NEW YORK (Reuters)-
S. housing security system company ADT Corp. has returned to the US leveraged loan market to cut borrowing costs by repricing the April acquisition loan for the second time, and due to the lack of loans, investors have no choice but to agree.
The US market has been hit by a wave of re-pricing that began this summer, and Europe is also experiencing this situation, due to regulatory and fluctuations surrounding the UK's vote to withdraw from the EU in June and the US election in early November, loans on both sides of the Atlantic have slowed.
As investors are under pressure on their portfolios, the company is returning to the US leveraged loan market as quickly as it has since 2014 for multiple repricing to take advantage of favorable lending conditions and reduce borrowing costs.
"There is nothing to do but smile and endure.
"If you like these loans, then you have to keep them," said one investor . ".
ADT is seeking to reduce its borrowing costs to 325bp lower than Libor by repricing its fixed-term loan due in May 2022, which has been cut to 350bp in June, A total of £ 75 was saved from acquisition financing in June.
The deal is also expected to grow to $2.
763bn as the company increased its facility to pay $1.
065bn fixed-term loans due on 2021.
Rackspace Hosting returned to the market more than a month after completing the $ 2bn loan, supporting Apollo Global Management to acquire the company.
The loan, signed in October 26, will be re-priced from 400bp to 50bp, saving 50 bp.
At least four companies, including grocery chain Albertson, cinema chain Cinemark and tracking technology provider Zebra Technology, have returned to the market for a second deal this year to reprice existing loans up to bp.
Private equity firms tend to be more aggressive in repricing, but as zebra technology and film companies have shown, listed companies are also rapidly returning to market repricing.
Zebra Technologies has successfully lowered its price by $1.
In December 2, 723bn fixed-term loans were up to 250bp from Libor after cutting interest rates to May bp.
The loan was originally priced at 400bp in September 2014.
"This is unusual, but given the rebound in the lending market and the lack of M &
"Driven by new offering supplies, borrowers can demand lower borrowing costs, and loan investors are willing to adapt to the situation to maintain adequate investment," said one banker . ".
Due to higher secondary prices, borrowers are encouraged to return to the market and cut prices almost immediately after the transaction is signed.
From 2016 to the present, there have been very few transactions, and demand has far exceeded supply, driving up secondary prices.
The Toppy secondary price reduces the rate of return and allows the company to refinance at a lower rate of return.
Repricing is not popular with investors, especially the mortgage obligation fund, the biggest buyer of leveraged loans, which needs to remain priced in the portfolio, but has little choice to continue investing.
The proportion of loans exceeding par climbed to 38.
8% on December 7, according to Thomson Reuters LPC data, this is the highest level since July 2014.
This is one percentage point higher than the share of loan transactions.
98-par level100 of 39. 8%.
The percentage of par plus loans has not exceeded nearly par loans since April 2014.
The current transaction price of SMi100, which measures the top 100 of leveraged loans, is 98.
After rebounding from a low of 95
Oil prices rose in February and demand for loans increased as a potential hedge against rising interest rates.
While the market rarely allows companies to reprice deals more than once a year, a similar wave of refinancing emerged in 2013 --
Concerns about rising interest rates have increased the inflow of leveraged loans and pushed up secondary prices.
"More than a few are seen at 2013 and 2014 (of repricings)
Said the banker.
"If a company does well, it will definitely happen in any year.
"Repricing is expected to continue until early 2017, until the upturn in M & A brings new deals to the market and ease supply --
Demand is out of balance, investors say.