Bloomberg Brief will not publish tomorrow due to good Friday. The next edition will be monday, April 25.
Leveraged
Finance
Capital
BRIEF
Q&A
04.21.11
Monday
Feb. 1, 2016
Thursday
www.bloombergbriefs.com
Loan Buyers Have Best New Issue Market Since 2011, Says Guggenheim’s Hauser
BtIG
to Hire
The U.S. leveraged loan new issue market
offers the best
opportunities for buyers since
after
Losing
2011, said Tom Hauser, portfolio manager,
Guggenheim Investments.
Software deals
Distressed
Salesmen
look attractive, New York-based Hauser, who
manages
$1.8 billion in assets, told Bloomberg
By
Lisa aBramowicz
Brief’s
in a Jan.
His as 10
BTIGCarol
LLCKoplans
to 27
hireinterview.
as many
comments
edited unit
and condensed. people
forhave
its been
high-yield
by July after
losing three distressed debt salesmen within the past two months.
Q: How do you see today’s volatility?
managing director Michael Cassidy left
A: Itboutique
can be traced
to certain
credits,
and
the
investment
bank
this month
it has combined with all the other negative
and
Steven
Bergman,
also a
managing
headlines
that
have caused
risk
assets todirector,
departed
march, according
to retrade off,
creatinginuncertainty
and paralycords
maintained
by the fund
Financial
sis in the
market. Mutual
flowsindustry
have
regulatory
authority.
Robert Hannigan,
been negative
but manageable
and fairly a
director
in the
distressed-debt
group,
consistent.
We’re
not hearing ofsales
institutionalnodemand
leaving thewith
market.
In fact,
was
longer registered
the firm
as of
our outlook
is incrementally
april
6, the records
show. positive. But
when
issues
come toits
market,
BTiGnew
more
than doubled
staff inpeople
the past
are frozen
in place,
and loans
struggle
two
years and
is adding
people
after comto find a clearing level. This represents a
petitors including Chapdelaine & Co. and
great opportunity. We haven’t seen opporLaBranche
Co. closed
credit-trading
units.
tunities this &
attractive
since
the summer
The
broker-dealers
were
among
70
debtof 2011. Buyside accounts and shops that
are willing to dig into credit are able to
price that risk at attractive rates.
BLoomBerg
Q:
Is it easier to push back on terms?
A: Absolutely. Economically speaking
you’re better positioned to dictate pricing
terms.
But
also finding
we<go>
can push
dEals
Inwe’re
thE PIPElInE
PReL
back on the document and strengthen
it,
amt
lending
Co. Rat.
which issYndiCated
also extremely
important.
Under-tenoR
(mln)
standing
of
Valitas the business is one
N/A component
$285
6YRS
credit
but you’re
investing
Asset analysis,
Acceptance Capital
Corp
BB+
$250in as-6YRS
IASIS
Healthcare
LLCdownsideBa3
5YRS
sets
with
all the
risk so$1,235
you need
N/A
260EUR
6YRS
to Memora
protectInversiones
yourself with a strong
document.
Barometer
Ameritox LTD
iPayment Inc.
B2
N/A
$450
$575
7YRS
6YRS
Q: Will we see more tranches with no
Libor floor?
amt
Yield Bonds
Rat. middle-oftenoR
A: Petco HigH
really
set the bar for
(mln)
the-fairway
iPayment Inc. single-B issuance.
NA That’s
$375 really
7YRS
the only deal of size that has priced this
year.
Issuance
in January is down 20 perIssuancE
(u.s.)
cent and deals that have priced
are much
mtd
Ytd
smaller.
Six months ago that
probLoans sold
$30.2deal
bn
$175 bn
HY Bonds
Issued
$20.1
bn points
$112 bn
ably
would
have come 100
basis
tighter. We participated in both tranches,
though
to a larger extent in the tranche
PRIcIng
with the floor. We thought the no-floor 1-daY
level
CHange
tranche was appropriate for some of our
S&P/LSTA
Leveraged
Loan
96.01
0.01
vehicles such as CLOs.
