So we’re heading into the home stretch of 2008. Next week marks the official end of summer, and the beginning of one last push to get deals through before bonus time (no matter how battered those checks may look this year).
Check back next week for a PEhub roundup of outlooks on Q408, which basically means Labor Day through Thanksgiving.
But before looking forward, let’s take the blood pressure of the current state of affairs, using a Factbox round-up of the live M&A deals, and a Wall Street Journal round-up of the leveraged-loan backlog.
FACTBOX: About 9% of the deals tracked by Reuters are LBOs (that’s 4 out of 41). Looking at the spreads, just one PE-backed transaction made it to the top ten widest spreads list, taking the top spot.
I covered Factbox spreads in June, when there were 6 PE deals on the charts. Half of them boasted the widest spreads. This time around, only Huntsman/Hexion (backed by Apollo Management) made the top ten, for no other reason than all the other big take-privates either fell apart or got done. (Clear Channel and BCE passed, Penn National failed.)
So Apollo’s messy attempted buyout of Huntsman Corp, with Huntsman trading at a 104% spread to the offer, is the last deal giving private equity firms a bad name. Every other buyout on the list (Triarc/Wendy’s, Blackstone/Apria Healthcare, Macquarie/Puget Energy) has spreads under 10%. Investors just might have re-established faith in take-privates (in the very, very few opportunities they have to show it).
And for the record, the strategic deals with the widest spreads are mostly in the energy sector, with Calpine Corp, Alpha Natural, and Grey Wolf posting up wide spreads.
LEVERAGED-LOAN BACKLOG: Today the Wall Street Journal took stock of year-to-date leveraged loan action. high yield issuance is down by nearly half, and debt from the mega-buyouts of Home Depot’s HD Supply, BCE, First Data, Intelsat, Clear Channel and Harrah’s remains on the books. WSJ’s Heidi Moore paints a telling picture:
Investment banks including Goldman Sachs and J.P. Morgan have tried to distance themselves from those hoary old loans by labeling them “legacy” loans. It’s an attempt by the banks to give the appearance of a fresh start; to mow the lawn and paint the fence. Making sure the house looks tidy is a tall order, however, with the giant trash bin of leveraged loans sitting in the driveway.
Meanwhile, in strategic deal-land, investors can’t get enough of the Mars-Wrigley debt. According to Churchill Capital’s On The Left newsletter, only a tiny slice of the buyout debt came to market.
“One buyer calls it the best deal in seven years, but accounts aren’t seeing much of it. Arrangers allocated Wrigley’s $3.6B TLB mostly to co-underwriters, leaving 250 funds to fight over the rest. Many got only $1MM tickets. The loan was flexed down and still traded at 100.5,” wrote Churchill’s Randy Schwimmer.