CLO Market Round-Up: Hertz Announces Bankruptcy Exit; Navistar Acquisition Approval

In Trepp's weekly CLO market round-up, we recap daily TreppWire stories that highlighted these relevant articles. Last week, we covered debt refinancing, company acquisitions, bankruptcy avoidance, ratings downgrades, and more...

If you are interested in seeing the coverage of the CLO headlines in your inbox every morning, click here. Read below for the overview and see how these developments might impact leveraged loan prices.

Here, see a preview of the loans that faced the largest movement in prices last week. Find Trepp's full list, along with the managers who hold the largest exposure to each loan in the TreppCLO product.

XPO Refinances $2.0 Billion in Debt

XPO Logistics announced that the firm will be refinancing $2.0 billion of existing term loan facilities to reduce the interest rate. The aforementioned debt is currently part of the CLO universe, listed as the $1.5 billion XPO Logistics - XPO Logistics Term Loan B (02/18) (L+200; due 2025) and the XPO Logistics – XPO Logistics Term Loan B1 (L+250; due 2025). The maturity dates of the facilities will remain unchanged upon refinancing.

The two facilities were held by over 240 and 170 CLO vehicles in January - approximately 24 and 17% of all US deals in Trepp's CLO database  respectively. When we last reported on XPO’s CLO exposure in January, we noted the large volume of trading activity for the firm's credits at slightly below par. Since then, both facilities have been sold at a price of slightly above par. IHS Markit priced both facilities in that range this week.

Navistar Receives Approval for Acquisition by Volkswagen Subsidiary

Navistar International received approval from stockholders to be acquired by Traton, a Volkswagen company subsidiary. The subsidiary currently owns 17% of Navistar and will now acquire all of the trucking company’s outstanding common shares at a price of $44.50 per share. Navistar expects the transaction to be completed in mid-2021. The deal provides Traton with a large foothold in the U.S. trucking business, one of the most profitable for heavy trucks. Shares of both Traton and Volkswagon rose with the announcement.

Navistar is represented in the CLO universe with the $1.6 billion Navistar – Tranche B Term Loan (L+350; due 2024). The facility was held by over 210 CLO vehicles in January – approximately 21% of all US deals in Trepp's CLO universe.

The Tranche B Term Loan was very actively traded in the last quarter of 2020 – seeing a large amount of both “buy” and “sell” trades priced at slightly below par from August into the new year. The most recent transaction took place at the end of January, as the facility was purchased at slightly below par. IHS Markit quoted the price this week in the same range.

Hertz Announces Bankruptcy Exit with $4.2 Billion Investment

Hertz filed its proposed Plan of Reorganization with the U.S. Bankruptcy Court in Delaware. The rental-car company would emerge from Chapter 11 reorganization with a $4.2 billion investment from Knighthead Capital Management and Certares Management – fully repaying the company’s first lien and second lien debts and giving the new investors 51% of new common stock. Unsecured bondholders will have an option to take a 70% cash payout of their investments face value or convert the debt into new financing.

Prior to the news, Hertz was represented in the CLO universe with the $1.65 billion Hertz - Unfunded Commitment (L+725; due 2021) and the $700 million Hertz – Term Loan B-1 (L+275; due 2023). Both facilities were held by over 30 CLO vehicles in January, which amounts to approximately 3% of all US deals in Trepp's CLO database.

We have continuously documented Hertz’s journey throughout the year, but its $1.6 billion Unfunded Commitment facility was recently originated (November 2020) and actively traded upon entering the market. It was mostly purchased at slightly below par before generating a handful of sell trades - meanwhile the price climbed above par over the same time frame. The price has remained steady over the past three months and came in at slightly above par recently, according to IHS Markit.

Since we last reported on the company’s $700 term loan, it has seen little activity. Its price however, has continued to rise and was quoted at slightly below par last week, according to IHS Markit.

Blount International Faces Ratings Downgraded

Moody’s announced recently that Blount International’s B1 Corporate Family Rating (CFR) and P1-PD Probability of Default Rating (PDR) were downgraded to 'B2' and 'B2-PD,' respectively. Additionally, the ratings agency downgraded the 'B1' ratings on the agriculture manufacturer's first lien senior secured revolving credit facility (expiring 2022) and first lien senior secured term loan (due 2023) to 'B2.'

These downgrades are in response to Blount announcing a $160 million 1st lien senior secured term loan, along with $43 million in cash, to pay a $200 million dividend to sponsor and pay fees and expenses for the transaction. Moody’s believes that while the economy is generally expected to recover in the near future, the pro forma leverage includes little margin for a decrease in operation performance as the company is reliant on cost cutting to improve metrics. The company's outlook is stable.

Blount is represented in the CLO universe with the $627 million Blount International – Term Loan B (09/18) (L+375; due 2023). The facility was held by over 175 CLO vehicles in December – or approximately 17% of all US deals in Trepp's CLO database.

The facility has been very actively traded since the summer of 2020, kickstarted by a wave of sell trades that were priced at slightly under par in August. Throughout the rest of the year, it was traded at a range around par. In 2021, the credit has been almost exclusively sold, with its last trade taking place at the start of February at slightly above par. IHS Markit quoted the price this week at slightly above par.

Boeing – Failing Engines and Volatile Share Prices

Boeing was a frequent name in the news after it was reported that two separate Boeing airplanes suffered engine fires while in flight. In response, its stock price stumbled, but then rebounded on Wednesday with the news that the mechanical problems were not Boeing's fault, but that of Raytheon Technologies – the engine supplier. Additionally, the company, and its share price, benefited from its “speedy response” to the issue, a direct contrast to its actions when troubles arose with its 737 MAX airplanes.

The company’s share price tumbled once again on the news that Boeing was already aware of potential problems with its engines prior to the weekend fires, and had been planned to correct the issue but never got around to doing so.

Boeing is represented in the CLO universe with the $13 billion Boeing CO – Term Loan (L+125; due 2022). The loan was originated in early 2020 and was held by over 15 CLO vehicles in December, around 2% of all US deals in Trepp's CLO database.

The facility’s price continuously climbed throughout the year and it was purchased in the last quarter of 2020 at slightly below par. Its most recent “buy” trade took place in February where it was purchased at par. IHS Markit quoted the price at slightly above par this week.

General Pricing Data

Issuance in the CLO market inched up last week with 31 deals priced, one more than the week prior. There were eleven new, twelve refi, and nine reset deals. 26 deals were sourced from the US market while the rest were sourced in the EU.

The best new execution in the US market was the $607.50 million KKR 31, which featured a AAA class at L+112. The deal is managed by KKR and arranged by Citi.

The best new execution in the EU market was the €478.93 million GoldenTree Loan Management EUR CLO 5, which featured a AAA class at E+82. The deal is managed by GoldenTree and was co-arranged by Barclays (lead), Morgan Stanley, and Wells Fargo.
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The information provided is based on information generally available to the public from sources believed to be reliable.

Originally published in TreppWire, which is distributed every morning as a client-only email newsletter. TreppWire enables readers to stay up-to-date on market activity, while providing a competitive advantage over others. TreppWire leverages Trepp’s market expertise and proprietary data sets to provide daily market commentary, trend analysis, research, and breaking news to its clients


CLO Market Round-Up: Hertz Announces Bankruptcy Exit; Navistar Acquisition Approval