Finra Avg. Junk Yield
Markit CDX North American HY
7.74
104.78
0.04
0.00
Q:Markit
What
do you expect for loan
issu-0.23
LCDX
100.49
ance
year?
Markitthis
Itrax Europe
94.67
-2.21
A: We’re off to a slow start, but the deal
A: The market in the past has had a
pipeline is roughlyLoans
$60 billion,Beat
which is U.S. as
knock
against some
of these 4.71%
asseteuropean
returns
reach
larger than it was for a lot of last year.
lite companies because there wasn’t a
building you could grab or a machine
don’t
know where
dealsloans
are going
to clear,
you
you got
european
leveraged
are outperforming
u.s.could
banksell.
debtBut
thisthat
yearmeans
as companies
they’re working
with sponsors
and delaying
a premium.
You’re
paid for the assetrefinance
borrowings
at the fastest
pace since 2007,
boosting
prices.
bringing
them
to market
hoping for
better
light nature
of the business,
when
western
european
leveraged
loans
have returned
4.71 percent,
comparedand
with
3.12
execution. But they’re not underwriting new
you break down the business model,
percent
in
the
u.s.,
according
to
Credit
Suisse
Group
AG
indexes.
The
performance
deals. After this $60 billion, there’s not a
we actually thought it set itself up well
marks
a turnaround
2010,
when
in america
whole lot
behind thatfrom
as far
as we
can bank
tell, debtfor
leverageoutperformed.
because of its ability to
a 41 percent
dropskittish
in european
buyouts
since
their
2007
peak
is have
curbing
because
banks are
and don’tleveraged
want
generate
cash.
Also,
when
you
a
the
amount ofnew
newrisk
loans
atnow.
the same time the region’s
raises interest
rates
to underwrite
right
physicalcentral
asset bank
or presence,
it needs
to
for the first time in almost three years. Funds buying
speculative-grade loans in europe,
be maintained.
which
mainly
in bank
debt issued to fund leveraged buyouts, received $14 billion in
Q: What’s
theinvest
outlook
for demand?
Q: What
do you
avoid?
repayments
in thetofirst
$7.7 billion
private-equity
firms raised
A: If we continue
seequarter,
healthyalmost
CLO is-double the
for
takeovers
in the
same
period.
A: Sectors where the conversion of
suance
in 2016,
as we
expect,
you’ll see a
next page
Ebitda to free cash flow Continued
is smallonbecause
positive technical dynamic in bank loans,
you constantly have to invest in the
with not a lot of supply coming to market.
business. For example, cyclical chemiThe technical backdrop was robust in
cal businesses where you have massive
trading
startups
in 2009
to capitalize
2014 and
2015, opened
and demand
outstripped
infrastructure you
need
to spend on and
new
supply.
We think
that will
remain
the
Jeffrey
Werbalowsky,
on
banks
pulling
back after
the worst
financial
where your earnings
is dictated by
co-CEO profile
of Houlihan
case in
2016,
at aassmaller
crisis
since
thealbeit
1930s.
larger level,
companies
Lokey, spoke with
commodity prices.
setting us up
well for
a positive
recovered
market
share,
tradersbank
that loan
joined
Aleksandrs Rozens
performance
this year.
smaller
businesses
have left for bigger banks.
about the
high yield
Q: Is credit quality
a concern?
“BTiG has been a net acquirer of high
market and how it is
Q:
What
loan
sectors
look
attractive?
A:
Ultimately
we
don’t
think
default rates
yield/distressed talent, an area that BTiG
spurring dealmaking.
are going to pick up outside of comA: The fundamental things we’re
driving
Continued on next page
modities. I think they will remain below
toward are cash flow and enterprise value.
historical averages in performing sectors.
