Regardless of whether a missed interest payment on second lien notes is made, the rating agency "believes that a default of some sort is inevitable."
For the third consecutive month, investor protections in high yield remained at historical lows in the latest bond covenant quality assessment from Moodys Investors Service.
Investors withdrew $511 million from the loan market this week, led by mutual funds for the week ending Dec. 3. High yield bonds returned to net outflows this week with investors pulling $732.4 million from the market after pumping in $73 million last week.
Subprime consumer finance lender Springleaf Finance Corp on Tuesday announced a drive-by offering of $500 million in five-year senior notes to repurchase notes from a bondholder as well as build capital reserves for further debt repurchases or acquisitions.
CDW Corp. and MGM international Resorts priced bond deals on Monday, including MGMs $100 million add-on to an upsized notes issue last week that sold above par.
CDWs $575 million, 10-year notes proposal is expected to price today through an bookrunning effort led Barclays. MGM is offering a $100 million in 6% senior notes that will be added on to the companys existing $1.15 billion in 6% senior notes maturing in 2023 issued through Bank of America Merrill Lynch.
B/E Aerospace and its spin-off KLX on Friday completed and priced $4 billion in loans and notes launched to fund capital and a dividend for the aircraft cabin manufacturer as it splits into two separately run firms.
According to Lipper, investors withdrew $373.7 million from loan funds in the week ended Nov. 19, down slightly from $397.8 million the previous week; it was the lowest amount of weekly withdrawals in more than two months.
Corporate speculative-grade liquidity improved to its best mark in over 18 months, with the Moodys Investors Service Liquidity-Stress Index easing to 3.2% in mid-November from the 3.5% level at the end of October.
While analysts have mostly noted the growing number of covenant-lite structures of loans and high-yield bonds, there are certain sectors that have recently moved toward increasing investor protections.
Firm: Octagon Credit Investors