CLO Market Round-Up: Seadrill Write-Off Proposal; Write Express Refinancing & Maturity Extension
In Trepp's weekly CLO market round-up, we recap daily TreppWire stories that highlighted the latest headlines impacting the leveraged loan and corporate CLO markets. Last week, CLO headlines surrounded write-off proposals, refinancing's, ratings downgrades, maturity extensions, 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.
Frontier Communications Adds $225 Million to DIP Term Loan
Moody’s assigned a 'B3' rating to Frontier Communications Corporation's new $225 million add-on to the exit portion of its $1.25 billion debtor-in-possession term loan. That term loan is also currently being repriced, and all proceeds will be used as cash on the balance sheet for the company's continued re-organization. The company’s other ratings, and stable outlook, remain unchanged. Frontier plans to exit bankruptcy protection during the second quarter of 2021.
Frontier is represented in the CLO universe with the $1.25 billion Frontier Communications Corporations – Term Loan DIP Exit (L+475; due Oct 2021). The facility was held by over 50 CLO vehicles in February, approximately 5% of all US deals in Trepp's CLO database.
The DIP facility has been traded since the company filed for Chapter 11 in October. It was purchased at slightly below par in October and November but has not seen any activity until 2021. Its most recent transaction took place in March when the facility was purchased at slightly above par. IHS Markit quoted the price last week in that range.
Seadrill Submits $4.8 Billion Write-Off Proposal; Requests Loan
According to Industry Leaders Magazine, deepwater drilling company Seadrill LTD. submitted a debt write-off proposal in US Bankruptcy Court that would allow the company to rid itself of over $4.8 billion in debt and give lenders a 99 percent stake in the company. The write-off would help Seadrill reduce its debt by more than 86.5% to $750 million. Additionally, the company has requested a $300 million loan to repay its Asia Offshore Drilling facility which has struggled with oversupply and lower demand during the pandemic.
Seadrill is represented in the CLO universe with the $1.8 billion Seadrill Limited – Term Loan B (L+800) and the $64 million Seadrill Limited Term Loan. The facilities were held by over 70 and 45 CLO vehicles in February – approximately 7% and 4% of all US deals in Trepp's CLO database.
Since we last wrote about Seadrill in February, the facilities have seen mostly muted activity. The smaller term loan was sold in a flurry of trades at well above par in February. On the other hand, the larger term loan has seen a slight uptick in price and was quoted in the mid-teens by IHS Markit last week - the highest it has been priced in 2021.
Wright Express Announces Refinancing and Maturity Extension
Wright Express announced that it has successfully refinanced and extended the maturity of its debt.
The revolving credit loans and tranche A term loans have an interest rate margin of L+200 and are set to mature on April 1, 2026. The tranche B loans have an interest rate margin of L+225 and also mature on April 1, 2026. The firm also increased its commitments under revolving credit and the tranche A term loans. Changes were also made to the existing agreement with lenders that would increase flexibility as it relates to "certain negative covenants, prepayments and other provisions of the Company’s credit facility."
Wright Express is represented in the CLO universe with the $1.47 billion Wright Express - WEX Term Loan B-3 (Wright Express) (L+225; due 2026). The larger facility was held by over 290 CLO Vehicles in February, approximately 28% of all US deals in Trepp's CLO database.
In March 2020, the facility was subject to multiple buy transactions when its price dipped to the low-$80s. It quickly recovered in value and was traded in the high-$90s. IHS Markit quoted the facility at a notch below par recently.
Sorenson Communications Refinancing With $600 Million Term Loan
Communications products maker Sorenson Communications announced that it has refinanced its existing first lien term loan with a new $600 million first lien term loan due March 2026. The deal was advised by Akin Gump Strauus Hauer and Feld LLP.
Sorenson is represented in the CLO universe with the $700 million Sorenson Communications – Term Loan (3/19) (L+650; due 2024) and the new originated $600 million Sorenson Communications – Term Loan (3/21) (L+450; due 2026). The larger facility was held by over 55 CLO vehicles in February, approximately 5% of all US deals.
During 2020, the larger Sorenson facility saw sparing activity – with most of its trades taking place in the late summer months (July/August) priced in the mid $90 range. Its most recent transaction came in November when it was purchased at par. The new $600 million facility was purchased at slightly below par in March after its origination. IHS Markit quoted both facilities at slightly above par recently.
EPIC Y-Grade Faces Ratings Downgrades; Maintains Negative Outlook
Privately-owned midstream energy company EPIC Y-Grade faces another set of downgrades from Moody’s. When we last wrote about the firm, Moody’s had downgraded EPIC-Y's senior secured Term Loan B to ‘Ca.’ In this round of downgrades, the company’s Corporate Family Rating (CFR) and Probability of Default Rating (PDR) were downgraded to 'Caa2' and 'Caa2-PD,' respectively. Additionally, the agency downgraded the company’s senior secured term loan (due 2024) and two senior secured term loans (due 2027) to 'Caa2,' and also downgraded its senior secured revolver (due 2025) to 'B2.' The company’s outlook remains negative.
The ratings downgrades reflect the company’s increasing debt, which adds to the firm's already highly leveraged balance sheet.
Epic Y-Grade is represented in the CLO Universe with the $950 million EPIC Y-Grade Services – Term Loan B (L+600; due 2024) and the $666 million Epic Y-Grade Services – Term Loan (7/20) (L+600; due 2027). The larger term loan posted little activity in 2020 after it was sold heavily in the mid $70s range last June. The smaller term loan was originated more recently and was sold in February in the high $80s range. Both were quoted by IHS Markit in the high $80s range last week.
General Pricing Data
Issuance in the CLO market decreased as 20 deals priced, down from 28 the week prior. There were five new, eleven refi, and four reset deals. 19 deals were sourced in the US market while one deal was sourced from the EU.
The best new execution in the US Market was the $508.9 million Sound Point XXIX, which featured a AAA class at L+107. The deal is managed by Sound Point and was arranged by Credit Suisse.
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