So here’s a funny thing. The one asset class that the great and good of the global economy seems to be worried about – leveraged loans – is just about the only one that has made money for investors in 2018.
Corporate bonds? In the red. EM bonds? In the red. Equities? In the red. Financials? In the red. You name it, investors have lost money on average in nearly all global markets.
The difference, of course, is that loans are floating rate and offer some protection against rising rates. Hence the rush to get exposure (whether directly or via loan funds and CLOs) and damn the credit concerns or the lack of sensible covenants.
As a consequence, leveraged finance was arguably the big markets story of 2018.
It certainly was for IFR.
In fact, it was on the day of the IFR Awards Gala Dinner in January 2018 that news broke that the part of Thomson Reuters that publishes IFR was to be purchased in a leveraged buyout by a consortium led by private equity giant Blackstone. The carved out company – named Refinitiv – finally came into being in October.
The deal was funded by US$13.5bn of bonds and loans, plus US$1bn of preferred equity, which has a 14.5% PIK coupon, and a US$750m revolving credit facility. Not forgetting US$3bn of equity.
We usually read the loan docs of such high-profile deals, but we did so for this one with extra interest (especially the part about US$650m of cost savings).
The deal, which turned out to be a great success, was a useful reminder that the activities that IFR writes about – and the deals we recognise via these awards – are not abstract intellectual exercises or get-rich-quick schemes for those involved, but have profound real-world consequences.
All of us would do well to remember that.
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