Investec Plc, a bank and money manager in South Africa and the U.K., is considering its first collateralized loan obligation since the financial crisis and United Continental Holdings Inc., the world’s largest carrier, proposed the rate it will pay on a $900 million term loan B it’s seeking to refinance debt.
Investec’s last European CLO was the Gresham Capital CLO V BV deal in June 2008. Spreads on the top-rated portions of European collateralized loan obligations fell to 150 basis points from 295 basis points at the start of 2012, according to data from Morgan Stanley. A basis point is 0.01 percentage point.
“We have been observing the re-emergence of European CLOs in the past few weeks and are exploring ideas with a number of investors,” Richard Downer, the London-based head of financial markets at Investec Corporate & Institutional Banking, said in an e-mail. “Investec has been a programmatic issuer of CLOs in the past and is a very active lender in the European leveraged loan market.”
High-risk loans that financed buyouts before the credit crisis may pose a “significant risk” to the U.K.’s financial system, according to the Bank of England. Companies owned by private-equity firms represent about 8 percent of U.K. corporate-sector debt, according to a report from the central bank.
About 34 billion pounds ($51 billion) of U.K. leveraged loans mature in 2013 and 2014, according to data compiled by Bloomberg.
EQT Partners AB raised 625 million euros ($813 million) of leveraged loans for its buyout of EON SE’s waste-incinerator unit, said a person familiar with the matter, who asked not to be identified because the deal is private.
In the U.S., United Continental proposed paying interest at 3.25 percentage points to 3.5 percentage points more than the London interbank offered rate for the $900 million loan it’s seeking, according to a person, who asked not to be identified because the information is private. Libor, a rate banks say the can borrow in dollars from each other, will have a 1 percent minimum.
McGraw-Hill Education, the digital learning company being acquired by Apollo Global Management LLC, increased the size of a covenant-light term loan that will back the buyout by $50 million to $610 million, according to a person with knowledge of the transaction, who also asked not to be identified because the deal is private.
The six-year debt will now pay interest at 7.75 percentage points more than Libor, up from a range of 6.5 percentage points to 7 percentage points, the person said. The Libor floor remains at 1.25 percent.
Fender Musical Instruments Corp., the maker of the iconic Stratocaster electric guitar played by artists such as Eric Clapton and John Mayer, set the rate it will pay on a $200 million term loan that will refinance debt, according to a person with knowledge of the transaction.
The six-year debt will pay interest at 5 percentage points more than Libor, with 1.25 percent minimum on the lending benchmark, said the person, who asked not to be identified because the information is private.
Loan prices rose for a ninth-straight day, to 98.17 cents on the dollar, the highest since July 22, 2007, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index.