Actionable Ideas for Companies and Sponsors
Strength in Syndicated Second Lien Term Loans
The syndicated second lien market has remained strong, with syndicated second lien issuance outpacing private placements by nearly 3:1 YTD. An incredibly hot loan market and a slew of first lien repricings this year have resulted in issuer friendly terms, as companies have been able to tighten spreads. Also, lower average coupons in high yield bonds have resulted in investors searching for yield and turning to second lien term loans. While inherently riskier for investors, second lien term loans reward this risk with higher yield. Second lien new issue volume this year is almost on pace with 2018, but the second lien term loans spread over their respective first lien term loans has tightened by 52bps to 335bps on average.
Jefferies recently completed a refinancing for Ankura Consulting, a provider of management consulting and expert services. The borrower chose to upsize the second lien term loan to fund cash to the balance sheet while leaving the first lien term loan unchanged. The $465 million first lien term loan priced at L+450 / 0.75% Floor / 99 OID and the $175 million second lien term loan priced at L+800 / 0.75% Floor / 98.5 OID, clearing 350bps wide of the first lien term loan.