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No love lost for levloan lovers

Fft Trader PA 230x150

Pricing is growing tight in the European leveraged loan market — very tight. Investors are moaning, but they will receive little sympathy from buyers of other asset classes.

R&R Ice Cream this week released price guidance on its €800m term loan ‘B’ at only 350bp over Euribor with a 0% floor, but was rated just B+ on Wednesday.

Perhaps even more striking is SIG Combibloc’s repricing request, its second in just 18 months since signing the loans concerned.

Some investors have been slated the move, arguing that SIG has gone too far.

While inevitable, leveraged loan investor frustration reflects a wider phenomenon — everything is tight.

Put simply, the levloan market is simply catching up with the rest of debt markets, and all investors are feeling the squeeze.

The most expensive tranche on Schaeffler’s euro PIK notes last week, for example, had a coupon of just 3.75%.

You'd also be hard pressed to find a sympathetic investment grade investor, given they now have the option, indeed the honour, of actually paying to invest their cash.

In fact, there has often been a lot of meat on the bone for leveraged loan investors this year.

Western Digital, a BB+ rated US tech firm, and Ineos, one of Europe’s canniest leveraged issuers, both issued loans in the spring at very generous levels.

Investors should also consider that issuers can’t exactly be blamed for the lack of leveraged buyouts that has stifled issuance throughout the year, and subsequently stacked the odds in their favour.

It shouldn’t be any real surprise that both Western Digital, Ineos and others are therefore returning for a refund.

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