By that I mean what we would pay for the
Leverage
has definitely picked up from
dEals
Ma <go>
business, not what the public market cap
Average
Junk-Bond
Yield
where we were seven years
2010 ago, but
Ytd
says it’s worth
or what
a sponsor
is willing
10
interest-coverage
ratios 25,075
are high, and
M&A Deal Count
7,600 we
to
pay. We tend to steer toward businesses Global
Global
M&Athink
Deal Volume
$2.42trn
$732 bln
don’t
it’s a major concern.
that have predictable earnings streams. To
9.5
that end, tech sector businesses — specifiactIvEly
tRadEd
tRaCe<go>
Q: What
do you
expect
from the Fed?
cally
software — are attractive. Also, there’s Most
9
Source: FINRA-Bloomberg
tKR
Rat.
Cpn
pRiCe
CHg
Yield spRd
no heavy capital expenditure
component
A:
We
think
the
Fed
will
raise
rates by 75
MFW
Caa1/B9.50 100.50 2.00 9.22 710
8.5
to software companies, so you have a con- OPCCN
basisCa/CCC
points in8.25
2016,54.20
which0.08
would
put2849
the
29.65
version of Ebitda to free cash flow.
target
range at6.75
1 percent
1.254.91
percent
ALLY
B1/B
106.00 to
N.A.
375
8
SLMA
Ba1/BBB- We
6.25
-0.13 4.96
at year-end.
see105.38
the terminal
rate 284
at
KSU
8.00 but
111.00
5.05 is389
Q:
Are you concerned about assets for
2.5 toB1/BB3.0 percent,
our N.A.
baseline
that
7.5
AXCA
Caa1/B
12.75 111.00 N.A.
6.58 446
businesses
like
software?
we’ll
get
there
around
the
end
of
2018.
A-10
J-10
A-10
O-10
D-10
F-11
A-11
GOK
B3/B9.75 98.00 N.A. 10.42 926
Right
now,eeuwens
there’s this
overhang,
the banks
By
Karen
and
emre PeKer
Q&A
nBBHYL InDex <go>
Grew up: Queens,
S&P/LSTA Leveraged-Loan
Index New
97
S
NMG
F
TOY
SGU
York
Ba3/BBCaa1/BBa2/BBB3/CCC+
B2/B-
Back Page
pG.5
8.75
9.00
6.63
7.38
8.88
Moody’s
Lives now: Garden City, New
York
96
InvEstoRs sERvIcE
95
109.50
104.88
110.60
100.38
104.25
-0.63
N.A.
N.A.
N.A.
N.A.
2010
Upgrades
508
Career history: Guggenheim
Partners (14 years this April)
94
93
Downgrades
376
7.82
3.62
4.66
7.31
7.92
333
150
187
391
580
YTD
151
96
Favorite restaurant: SALT Waterfront Bar & Grill, Shelter Island, NY
92
91
standaRd
PooR’s
Favorite vacation spot: Callicoon,
New& York
90
89
88
A-10
J-10
A-10
2010
Upgrades
576
160
Downgrades
376
105
Favorite
sports
team:
St. John’s University basketball team
D-10
F-11
A-11
O-10
YTD
SPBDaLB InDex <go>
Posted from Bloomberg Briefs, February 1, 2016, copyright by Bloomberg L.P. with all rights reserved.
This reprint implies no endorsement, either tacit or expressed, of any company, product, service or investment opportunity.
#C47465 Managed by The YGS Group, 800.290.5460. For more information visit www.theYGSgroup.com.
For financial professional/institutional investor use only. Do not distribute to the public.
Ratt<go>
This article is distributed for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. The article should not be considered research nor is
the article intended to provide a sufficient basis on which to make an investment decision. This article contains opinions of
the author but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The author’s opinions are subject to
change without notice. Forward looking statements, estimates, and certain information contained herein are based upon
proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources
believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information.
Guggenheim Funds Distributors is an affiliate of Guggenheim Partners, LLC.
Investments in loans, including loan syndicates and other direct lending opportunities, involve special types of risks, including credit risk, interest rate risk, counterparty risk and prepayment risk. Loans may offer a fixed or floating interest rate. Loans
are often generally below investment grade and may be unrated. The Fund’s investments in loans can be difficult to value accurately and may be more susceptible to liquidity risk than fixed-income instruments of similar credit quality and/or maturity.