Primary leveraged yields decline slightly in 3Q19

Primary yields have tightened slightly across rating levels so far in 3Q19. The main driver behind the decline in yields are falling Libor rates. At its current level of 2.13%, the 3-month Libor rate has dropped 19bp from 2.32% at the end of 2Q19. For single B issuers, the average yield, assuming a three-year term to repayment on first-lien institutional term loans is 6.89%, 16bp below their 2Q19 level. However, the average Libor spread for these issuers is slightly up to 422bp from 415bp in 2Q19. At an average of 5.27% so far this quarter, the average primary yield for BB-rated issuers is down 25bp from 2Q19. For these higher-rated issuers, the average spread is flat relative to 2Q19 at 283bp. As investors have become more cautious given fears of an economic slowdown, they have embraced higher-rated deals. Ba1/BB+ rated Dell increased its term loan B to US$4.75bn from US$4bn. Pricing is now being offered at 200bp over Libor, a 0.75% floor, 99.875 original issue discount from original guidance of 200bp-225bp over Libor and a 99.75 OID.