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William Hoffman

Sasha Padbidri

Bill Weisbrod

All the fun seems to be happening in loans these days (although the World Cup is also providing plenty) so we’ll start there. Entain, Restaurant Technologies and Electro Rent all completed loan deals, while DexKo Global raised cash to take out seller financings from a recent acquisition.

The dual-currency deal from Entain, which provides services to the online gaming and sports betting markets, is the second time the UK-based company has tapped the market in six weeks. It priced a $375m add-on to the $1bn S+350bp TLB it raised back in October.

The add-on came at 98.75, tight of the 98 price talk and a full point tight of the 97.5 OID on the original loan. Our London colleagues covered the deal in greater detail, in particular noting European investors’ higher sensitivity to ESG concerns around the credit.

Speaking of ESG, smart kitchen automation company Restaurant Technologies marketed its new debt raise (which was used to pay down revolver borrowings) as a ‘green’ loan. The debate around ESG has become increasingly polarized this year, but that doesn’t seem to be stopping companies from riding the wave.

Leasing company Electro Rent, meanwhile, managed to extend the majority of its TLB by nine months — not exactly the longest extension, but the company’s hands were tied by the the maturity of its second lien facility.

Not to be confused with Electro House (via Wikimedia)

Not all lenders extended — a small $13.8m stub of the original TLB was left over. Sources noted that these stub pieces could become more commonplace in amend-and-extend deals.

Indeed, during investor calls for Electro Rent’s deal, the sellside acknowledged the possibility that some lenders might not be able to participate because of fund restrictions. Many took this as an allusion to the reinvestment crunch in CLOs (here’s our recent podcast on that topic).

It’s an awkward time for CLOs to be forced to spectate on deals they would probably like to participate in. The recent primary activity in loans is attracting plenty of attention, including from investors that don’t generally play in the loan market — they’re looking to take advantage of recent outflows from pure-play loan funds and of CLO managers’ post-reinvestment stasis.

“We have never participated in loans until this year, but they are more interesting right now,” said a portfolio manager who typically focuses on high yield bonds.

“Generally we find it to be not as good as the bond space, but you’re getting some OID now. And the fact that SOFR is now above the five-year Treasury rate makes loans more interesting.”

There’s more supply on the way: recently announced loan deals include a $1.725bn amend-and-extend from aerospace components company TransDigm and a new $785m TLB due 2029 from asset manager Guggenheim Partners, to refinance existing debt.

Final terms are also out for an interesting new deal from DexKo Global, which will take out seller financing provided by American Trailer World during a recent M&A deal.

DexKo, which makes axels, chassis, and other components for trailers, agreed to buy three businesses (TexTrail, Wholesale Trailer Supply and Marius Garon) from ATW back in August for an undisclosed amount.

ATW provided seller financing for the deal, and is now making its exit amid stronger conditions in the primary market. DexKo’s new $225m first lien term loan, which matures in 2028, is set to price at SOFR+ 650bps with a 0.5% floor and an OID of 93.

Sources noted that such deals could happen more as the economy continues to cool — these days, dealmaking is all about creativity, and seller financing is just one of several tools that can help grease the wheels in a tough market.

She’s not exactly street legal (via pxhere)

Better-than-expected earnings — and the hope that the Fed might ease up on rate hikes — have helped propel the leveraged loan index 1.23% higher in November, according to a note from JP Morgan.

High yield has also rallied, with effective yields tightening to 8.26% this week. But that improvement hasn’t resulted in any post-Thanksgiving issuance yet, and it’s unclear whether new issuance will follow its usual year-end patterns.

“In a typical year you might see a rush of deals pre-holiday, but I don’t sense that this year,” said a credit PM. “At least in high yield, companies are holding off to see if rates come down. And you’re also past earnings season for the most part, so it’s a relatively quiet period.”

Still, there’s plenty of underwritten debt waiting to be offloaded. Financing for energy equipment manufacturer Chart’s acquisition of Howden is yet to launch, the Tegna buyout is still being held up, and banks are yet to syndicate the debt backing NielsenIQ’s merger with GfK.

And then, of course, there’s the Twitter debt. At this point it’s anyone’s guess when the banks will try to offload that, but with every day that goes by it seems like a more daunting task — for example, this week S&P withdrew its credit rating for the company, citing “insufficient information”.

As the end of the year looms, market participants are inevitably looking back at performance through 2022 and attempting to prepare for more volatility ahead. Today’s jobs report notwithstanding, a recession now seems all but inevitable.

While healthcare credits have tended to be an area of defense in times like these, that might not be the case this time round. We’ve been speaking to market participants about the multiple issues facing the sector and the borrowers they put at risk — check out our deep dive here.

Labor issues have been weighing on the sector for a while already, and they’re not going away. As companies struggle to rein in the high cost of hiring and retaining employees, they’re also facing a decline in revenue. All of this spells trouble for highly levered credits.

Consumer-facing sectors like retail also look vulnerable. This week, we reported on two sets of private third-quarter earnings that exemplify this trend: guitar maker Fender and apparel retailer J. Crew, which both suffered a significant deterioration in margins.

There’s still a great deal of concern about the strength of consumer demand, even though data showed a jump in consumer spending in October and some estimates suggest Black Friday sales may be stronger than expected.

“You have to have a maximum defensive view on retail names given everything that’s going on in the economy,” said a credit analyst covering the sector.

“Inflation and Covid have certainly pulled forward a lot of demand in some quarters, but we haven’t quite seen the shoe drop of rising unemployment.”

Hate speech’s rise on Twitter is unprecedented, researchers find (NYT)

Meta reduces NYC Hudson Yards space in cost-cutting pivot (Bloomberg)

Miami nightclubs mourn absence of high-rolling crypto entrepreneurs (FT)

Wall Street banks are slashing bonuses by as much as 30% (Bloomberg)

Alex Jones files for bankruptcy after Sandy Hook judgement (Washington Post)

Florida pulls $2bn from BlackRock in largest anti-ESG divestment (Reuters)

Sam Bankman-Fried blames “huge management failures” at FTX (NYT)

US LevFin Wrap — Entain adds to TLB, DexKo takes out seller note, Fender and J.Crew show retail woes

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