. The noteholders argue that the change makes the plan a consensual one, and entitles them to the cash recovery that they would have received had they accepted the plan in the first place. As reported, it is because of the noteholders’ rejection of the plan that their recovery toggled to replacement debt in lieu of cash.

The company, however, opposes the noteholders’ attempts to change their votes, arguing that there is no legal basis to justify a change at this point, beyond the noteholders defeat at the confirmation hearing.

In addition, the company still has to navigate appeals of Drain’s ruling. More specifically, subordinated noteholders have appealed Drain’s finding that their claims are subordinate to, and not pari passu with, the company’s second-lien debt. The subordinated noteholders are seeking, among other things, to stay the confirmation ruling until their appeal can be heard on an expedited basis.

The next hearing in the case is scheduled for Sept. 9 in White Plains, N.Y. – Alan Zimmerman


Gannett 2-part high yield bonds deal (BB/Ba1) prices at tight end of talk

gannett_logo_detailGannett this afternoon placed its two-part offering of senior notes via Citi, J.P. Morgan, Barclays, RBC, MUFJ, Mizuho, SunTrust Robinson Humphrey, and US Banc. Terms on both tranches were finalized at the tight end of talk. Proceeds will be used to partially finance the acquisition of, and for general corporate purposes. The remainder of the financing for the deal will come from cash and revolver borrowings, according to sources. Gannett in early August agreed to buy the shares in that it does not already own – namely 73% of the company – for $1.8 billion. Terms:

Issuer Gannett Co, Inc
Ratings BB+/Ba1
Amount $350 million
Issue senior (144A-life)
Coupon 4.875%
Price 98.531
Yield 5.125%
Spread T+301
Maturity Sept. 15, 2021
Call nc3
Trade Sept. 3, 2014
Settle Sept. 8, 2014
Bookrunners Citi/JPM/Barc/RBC/MUFJ/Mizuho/STRH/USB
Price talk 5.25% area
Issuer Gannett
Ratings BB+/Ba1
Amount $325 million
Issue senior (144A-life)
Coupon 5.5%
Price 99.038%
Yield 5.625%
Spread T+321
Maturity Sept. 15, 2024
Call nc5
Trade Sept. 3, 2014
Settle Sept. 8, 2014
Bookrunners Citi/JPM/Barc/RBC/MUFJ/Mizuho/STRH/USB
Price talk 5.75% area

Bankruptcy: In cram-down fight, Momentive loses the battle, but wins the war

The bankruptcy court overseeing the Chapter 11 proceedings of Momentive Performance Materials yesterday afternoon issued a lengthy bench ruling turning back most of the objections to the company’s proposed cram-down reorganization plan filed by both senior and subordinated noteholders in the case, but nonetheless stopped short of confirming the plan.

White Plains, N.Y.-based Bankruptcy Judge Robert Drain wouldn’t confirm the plan because he found that based on at least one measure of the value of recoveries for senior noteholders, the interest rate on the replacement debt that is to be issued to the company’s first-lien and 1.5-lien noteholders under the plan is too low.

According to Reuters, an attorney for Momentive said the company would file a revised plan next month.

The proposed interest rate on (and calculation of the present value of) the replacement debt was significant because Momentive was seeking to “cram down” the plan on senior noteholders, requiring, in effect, that noteholders be paid in full. As reported, the replacement notes for first-lien lenders carried a proposed interest rate of the T+150, and for the 1.5-lien lenders a rate of the T+200. With the Treasury rate estimated at 2.2%, that equated to an all-in rate of 3.7% and 4.2% for the first-lien and 1.5-lien notes, respectively, according to court documents.

But according to Wilmington Trust, the indenture trustee for the 1.5-lien notes, “[i]t is incontrovertible that the replacement notes, as issued at this time…will have a fair market value substantially less than the face amount of the notes, and will therefore be worth far less than the amount of the allowed claims.”

