Halister News

(Bloomberg) -- Despite a heated first quarter that saw leveraged finance volumes reach $283b, surpassing 2013 highs, only a “modest uptick” is expected in 2017 because of fiscal uncertainty and rate volatility, S&P Global Ratings analysts led by Olen Honeyman wrote in an April 17 report.

• The analysts didn’t provide a forecast, saying it remains to be seen “where leveraged loan volumes will land in 2017”
  • 1Q saw $201b in loan issuance and $82b in HY bond issuance
• Positives for issuance
  • Stabilizing commodity prices; more lenient energy policies may lead companies to ramp up capital spending
  • Opportunistic refinancing activity expected ahead of further interest rate hikes
• Negative for issuance
  • Likely corporate tax cuts leaving companies with more cash and higher after-tax debt
  • Possible easing on foreign cash repatriation
  • Cross-border M&A discouraged
  • Recent refinancing activity has shrunk potential volume
• Increasing risk appetite as volume remains strong for now
  • B-rated issuances increased to 37% of LTM loan volume in 1Q of 2017
  • 1Q B-rated volume of $72b was the highest level since 1Q of 2014
  • Dividend recapitalization surged 260% to a LTM volume of about $65b at March 31, 2017
  • Spreads falling; average new issue yield to maturity (YTM) for BB- rated issuances down to 3.6% at end of 1Q from 4.59% in same period 2016; for B-rated issuances, down to 5.12% from 6.47%
  • 2L volume boosted to $71b in 1Q compared to a total of $10b for the full year 2016
  • LBO activity increased 35% to LTM volume of $89b over the prior year