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Corporate Bonds

Loans make last stand as corp fin crumbles

Loans are the last bastion of European corporate finance activity, as the rest of the market falls to Federal Reserve trepidation. But the right message from the Fed could open the door for small, opportunistic trades.

There have been no surprises so far this week in investment grade corporate bonds. The Federal Open Market Committee’s meeting on Wednesday and the looming Christmas holidays have stifled even any whisper of deals.

Should the FOMC bring peace and joy by delivering the message that markets want (small rate rise and some idea of the future schedule), there could still be time for the most opportunistic of corporate bonds, say market participants. But for a benchmark transaction the market seems all but closed. Even if a corporate borrower decides to issue a tap, there will only be two days to do so.

The European high yield bond market is equally subdued, with no new issuance and no deals closing.

Not so for its kin, the European leveraged loan market, which has several deals closing this week. But there were no new announcements made nor any expected.

David Lloyd closed its £380m dividend recapitalisation and refinancing on Monday, following an extension of the deadline and a widening of the OID to 96.

Jost’s €2727m seven year term loan ‘B’ and Terex’s $900m, €500m seven year term loan euro carve-out are both allocating this week.

NGA Human Resources' recapitalisation through a £320m-equivalent seven year term loan ‘B’ awaits replies tomorrow (Thursday). And Dexter Axle’s $310m, €135m seven year term loan has replies due by today.

The approach of the Christmas break has spurred banks to press to finalise deals in the investment grade loans market. The Nordic region has been especially active, with a string of deals closing in the first half of the week.

Energy providers Dong Energy and Fingrid both bumped up volumes and saw a minor rejigging to their respective syndicates in refinancing deals, and Finnish Steel producer Outokumpu made several amendments to existing credit lines as part of a wider deleveraging effort.

In a deal which replaces exiting bilateral credit lines, Stockholms Läns Landsting (Council of Stockholm County) signed the first green revolving credit facility. The Skr4bn ($471m) facility includes a Skr1bn green tranche, which if drawn can only be used in accordance with the Council’s existing green bond framework.

Two Italian oil firms also finalised deals, as Saipem named the 21 banks that participated in its debut syndication. The firm raised €4.7bn in a credit package which will refinance the company’s indebtedness to Eni. Refinery business Saras also completed a refinancing deal, cutting the margin by 150bp on a €265m term loan it signed in 2011.

Dan Alderson, syndicated loans and derivatives editor +44 207 779 7311

Max Bower, leveraged loans +44 207 779 8964

Robert Cooke, investment grade loans +44 207 779 8124

Jon Hay, corporate finance editor +44 207 779 7321

Victor Jimenez, high yield +44 207 779 7379

Ross Lancaster, corporate bonds editor +44 207 779 7322

Elly Whittaker, senior loans reporter +44 207 779 8361

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