Losing the battle, winning the war
Even though the company’s reorganization plan failed to gain confirmation last night, Momentive clearly came out the winner from Drain’s ruling, prevailing in the two key disputes that have dominated the case.

First, Drain rejected the arguments of the first-lien and 1.5-lien noteholders ($1.1 billion of 8.875% first-priority senior notes due 2020 and $250 million of 10% senior secured notes due 2020, respectively) that they were entitled to make-whole payments in connection with the early repayment of their debt.

As reported, the crux of the issue between noteholders and the company came down to an interpretation of the language – similar in each of the respective indentures – governing the early redemption of the notes. Noteholders argued that make-whole payments were due because the repayment of the notes’ principal pursuant to the reorganization plan constituted an optional prepayment ahead of the notes’ scheduled maturity dates in October 2015. The company, however, argued that under the indentures, the company’s bankruptcy filing caused an acceleration of the notes’ maturity dates, and the recovery under the proposed plan does not therefore constitute a prepayment ahead of maturity.

One question addressed by Drain was whether as a general matter a bankruptcy filing that accelerates maturities could trigger an enforceable make-whole premium. Drain ruled that while it was permissible under New York law for parties to agree to the payment of a make-whole premium even in a case where maturity was automatically accelerated due to a bankruptcy, such an agreement needed to be spelled out – typically in the indenture – in detail and explicitly.

Drain said that standard was not met in this case.

“Absent specificity, which is here lacking,” Drain ruled, the first- and 1.5-lien noteholders “do not have an enforceable claim” for the make-whole premium.

“Case law requires that much more is required upon acceleration to trigger such a provision under New York law,” Drain ruled.

Drain also rejected a challenge from holders of the company’s 11.5% senior subordinated notes, who had argued that their claims were not subordinate to, but pari passu with, those of the company’s second-lien lenders.

As reported, the company’s proposed reorganization plan provides for second-lien lenders, led by Apollo Management, to receive 100% of the reorganized company’s equity, after giving effect to the subordination provisions of the subordinated notes. Holders of subordinated notes would not see any recovery under the proposed reorganization plan. Given the plan’s dependence on the subordination provision to effectuating the second-lien recovery, a ruling favor of subordinated noteholders would have obviously torpedoed the proposed plan.

The subordination dispute also revolved around an interpretation of indenture language, in this case the definition of “senior indebtedness” in the subordinated notes indenture.

As reported, the subordinated notes indenture excluded from the subordination provision any debt that “by its terms is subordinate or junior in any respect to any other indebtedness or obligation of the company.” The subordinated noteholders argued that the second-lien debt fell within the exclusion from subordination based on the “junior in any respect” provision, because of the junior secured ranking of its liens.

In ruling in the company’s favor, however, Drain found that under the applicable law governing interpretation of contracts, “It is clear from the [indenture’s] definition of indebtedness [that the language “junior in any respect” applies to] subordination of debt and subordination of payment of debt,” not to the priority of the liens that might secure the debt.

It ain’t over ’til it’s over
Still, despite yesterday’s detailed four-hour decision read aloud from the bench by Drain, there could be one more round of key litigation to come before this case is finally completed.

As reported, following last week’s contentious cram-down confirmation hearing, Drain was set to deliver his ruling Monday afternoon. Before he could do so, however, attorneys for both the first- and 1.5-lien noteholders announced that some noteholders had changed their votes and now wanted to accept the plan – enough, in fact, to change the vote of the class from rejecting the proposed plan to accepting it.

As the noteholders saw it, that change of heart entitled them to the recoveries provided for them in the reorganization plan had noteholders accepted the proposed plan in the first place, comprised of a cash payment of 100% of principal and accrued but unpaid interest, but excluding the make-whole payments.

But the company opposed the noteholders’ attempts to change their votes, saying the noteholders had already rejected the plan and that their recovery should consist of the toggle distribution specified for them if they rejected the plan, namely, replacement debt.

