The questions we get most often entail what type of loan data/analysis LCD provides and what info is available via our various Indexes (and how that data is compiled). Hopefully, the following FAQ addresses those questions. If not, or you have other questions about LCD Research or LCD News, contact Marc Auerbach (US) or Anna Cini. (Europe)
What is the difference between pro-rata and institutional?
Pro rata loans consist of revolving credits and amortizing term loans. The are traditionally syndicated to finance companies and banks. Institutional debt consists of term loans structured specifically for institutional investors, including CLOs, although some banks buy institutional term loans. These tranches include first- and second-lien loans, as well as prefunded letters of credit. Traditionally, institutional tranches were referred to as TLBs because they were bullet payments, and lined up (were longer-maturity) behind TLAs.
What is LCD's definition of a Covenant-Lite?
A cov-lite loan has bond-like incurrence covenants, rather than maintenance tests which loans traditionally have featured.
What are the Flow Names/Secondary Levels?
Flow names/secondary levels are a composite of large liquid loans and bonds (there's a flow name analysis for each) that trade on a regular basis. These numbers are reported each Tuesday and Thursday. The bid/ask levels are compiled via LCD's Editorial team and traders in market, making the levels an especially timely picture of the current market.
What is the difference between a Buyback and a Tender Offer?
A buyback is when an issuer or its financial sponsor purchases a portion of the issuer’s debt in the secondary market below par, either to cancel the debt or hold as an investment. LCD's buyback amount would be the entire amount the issuer is planning to purchase, and the tender amount is the amount that has been purchased so far. The tender amount is a best estimate, as the final amounts often are not made public. Issuers do not tender for the entire buyback amount at once. Typically, the amendment stipulates repurchase incrementally through a number of tender offers, often over the period of one year, but this can vary.
What is an Upfront fee?
An upfront fee is the same as the original-issue discount (OID). For example, an upfront fee of 100 bps reflects a price of 99. (
What is a Prepayment fee?
A prepayment fee is a feature generally associated with institutional term loans. This fee is seen mainly in weak markets, as an inducement to institutional investors. Typical prepayment fees will be set on a sliding scale, 2% in year one and 1% in year two, for instance. The fee may be applied to all repayments under a loan or “soft” repayments, those made from a refinancing, or at the discretion of the issuer (as opposed to hard repayments made from excess cash flow or asset sales).
Does LCD track amendments? What kind of amendments?
Yes. An issuer often will opt to undertake an amendment in order to better its current negative position, while providing fees and/or increased pricing to its lenders in exchange for this relief. LCD tracks covenant relief and non-covenant relief amendments. Non-covenant relief, for example, might entail a waiver/forebearance agreement in order to avoid default or to not break covenants, filing extensions, loan increases/extensions, etc.
What are BWICS?
Bids wanted in competition is secondary auction of loans or bonds. Typically, an account will offer a portfolio of facilities via a dealer. The dealer will then put out a BWIC, asking potential buyers to submit for individual names or the entire portfolio. The dealer will then colate the bids, awarding each facility to the highest bidder.
Does LCD track investment grade issuance?
LCD started tracking investment grade bonds and loans in 2009.
How does LCD define Middle Market?
Deals with an EBITDA of less than $50 million.
Why can't I get purchase price multiples, equity contrributions or credit stats on indvidual issues?
For individual issuers, LCD provides public EBITDA figures, revenue, total leverage and senior leverage, when available via reporting or filing. LCD cannot provide data per individual issuers. That data comes via non-public sources.
How does LCD compute volume? Other sources have different amounts.
LCD tracks newly syndicated dollars, or new money.
Does LCD have data going back to the 1980s?
LCD was started in the late 1990s (some of you might remember PMD), so a large portion of our data does go back to 1997. We do have a few slides/data points that date further back, based on public sources.
What is the difference between a Repayment Rate and Average Repayment Rate?
Repayment Rate: Sum of all repayments in the LTM divided by the total amount outstanding 12 months ago.
Average Repayment Rate: Sum of all repayments in the LTM divided by the average of the total amount outstanding in the beginning and end of the period.
What are Repayment components?
All partial and full repayments and prepayments, which includes amortization payments, voluntary prepayments and full paydowns.
How does LCD define a Default?
The issue must meet one of the following criteria:
- The company files for bankruptcy
- The facility gets downgraded to D by S&P
- The interest payment is missed without a forbearance
How does LCD calculate lagging 12-month default rate?
The sum of all Index defaults in the LTM divided by the total amount outstanding of the performing loans 12 months ago.
How does LCD define a shadow default?
Shadow Defaults meet one of the following criteria: The issuer ...
- has engaged bankruptcy counsel
- is in forbearance
- has a corporate credit rating of D or SD (SD = selective default, meaning the company missed a payment on an issue, but not all of them.). To calculate the shadow rate LCD adds the amounts and count of issuers to the actual defaults.
What's the difference between the broad LSTA Index, daily composite, and the L100 Index?
– The LSTA Index is the universe of all the loans (approximately 825 issuers with 1,100 facilities).
– The Daily composite sheet provides stats for
- Ratings: top 15 names in three ratings buckets (BB-/Ba3, B+/B1, and B/B2)
- First-lien/second-lien: top 15 first-liens with a corresponding second-lien
- Deals structured in 2009
How does LCD calculate the discounted spread?
Discounted Spread = (Nominal Spread + (((100-Avg. Bid)*100) / Duration)) / (Avg. Bid/100)
What are the criteria for inclusion in the Index?
Characteristics: Syndicated term loan instruments – Facility types: Term loans (both amortizing and institutional), acquisition loans (after they are drawn down) and bridge loans – Security: Secured – Seniority: Senior – Currency: U.S. dollar denominated • Minimum Term: One year at inception • Minimum Spread: L+125, initially • Minimum Size: $50M initially funded loans • Valuation source: Single bid from the LSTA/LPC mark-to-market pricing for those facilities with 1 bid. • When loans are retired: When there is no bid posted on the facility for at least 12 successive weeks or when the loan is paid out or paid down to a negligible amount; defaulted loans will remain in the Index through repayment • Calculation Frequency: Daily; monthly prior to Jan. 1, 1999 and weekly prior to Mar. 31, 2007 • Rebalance Frequency: Weekly (eventually this will be moved to daily for the “tradable” Index); monthly prior to Jan. 1, 1999 • Interest: Accrued by the system on a daily basis; compounded quarterly