Shortly after BB-/Ba3 Ziggo‘s $2.35 billion term loan strip broke for trading late this morning, bids for the loan (L+275, 0.75% LIBOR floor) dipped below its 99.75 issue price. After opening into a 99.75/100 market, the paper cooled to a 99.375/99.75 context and was said to have traded below its OID.
Ziggo’s lackluster aftermarket performance isn’t specific to the credit itself – though the company is making its debut in the U.S. institutional loan market, the Dutch cable concern has long been a well-regarded issuer in Europe, and Liberty Global is a well-known entity in the U.S. – but instead comes amid a building resistance to aggressively priced deals following the recent pullback in the secondary.
In addition to its low coupon and nearly eight-year tenor, Ziggo’s loan doesn’t fund immediately. A ticking fee of 50% of the drawn spread kicks in after 31 days, rising to the full margin after 106 days. The $2.35 billion loan is split among three tranches that trade as a strip – an $869 million B-1 term loan, a $560 million B-2 term loan and a $921 million B-3 term loan – that have identical terms but will fund at different times.
Ziggo isn’t the only recent new issue bid below its issue price. B+/B2 Dunkin’ Brands’ $1.379 billion B-4 term loan due 2021 (L+250, 0.75% floor), has cooled to 99.5/99.75, versus issuance at 99.75 on Friday, while BB+/Ba1 TCW Group’s repriced term loan due 2020 (L+225, 0.75% floor) has slid to 99.75/100.25, from issuance at par last week.
With secondary prices off the year’s highs and the recent volatility slowly beginning to creep into the new-issue market, repricing activity has slowed in recent days and it isn’t smooth sailing for every deal already out there. As reported, B/B2 ADS Waste yesterday lifted the spread on its proposed repricing of its term loan by 25 bps, to L+300, while B+/B2 Ineos’ proposed repricing of its term loan due 2018 – which is talked at L+250-275, with a 0.75% floor and a par offer price – is said to be facing some pushback from lenders.
This is not to say that the repricing train has stalled out, or that the market won’t see another reverse-flex. Rather it appears, at least for the time being, that there isn’t much room left to tighten after yields snapped tighter last month courtesy of lopsided technicals. Indeed, for the first time this year, the average single-B new-issue yield rose this week to 4.76%, from 4.61% the previous week. – Kerry Kantin
Source: Forbes Business