“There should not be a do-over” in plan voting, an attorney for the company told Drain at Monday’s hearing, saying all that had changed since last week’s contentious confirmation trial and this week’s ruling was that noteholders had “read the tea leaves” (correctly, as it turned out) and believed Drain would rule against them.

That was not sufficient cause to permit a change of votes at this point in the process, the company’s attorneys argued.

Regardless, the disclosure of the changed votes clearly threw a monkey wrench into Drain’s plans on Monday afternoon, and rather than issue his ruling he brought the parties back into his chambers – and ultimately postponed his decision by a day – to give the parties one last shot at a consensual deal.

A deal was not reached, however – a fact ruefully pointed out by Drain at the start of yesterday’s hearing by his noting of the “stony faces” of the attorneys before him waiting to hear his ruling.

At yesterday’s hearing, however, an attorney for the first-lien noteholder said that he would be filing a motion seeking to change the votes of senior lenders, so more litigation on that issue could lie ahead. – Alan Zimmerman



As Energy Future extends reorg timetable, NextEra withdraws proposal


NextEra Energy has withdrawn its proposal to purchase the portion of Energy Future Holdings that controls the company’s 80% interest in regulated utility Oncor, according to a court filing.

As reported, the NextEra proposal was made jointly with a group of second-lien bondholders at unit Energy Future Intermediate Holdings, the intermediate holding company that directly controls the Oncor interest (see “NextEra, noteholder group up offer for Energy Future Holdings,” LCD, July 17, 2014, for a description of the NextEra proposal).

“After submitting the [proposal],” NextEra said in a court filing yesterday afternoon in Wilmington, Del., “NextEra and EFH engaged in discussions regarding the terms on which NextEra would serve as the stalking-horse bidder in an auction process for the equity of reorganized EFH….the debtors filed [yesterday] with the court their plan to run an auction process for the equity of reorganized EFH. As a result, NextEra hereby withdraws the strategic proposal.”

The NextEra statement refers to a filing, also yesterday afternoon, made by Energy Future with the bankruptcy court, stating, “Given the interest in reorganized EFH expressed by potential strategic and financial bidders, the debtors have decided to extend the time frame for determining the highest and otherwise best bid for reorganized EFH and seek early court approval of the process for doing so.”

The company said it intends to file in September a motion seeking approval “for the procedures and deadlines that will govern the marketing process,” adding that during the process the company “also intends to further advance [its] ongoing discussions with creditor groups regarding a value-maximizing plan of reorganization.” – Alan Zimmerman


No ‘do-over’s’: Momentive noteholders revote to accept plan, but co. says it’s too late

At a hearing this afternoon in the Chapter 11 proceedings of Momentive Performance Materials, holders of both the company’s first-lien and 1.5-lien notes, which had previously rejected the company’s proposed reorganization plan, sought to change their votes in order to accept the plan.

As the noteholders see it, that would make the proposed a plan a consensual plan and thus entitle noteholders to the cash recoveries, comprised of 100% of principal and accrued but unpaid interest – but excluding some $250 million of disputed make-whole payments – to which noteholders would have been entitled had they accepted the plan in the first place.

But the company opposed the noteholders’ attempts to change their votes, saying they had already rejected the plan and, therefore, the noteholders’ distribution should consist of the replacement debt specified in the toggle feature of the plan.

“There should not be a do-over” in plan voting, an attorney for the company told Judge Robert Drain at this afternoon’s hearing in White Plains, saying all that has changed between last week’s contentious confirmation hearing and today’s change of heart is that noteholders “have read the tea leaves” and believe that Drain will rule against them with respect to the key make-whole issue in the case.

Besides noting that the company had already extended the time and resources for last week’s trial, and was ready to take Drain’s ruling in the dispute “in whatever form it comes,” the attorney noted that if noteholders were permitted to change their votes at this point in the process, simply after determining that the legal tide was against them, creditors facing a toggle vote in a reorganization plan would never have any incentive to vote in favor of a plan.

The development sent the parties to an off-the-record conference in chambers to sort out the matter.

