power solutions’ us$5.45bn loans expected to fly amid thin supply - battery management unit

New York, March 7 (LPC)-
The limited supply of leveraged loans in the US looks likely to ensure a strong performance of $5.
The 45bn loan is part of a $10 bn financing plan to support the acquisition of Johnson-controlled car battery units, power solutions, although loan funds have flowed out more than $15 in recent months.
Bankers expressed concern at the end of last year that investors began large-scale trading to withdraw funds from retail lending funds after the Fed said interest rates would not rise as quickly as expected.
This makes other instruments, including bonds, more attractive on a relative value basis, and the price of subprime loans falls as investors sell their loans.
Investors need to deploy cash in slower markets with fewer transactions, which is expected to overcome concerns about the high leverage of power solutions, aggressive documents and the structural challenges faced by the automotive industry in its transition to electric vehicles
"There are few other loans in the market at the moment," said a senior manager of the CLO portfolio . ".
"If you're Johnson control, it's the best background possible.
"So far, the total amount of US leveraged loans in 2019 was US $ bn, 66% lower than the total amount of US $ 343bn in the same period last year, because of the reduction in refinancing activities after the price correction in December.
No other deal of this size is brewing in the US or Europe.
Picture: tmsnrt
Rs/2 VCXtwM investors also expect the loan to sell well as its higher B1 rating is attractive and price negotiations for 400bp are going on in the market, despite concerns about this
"Johnson Control "(loan)
Definitely flying out of the house.
It was a good deal and all the boxes were ticked except for the documents.
"If you have four boxes to tick, you have three, that's enough," said the second senior loan investor . ".
Private equity firm Brookfield Business Partners and pension fund Caisse de depot et placement du Quebec announced $13.
2bn acquired Power Solutions in November 2018.
The acquisition was backed by $5.
45 bn loans will be denominated in dollars and euros, as well as $ 2bn secured bonds and $2.
Unsecured Notes for 7bn will also be US dollars and euros.
The loan will be allocated between $3. 2bn dollar-
Loans and $2 in dollar terms. 25bn-Euro equivalent
Pricing loans.
The pricing of both parts is 400bp-
More than the respective benchmark's ymbp.
The rating agency has issued a corporate rating for B1/B.
Moody's estimates that free cash flow for 12-12 years is generated between $375 and $400
15 months after the transaction, it is expected that this will help to reduce leverage and improve the rating.
Investors are now more interested in larger, better
After the surge in volatility in late 2018 and early 2019, rating companies have strong fundamentals in the late-cycle environment.
"The B1 rating is very different," said the second senior loan investor . ".
The reduction in loan size is also expected to support demand.
Initially, the bank underwrote $5. 2bn dollar-
But loans were cut to $3.
In the addition of the $ 2bn guarantee note to take advantage of red-
Hot spots with high demand
A senior banker said bond yields.
Concerns about the battery maker's exposure to the slowing auto industry are offset by the company's ability to supply batteries for used cars and new cars, which investors see as evidence of a recession.
"Even all new electric cars and hybrid cars require Johnson to control the traditional batteries produced by the company," said a senior banker . ".
For investors, the company's loan documents, high leverage, and relatively low equity checks by the company's private equity owners are more pressing issues, but are unlikely to be dealmakers.
Investors said that Power solution's loan documents contain a full range of aggressive features, including the most vulnerable countries (MFN)
Terms, and the ability to take large-scale measures to pay dividends and increase large amounts of additional debt.
"You said they could do anything," said the second loan investor . ".
Investors say the Power solution document is a bit more aggressive than the huge loans of Refinitiv and Akzo Nobel in syndicate in last September, and due to their large size and synchronicity in the market, it's a bit“It (Power Solution)
Probably more than Refinitiv and Aksu.
The market was tight when they came, but after they did a good job, the market started again.
"From the beginning, the feeling was more optimistic," said the second loan investor . ".
The company will adjust its leverage.
According to the information provided to investors, once after the buyout.
S. financial regulators are concerned about leverage levels above level 6.
The US leveraged loan guide, implemented in 2013, limits systemic risks 0 times.
"Pricing seems fair and we like the business," said the third investor . "
"It's just a touch of too leverage.
"Brookfield Partners also supports the deal, which has more debt and a smaller equity cheque of 23% compared to most transactions.
According to LPC data, the average equity check was 40% in fourth quarter of 2018.
Last week, retail lending outflows slowed to $33, the minimum after 15 weeks of more than $15 outflows, and higher
There was a strong inflow of yields.
Investors increased $3 in the week ended January 17. 3bn into high-
Fund yields, the highest since the end of 2016.
Demand for mortgage debt (CLO)
The largest loan buyer fund has also picked up after a slow start, with about $ 18bn issued so far this year, according to refin, a division of Refinitiv.
"The CLO manager didn't sit in a lot of cash.
"They don't have to play if they don't want to play Johnson control, but they may because the supply is too low," said the CLO portfolio manager . ". (
Additional reports from Tessa Walsh. )