Jefferies

Actionable Ideas for Companies and Sponsors

Record Strength of Leveraged Finance Market Driving 100% First-Lien Refinancing and Access to the Subordinated Note Market

The strong leveraged loan market has driven first lien leverage levels to record levels, providing companies with the opportunity to refinance into less expensive “all-first-lien” debt structures. Even after accounting for the breakage cost from paying the call premium on the junior debt, the interest savings are typically substantial. In addition, the strength of the high yield market is allowing issuers to tap the often-closed Subordinated Note Market, allowing issuers to raise incremental financing beyond the levels that senior debt is restricted to. Recently we have seen Subordinated Notes used to fund acquisitions, refinance other debt and to fund dividends. Most recently, Golden Nugget raised $670 million Senior Subordinated Note priced at par with an 8.75% coupon, as part of a larger dividend financing that also included a $1.045 billion Incremental Term Loan and a $745 million Senior Note add-on. Jefferies acted as lead left bookrunner on the Golden Nugget financing.