At least three companies failed to get deals completed in the market for speculative-grade corporate loans as investors stage the biggest retreat since 2011.
HCP, the Chinese packaging company owned by TPG Capital, pulled a $230 million loan this week that’s part of a deal to refinance debt and pay a shareholder dividend, according to data compiled by Bloomberg. Styrolution Group GmbH, a German chemicals company, delayed the marketing of 1.6 billion euros ($2.15 billion) of loans and ship-parts builder SeaStar Solutions withdrew an effort to lower the interest rate on a $210 million loan.
The pullback comes as U.S. funds that invest in leveraged loans saw $1.5 billion in outflows during the week ended Aug. 6, the biggest withdrawal since August 2011, according to Lipper. The debt lost 0.25 percent in July for its first monthly loss in 11 months, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index.
“The more marginal or more difficult credits have had to be shelved,” Beth MacLean, a money manager at Newport Beach, California-based Pacific Investment Management Co., said in a telephone interview.
Investors will be pushing back for more yield and better terms on deals that are able to get done, she said.
Styrolution cited yesterday “changes in market conditions” as it withdrew its loan, which would have been used to repay notes and fund Ineos Group Holdings Inc.’s purchase of a 50 percent stake in the company from BASF SE.
There’s been a broader retreat from riskier corporate debt, with a record $7.1 billion pulled from U.S. high-yield bond funds in the week ended Aug. 6, according to Lipper.
“It’s very possible this will be a relatively short-lived correction, because you do still have strong credit performance and low defaults,” MacLean said.
Loan prices fell today to 98 cents on the dollar, the lowest since Oct. 31, 2013, according to the S&P/LSTA U.S. Leveraged Loan Index.