As reported, last week’s cram-down confirmation hearing was set up after the company’s senior secured lenders overwhelmingly rejected the company’s proposed reorganization plan.

According to a voting report with the bankruptcy court earlier this month, first-lien noteholders ($1.1 billion of 8.875% first-priority senior notes due 2020) rejected the plan, with nearly 92% by amount of debt held and 89% by number of holders, voting against it. The story among holders of the 1.5-lien notes ($250 million of 10% senior secured notes due 2020) was similar, with 80% by amount held and 81% by number of creditors, voting against the proposed plan.

Neither result was close to the Bankruptcy Code’s required two thirds by amount of debt and a majority by number, respectively, for approval of a reorganization plan.

As reported, at issue between both tranches of noteholders and the company is whether make-whole payments, totaling in the aggregate about $250 million according to court filings, are due on the secured debt. The legal dispute comes down to an interpretation of the language in the indentures governing the notes, with noteholders arguing that make-whole payments are due because the proposed repayment of the notes’ principal under the reorganization plan constitutes an early payment ahead of the notes’ scheduled maturities, and the company arguing that the bankruptcy filing accelerated the maturities under the indentures, and thus do not constitute a prepayment.

According to news reports, Drain last week lost patience with the case and the parties’ inability to reach a settlement, saying at one point, according to Bloomberg, “This is just stupid.”

In that context, Drain said he would issue his rulings today.

Also at issue in the case has been an adversary action filed by the company’s 11.5% senior subordinated noteholders, arguing that their claims are not subordinate to, but pari passu with, those of the company’s second-lien lenders.

As reported, the company’s proposed reorganization plan provides for second-lien lenders, led by Apollo Management, to receive 100% of the reorganized company’s equity, after giving effect to the subordination provisions of the subordinated notes. Holders of subordinated notes would not see any recovery under the proposed reorganization plan.

That dispute also revolved around an interpretation of indenture language, in this case the definition of “senior indebtedness” in the subordinated notes indenture. The indenture excludes from subordination any debt that “by its terms is subordinate or junior in any respect to any other indebtedness or obligation of the company.” The subordinated noteholders argue that the second-lien debt falls within the exclusion of “junior in any respect” because of the junior secured ranking of its liens, while second-lien holders contend the language does not include the priority of liens. – Alan Zimmerman




Distressed Debt: Logan’s Roadhouse joins Restructuring Watchlist

logansLogan’s Roadhouse this week joined  LCD’s Restructuring Watchlist, which tracks companies with recent credit defaults or downgrades into junk territory, issuers with debt trading at deeply distressed levels, as well as those that have recently hired restructuring advisers or entered into creditor negotiations.

The struggling restaurant operator has seen its troubles cascade this month, with Moody’s cutting the corporate credit and second-lien bond ratings to Caa  from Caa2, leaving the outlook as negative. Moody’s cited an expectation that Logan’s will not be able to cover interest and maintenance capital expenditures over the next 12 months without a draw on its $30 million RC. Further, Moody’s explained that  “Without material improvement in earnings, Logan’s may have difficulty refinancing the expiring revolver.”

Neither the recent market inflection nor the company’s credit downgrade helped Logan’s bond market position:  its 10.75% second-lien 2017 notes traded down roughly four points the week of Aug 1. LCD observers determined that the totality of these factors  qualified Logan’s for its Restructuring  Watchlist.

Headed in the other direction, Aurora Diagnostics was removed from the Watchlist, owing to a refinancing from Cerberus Business Finance.  – Matt Fuller

Contact Marc Auerbach for questions on the Watchlist or LCD Research.



NII high yield bonds go flat, shares plunge 70% with Ch. 11, Aug.15 coupons looming

NII_Alternate_LogoBonds backing NII Holdings declined today and began trading flat, or without accrued interest, just as its shares fell 70%, after management warned that a Chapter 11 restructuring is imminent after “falling short” with actions to improve operational performance. Market participants relay it’s expected to be a near-term event, what with $118.76 million due to bondholders on Friday, Aug. 15.

