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Lpc european secondary loan prices start to mirror us weakness


Feb 9 European secondary loan prices fell below 98% of face value on Tuesday as the market starts to succumb to the weakness that is dragging US secondary prices lower as fears of a global recession mount. Average bids on Europe's Top 40 composite of the most actively-traded loans dipped to a three-year low of 97.8 on Tuesday, down 50bp since Monday according to LPC analysts, as contagion from the US market starts to spill into Europe."There are dealers who frankly are very nervous who are marking things lower," a senior European loan investor said. European secondary prices have held up to date against the volatility that has hit the US market since last October as concern over energy exposure mounted, but the differences between the markets are starting to fade as European loan prices dip. Average US secondary bids on the SMi100 composite of the 100 most widely held loans hit a four-year low of 95.81 on Monday from 96.02 a week earlier, according to LPC data. The last time the index was that low was January 2012. European secondary prices are falling as investors' trade out of lower-yielding names, such as Swiss chemicals company Ineos' and German metering company Ista, in favour of higher-priced new primary issue. Ineos and Ista are now quoted at 93.9 and 96 respectively.

"There are no buyers, and there are sellers looking to trade out of lower margin secondary to make room for new primary," the senior European loan investor said. LOWER DEMAND

US investors are also worried about falling issuance by Collateralised Loan Obligation (CLO) funds, the biggest buyers of leveraged loans, which is failing to offset 28 weeks of retail outflows and are not yet willing to snap up cheap loans."Eventually if markets weaken enough, participants have to take advantage of the weakness, but for now accounts want to sit and wait," a US loan investor said. The bid-ask spread on the US SMi 100, a proxy for market liquidity, widened to 0.85 on Monday from 0.82 for the week.

US investors are wary of the impact of expected Moody's Investors Service ratings actions on struggling oil and gas loans. Moody's downgrade of exploration and production company Fieldwood Energy's first-lien term loan to Caa1 from Ba2 pulled the loan's secondary price 2.5 points lower to 63-64 on Tuesday, traders said. Although natural gas company Chesapeake Energy no longer has a loan or secondary price, news that the energy giant had hired restructuring adviser Kirkland & Ellis hit sentiment on Monday, sources said."It spooks us a lot  what does that mean for everybody else?" a second US loan investor said. Trouble in the commodity sector is also starting to drag US industrial companies' secondary prices lower. Industrial equipment maker Gardner Denver's loan traded at 86.5-87.5 on Monday, down from 90 a week earlier, sources said.

Lpc pirelli to refinance _68bn acquisition bridge loan


Dec 22 Pirelli is talking to banks about refinancing a 6.8bn 18-month bridge loan which financed ChemChina's acquisition of the Italian tyremaker early next year, banking sources said on Tuesday. ChemChina agreed to become the majority owner of the world's fifth-largest tyre manufacturer in March, as part of a 7.3bn deal. Discussions are in progress with lenders including JP Morgan, which was the original underwriter of the bridge loan and is co-ordinating the refinancing, the banking sources said. The refinancing could have a tenor of three to five years and will put a more permanent capital structure in place. The deal is expected to launch early next year, they added.

The bridge loan was originally raised at a bid vehicle level, but the debt was subsequently pushed down to Pirelli, where it is being refinanced. The bridge loan attracted 17 banks in addition to JP Morgan, according to Thomson Reuters LPC data.

The new refinancing will be non-recourse to ChemChina, but will have elements of support from Pirelli's Chinese owner, bankers said. The original 6.8bn bridge loan was the largest non-recourse financing for a Chinese buyer.

A public tender offer for Pirelli's shares was launched in September by Marco Polo Industrial Holding, a company indirectly controlled by ChemChina through subsidiary China National Tire & Rubber Co., Ltd. Pirelli was delisted on November 6 after Marco Polo acquired 100% of its ordinary shares and 93.2% of its savings shares. The company intends to convert the remainder into special shares, which is expected to be approved by the board at a meeting in mid February 2016.