CLO Market Round-Up: New Covenant Agreement Legal Terms; McAfee Sells Enterprise Security
In Trepp's weekly CLO market round-up, we recap daily TreppWire stories that highlighted these relevant articles. Last week, headlines surrounded court rulings and legal terminology in covenant agreements, loan refinancings, new sales, bankruptcy restructuring, 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.
"Erroneous Payment" Terms Added to US Loan Deals in Wake of Citi Ruling
Last month, New York Judges ruled that a group of Revlon lenders that were accidentally repaid by Citigroup can keep the money they received. The accident stemmed as Citi tried to pay interest due on a loan for cosmetic maker Revlon, but instead paid the $900 million loan in full. Some lenders returned the mistaken payments, but the ones that did not were ultimately sued by Citi. The New York District Court ultimately ruled in favor of the 10 defendants, who received more than $500 million through the accident in August.
Now, lenders have begun to come up with legal terminology to be inserted into covenant agreements – requiring lenders to return any accidentally transferred funds to banks. In a rare new legal development in the leveraged loan market, the Financial Times reports that Eagle Materials, Petco, and Mesa Laboratories have all seen an “erroneous payment” term added to their US loan deals.
These new clauses have only been spotted in US deals so far but will likely become standard as arrangers attempt to avoid incidents similar to what Citi had just gone through in the future. JP Morgan was the lead arranger for the Eagle Materials and Mesa Laboratories deals while Citi led Petco’s deal.
McAfee Sells Enterprise Security to STG for $4 Billion
Security company McAfee announced early last week that it will sell its enterprise security business to Symphony Technology Group (STG) for $4 billion. The company claims that its cloud security platform is used by 86% of Fortune 100 firms and recently reported revenue topping $1.3 billion in fiscal year 2020.
When we last reported on McAfee, it was in the midst of pricing its IPO and was heavily leveraged in the CLO universe. According to Trepp's CLO database, the firm is now represented by the $3.1 billion McAfee – Term Loan B (L+375; due 2024) and the €1.096 Billion McAfee-Term Loan B New (L+350; due 2024). The dollar-denominated facility was held by over 425 CLO vehicles in January – approximately 42% of all US CLOs in Trepp’s database. The euro-denominated facility was held by over 130 CLO vehicles in January – approximately 50% of all EU CLO’s in Trepp’s database.
Since our last coverage in October, McAfee’s US Term Loan B has generated active trading – the credit saw a flurry of both buy and sell trades at slightly below par that carried into the new year. In 2021, the facility has been actively sold, with the most recent sell transaction taking place in February at above par. The facility was quoted at slightly above par this week.
The Euro Term Loan has also seen activity in the last part of 2020 and in early 2021. Through the end of last year and in early 2021, it has been actively bought and sold at slightly above par. IHS Markit quoted the price in that range this week.
Daseke Companies Refinances Term Loan; Sees Ratings Upgrade
Daseke, Inc. announced that the firm has refinanced its existing $484 million Term Loan B (due 2024) with a new $400 million Term Loan B and available cash. The new term loan matures in March 2028 and has a floating interest rate of L+400. Moody’s upgraded the transportation and logistics company’s corporate family and senior secured ratings to ‘B2’ from ‘B3.’
Daseke is represented in the Trepp CLO database with the $498 million Daseke Companies – Term Loan (L+500; due 2024). In January, the facility was held by over 140 CLO vehicles, approximately 14% of all US deals in Trepp's CLO database.
Trading has been very active for the facility since May of 2020, when it was heavily traded in the high $70s range. Since that time, its price has continued to rise, with the subsequent flurry of trades taking place in August as "sells" priced at slightly below par. At the end of 2020 and into early 2021 the facility has continued to generate decent trading activity and was most recently sold at slightly below par. IHS Markit priced the facility at slightly above par this week.
GTT Formally Discussing Bankruptcy Restructuring
GTT Communications' share price fell following news that the telecom company has started formal talks with creditors about a restructuring and potential bankruptcy filing. The proposed plan would give term loan holders a cash payment from the $2.15 billion sale of its infrastructure unit and would have unsecured debt holders take ownership of the company.
When we last reported on the communications company in September, it had seen its Long-term IDR get downgraded due to a delayed 10-Q. The firm subsequently received default notice for over $575 million in outstanding debt.
According to Trepp's CLO database,, the firm has a heavy presence in the CLO universe with the $1.7 billion GTT Communications – U.S. Term Loan (L+275; due 2025), the $175 million GTT Communications – Unfunded Commitment (L+500; due late 2021), the $140 million GTT Communications – Term Loan (2/20) (L+425; due 2025), the $100 million GTT Communications – Term Loan (L+500; due late 2021), and the €750 million GTT Communications – Term Loan (L+325; due 2025).
Since we last reported on GTT, its $1.7 billion U.S. Term loan and the €750 million Euro Term Loan have continued to generate a large volume of trades. The U.S. facility has experienced a large amount of sell trades – with transactions ranging from the high $80s in October to the high $70s in January. Its most recent sell trade took place in February in the high $70s range, where IHS Markit also quoted its price this week. The EU Term Loan saw a similar amount of activity, but the majority of its trades from October to January took place in the low-$90 to high $80s range. The most recent sell trade was in February in the high $80s range – where IHS Markit quoted the price this week.
The $175 million Unfunded Commitment, $140 million Term Loan, and $100 million Term Loan were all originated in the past year and were initially purchased in the low to mid $90s range. The Unfunded Commitment has since seen a few purchases at par, and was quoted at that price by IHS Markit this week.
Tenneco Receives Rating Affirmations From Fitch
Recently, Fitch Ratings affirmed Tenneco Inc’s Long-Term Issuer Default Rating (IDR) at 'B+.' Fitch also affirmed the ratings of the auto part maker's secured revolving credit facility, secured term loan, and senior secured note ratings at ‘BB’/'RR2’ while marking its senior unsecured note ratings at ‘B-‘/RR6.’ Lastly, Fitch rated Tenneco’s proposed issuance of $800 million in senior secured notes (due 2029) at ‘BB’/’RR2.'
Tenneco is represented in the CLO universe with the $1.7 billion Tenneco – Tranche A Term Loan (L+300; due 2025) and the $1.7 billion Tenneco – Tranche B Term Loan (L+250; due 2023). In January, the two term loans were held by approximately 1% and 31 % of all US deals in Trepp's CLO database.
Since we last wrote about Tenneco in January, the Tranche A term loan generated a flurry of buy trades in early February at slightly below par. The Tranche B term loan saw the opposite – and instead, posted a number of sell trades at the beginning of February, also priced at slightly below par. IHS Markit quoted both term loans at a touch below par recently.
General Pricing Data
Issuance in the CLO market decrease slightly last week as 27 deals priced. There were nine new, twelve refi, and six reset deals. 22 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 $705.21 million Palmer Square Loan Funding 2021-2, which featured a AAA class at L+80. The deal is managed by Palmer Square and arranged by Citi.
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