529 plans: The ins and outs of contributions and withdrawals

Lpc pricing widens to help emea buyout loans close


´╗┐Aug 10 Arranging banks have had to increase pricing on several buyout loans to close the deals to avoid holding risk over the summer holidays and get ready for September's new deals as increasingly risk-averse investors become more selective, bankers said. Pricing has been increased on a range of buyout loans in the last couple of weeks, including the UK's Motor Fuel Group, German laboratory services company amedes, and London-listed Bwin.party."Pricing has been amended on several deals. They have been priced to clear and it is a great time to be an investor," a leveraged loan investor said. All of the deals with increased pricing are new buyouts, which have met a less enthusiastic reception than deals for well-known names as investors grow pickier. A rush of deals in July offered lenders more choice for the first time in 2015, which has otherwise been defined by low deal flow. Deals for popular, well-known companies such as UK pharmaceuticals firm AMCo and European cable and telecoms group Altice were well received in the summer and pricing was reduced, but some newer buyouts have struggled recently."When people really like credits the price becomes secondary, such as on AMCo and Numericable. When people don't have high conviction you start getting into discussions on price and it is usually on deals involving new clients or credits," a leveraged loan investor said. UNFAVORABLE COMPARISONS Several recent buyout loans have suffered due to comparable deals offering higher pricing, including a $600 million-equivalent term loan backing online gambling company 888 Holdings' acquisition of Bwin.party.

Pricing widened to 400 basis points (bp) with a discount of 99-99.5 percent of face value, up from initial guidance of 325bp-350bp with a 99.5 OID. A one percent Libor floor, which guarantees returns for investors, remained unchanged. The loan, which was roughly split between a $350 million tranche and a euro-denominated tranche, increased pricing to stay in line with a comparable $400 million-equivalent add-on facility for Canadian online gaming company Amaya, which was in the market at the same time. Amaya's add-on loan had price guidance of 400bp on the dollar tranche and 425bp on the euro tranche, in line with existing loans. A 425 million euro ($464.61 million) term loan backing the acquisition of amedes Group was also affected by investors' comparing the deal with German laboratory operator Synlab, which priced a high-yield bond financing on July 23, which backed its buyout by Cinven. Investors wanted amedes to pay up for the loan after receiving higher pricing on Synlab's bonds, which yield 6.429 percent on the senior secured notes and 500bp with a 99 discount on the Floating Rate Note (FRN).

Amedes flexed pricing higher on a 425 million euro term loan B 475bp with a 98 discount, from initial guidance of 450bp and a 99.5 discount. Soft call protection of 101 was also added to the deal for six months. Bankers were trying to close amedes before the expected summer slowdown. The price increase had the desired effect of attracting investors and banks to the yield on the covenant-loose deal. BETTER DOCS As well as higher pricing, documentation has also been improved on some buyout loans to attract investors, including a 300 million pound ($464.25 million) term loan backing the buyout of Motor Fuel Group.

Pricing increased to 500bp with a 99 discount from initial guidance of 475bp with a 99-99.5 discount. Soft call protection of 101 for six months was added to the deal. The documentation changes on Motor Fuel Group's loan included a reduction in the Most Favoured Nation (MFN) cap to 50bp from 100bp, which means that any incremental debt raised cannot pay any more than 50bp over the term loan. Some arranging banks are keen to derisk and sell their exposure quickly to avoid a repeat of previous summers, when several buyout loans were 'hung' in the market. Arrangers were left overexposed and were forced to offer heavy discounts and sell the deals at a loss in September."The investment banks are a lot more focused at getting stuff off of books," the banker said. NEW DEALS Lenders also want to clear their books for new deals that will hit the market in September, including up to 400 million euros of loans led by Goldman Sachs to back French digital media company Technicolor's acquisition of Cisco's home equipment business. Loans totalling 595 million euro are also expected for Netherlands-based textile technology group TenCate's buyout by a consortium led by Gilde Buy Out Partners and around 1 billion pounds will also be needed to refinance British cereal maker Weetabix."Lenders don't want any overhang and they don't want to hold product or risk as there are a lot more deals coming in the final quarter," an investor said. ($1 = 0.9147 euros) ($1 = 0.6462 pounds)

Money funds soothed by lack of fed rate cut talk


´╗┐Money market fund managers breathed a sigh of relief on Wednesday after minutes from the Federal Reserve's June policy meeting showed no indications the central bank was considering cutting the interest rate it pays on excess reserves to banks. Many fund managers believe any cut in the rate, which currently stands at 0.25 percent, would cause disruptions in funding markets, especially money market funds. Minutes from the Fed's June meeting, released on Wednesday, showed the central bank was open to the possibility of buying more bonds to stimulate the economy, although the recovery might need to weaken for a consensus to build. The minutes did not include any discussion of a possible cut in interest rates the Fed pays on excess reserves on banks. Such a cut has been posited as an economic stimulus option for the central bank, as it would then be less profitable for banks to leave their excess reserves with the Fed, and might encourage banks to make more loans and invest in higher-yielding securities. But some analysts believe any cut in the interest rate would hurt money market funds.

"Money funds are prohibited from buying assets with negative yields. So what would they buy if interest on excess reserves was lowered and caused all market rates to move to zero percent or less?" asked Joseph Abate, money market strategist at Barclays Capital in New York, adding "they would have to close shop."Meanwhile, in Europe, euro-zone bank-to-bank lending rates hit new all-time lows on Wednesday, as the European Central Bank's move to cut its main refinancing and deposit rates to historic lows weighed on market rates. The ECB's overnight deposit rate, which it cut to zero on Thursday, acts as a floor for money market rates as banks only lend to rival banks if they are able to earn a better rate of interest than at the ECB.

The ECB hopes its unprecedented move, which means banks will now get nothing if they park their spare cash with the central bank, will boost interbank lending by forcing banks to look for more profitable options. Although some money market experts fear the cut could backfire and kill off parts of the market, the move has had an immediate impact on bank-to-bank rates. Three-month Euribor rates, traditionally the main gauge of bank-to-bank lending, on Wednesday hit a new all-time low of 0.512 percent, down from 0.521 percent.

Other key rates saw similar drops. Six-month Euribor rates fell to 0.795 percent from 0.805 percent and shorter-term one-week rates decreased to 0.145 percent 0.158 percent. Overnight rates which do not yet factor in the benefit of the ECB's cut - coming into force overnight Wednesday - inched down to 0.323 percent from 0.325 percent. Euribor rates are caught up in a manipulation scandal centered on the counterpart Libor bank-to-bank rates, after it emerged a number of banks were falsely submitting the rates they pay to the committee that aggregates the data. Dollar-priced three-month bank-to-bank Euribor lending rates also fell on Wednesday, dropping to 0.97571 percent from 0.978 percent, with overnight rates falling to 0.34286 percent from 0.346 percent. Euribor rates are well above the euro-priced Libor rates, one reason being that Euribor figures include prices from more of Europe's struggling banks than Libor.