NII Capital 7.625% notes due 2021 slumped to 18/20 flat, versus trades at 25 yesterday, though with roughly three points of accrued interest, according to sources. The CC/Caa2 pari passu 10% notes due 2016, which owe $40 million on Friday, slipped to a 25 context, flat, for roughly a net five-point decline against with-interest valuation.

At higher-rated, CCC-/B3 subsidiary NII International Telecom, the 7.875% notes due 2019 were in price discovery around 70 flat, versus trades at 79 with accrued interest going out last week, according to sources and trade data.

Shares of the Latin American mobile telecom firm, formerly Nextel International, plunged 70% on the Nasdaq under the symbol NIHD, to $0.20 per share.

The company reported operating revenue of $969 million, a 23% decrease versus the second quarter of 2013; an adjusted OIBDA loss of $137 million; and a consolidated operating loss of $504 million, corporate filings show. Moreover, NII reported a net loss of 77,000 subscribers in the quarter, bringing its quarter-end subscriber base to 9.4 million, a 6% decrease from a year ago, filings show.

In recent quarters, NII management had relayed “going concern” warnings, and today’s report included more specific language that the company “will likely find it necessary to file a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in order to implement a restructuring of its obligations on a stand-alone basis or in conjunction with one or more potential strategic transactions,” filings show.

“Despite the actions we’ve taken to improve our operational performance, we have fallen short in our efforts, leaving the Company with a liquidity position that is not sufficient to support the business,” said Steve Shindler, NII Holdings’ chief executive officer.

Given the situation, there will be no financial results conference call this quarter, management stated.

The company stated that it ended the quarter with $5.8 billion in total debt and $1 billion in cash and equivalents, for $4.8 billion of net debt, the filing shows.

NII bonds have been under pressure over the past year amid subscriber losses, credit downgrades, and allegations of default. To wit, the company earlier this year dismissed allegations by Aurelius Capital Management that some of its bonds were unfairly pushed down in the capital structure due to an illegal transfer of equity interests to a subsidiary in 2009.

Recall that the 10% paper was in the low 60s at the outset of the year and leading up to Feb. 28, when the company reported disappointing full-year earnings and raised liquidity concerns (see “NII Holdings bonds plummet on weak results, liquidity concerns,” LCD News, Feb 28, 2014).

As reported, the company announced on March 10 that it hired UBS to explore strategic opportunities, including possible partnerships, a sale of a business unit, or a strategic transaction involving the whole company. The company said at the same time that it retained Rothschild to look into a possible refinancing or debt restructuring.

NII Holdings was last in market in May 2013 with the $700 million issue of 7.875% senior notes at NII International Telecom, which priced at par, after a $200 million upsizing via J.P. Morgan and Goldman Sachs. Proceeds were used to repay loans in Mexico and Brazil. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.


US high yield bond funds see record $7.1B investor cash outflow

high yield bond flows3

Retail-cash outflows from high-yield funds ballooned to a shocking, record $7.07 billion in the week ended Aug. 6, with ETFs representing just 18% of the sum, or roughly $1.28 billion, according to Lipper. The huge redemption blows out past the prior record outflow of $4.63 billion in June 2013.

With four straight weeks of outflows from the asset class totaling $12.6 billion, the four-week trailing average expands to negative $3.15 billion per week, from $1.4 billion last week. This reading is also a record, eclipsing a prior record at $2.8 billion, also in June 2013.

The full-year reading is now deeply in the red, at $5.9 billion, with 43% of the withdrawal tied to ETFs. One year ago at this time outflows were $3.9 billion, with 15% linked to the ETF segment.

In addition to the huge outflow, the change due to market conditions was negative $1.24 billion, also the greatest negative move dating to June 2013. The change this past week is nearly negative 1% against total assets, which stood at $176.3 billion at the end of the observation period, with 19% tied to ETFs, or $34.1 billion. Total assets are up $6.5 billion in the year to date, reflecting a gain of roughly 4% this year. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.