This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Leveraged Loans Are Being Issued Like It's 2007

This is all despite the fact that M&A still hasn't hit its stride.

U.S. M&A totaled $853.7 billion for the first three quarters, which was up 37% over last year, according to Dealogic. This was thanks in large part to Verizon Communication Inc.'s (VZ) $130 billion deal to buy back Vodafone Group's (VOD) part of their JV in Verizon Wireless, as well as the Dell and Heinz LBOs. However, the number of deals dropped 21% year-over-year to 7,117.

"The pace of M&A activity hasn't accelerated to the point that people might have expected, as auction activity remains relatively weak," Ryan says. "In addition, some private equity sponsors appear to be taking a relatively conservative approach on valuations while they wait to see how some of the issues in the macro-economic market play out."

With the right company's story, "there won't be a hard cap within reason on the amount of debt that can be raised as we have seen some large acquisition financings this year," said Ryan.

Still, companies could be borrowing trouble, especially if banks allow leverage to creep back up to higher levels.

At the same time, the latest in leveraged loan flavor has tended toward the covenant-lite, which helps keep the default rate low. As Ryan explains, "If there aren't any financial covenants to breach, companies will have a longer runway to restructure before a refinancing is required."

In the 2013 third quarter, 64% of loans issued were covenant-lite, beating out the prior record of 58% set during the second quarter, according to S&P's LCD.

As long as the default levels remain low, the debt markets should remain very, very happy.

Written by Jonathan Schwarzberg
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
AAPL $117.81 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%
TSLA $231.61 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs