Amend-and-extend activity for U.S. leveraged loans was red hot in March, rising to $16.5 billion, from $11.6 billion in February, marking the highest monthly total since January 2020, according to LCD. The tally of A-to-E transactions through the first three months of the year, at $34.2 billion, is already 44% of the total from the entire year of 2020.
There were several large pro rata amend-and-extend transactions in March, including an extension of a $2.05 billion revolver for Charles River Laboratories Inc. to April 2026 from April 2023, an extension of Dana Inc.'s $1.15 billion revolver to March 2026 from August 2024, and an extension of LPL Financial LLC's $750 million revolver to March 2026 from November 2024. On the institutional side, Ply Gem Industries Inc. extended its $2.498 billion term loan B to April 2028 from April 2025, Pinnacle Summer Investments Inc. extended its $1.426 billion term loan B to March 2028 from July 2025, and IDEMIA France SAS extended its $760 million term loan to January 2026 from January 2024. In all, there were 23 amend-and-extend transactions in March, covering $10.6 billion of pro rata deals and $5.9 billion of institutional deals.
Market participants speculate that while many borrowers are performing a standard market practice of addressing upcoming maturities in, say, 2022 and 2023, some borrowers may be looking for any opportunity now to push out maturities even further. In fact, so far this year, borrowers have been focused on maturities coming due in 2023 and 2024, extending $7.1 billion and $8.5 billion or pro rata loans, respectively. In 2020, borrowers with pro rata loans focused on maturities coming due in 2021, 2022 and 2023, extending $14.2 billion, $15.8 billion, and $9.4 billion of debt, respectively.
On the institutional side — the type of loans bought by CLOs — borrowers in 2020 mostly focused on debt coming due in 2024 or later, extending $16.8 billion. So far in 2021, $11.2 billion of debt coming due in 2024 or later has been extended.
Turning to upcoming maturities, the volume of loans coming due in 2021-2023 fell by roughly $11.1 billion between February and March, to about $86.4 billion, against the backdrop of roughly $1.2 trillion in outstanding loan paper. Moreover, the volume of loans coming due in 2021-2023 was about $188.8 billion less at the end of March than it was at the end of 2019. The volume of loans coming due in 2024 and 2025, meanwhile, shrank by about $106.6 billion between the end of 2019 and March 2021, while the par amount outstanding due 2026 or later grew by $295.4 billion.
Switching to the covenant-relief side of amendment activity, the volume of these transactions fell to about $2.5 billion in March, from about $6.1 billion in February, courtesy of four borrowers: National CineMedia LLC, Harsco Corp., Regal Beloit Corp. and ACCO Brands Corp.
Covenant relief deals for Harsco, Regal Beloit and ACCO Brands were all done alongside extensions to revolving credit, while National Cinemedia inked an amendment that extended the waiver of its leverage covenants to the quarter ending June 30, 2022, from the previous deadline, the quarter ending July 1, 2021. Note that borrowers extending waiver periods they received earlier in 2020 has been a trend, as the pandemic continues to weigh on the economy.
And in terms of specific sectors, borrowers in Real Estate and Manufacturing & Machinery have seen the most — three covenant-relief transactions each — amid this sample of 2021 covenant relief transactions.
Of course, one of the most fundamental differences in the covenant-relief landscape today, compared to the Great Recession, is that most current deals are in the pro rata segment, comprising revolving credits and amortizing term debt taken on by banks and financial institutions. A decade ago it was institutional issuers, whose debt is primarily bought by CLOs and retail/mutual funds and exchange-traded funds.
In 2009, the volume of institutional and pro rata covenant-relief activity was roughly $140 billion and $97 billion, respectively. Fast forward to 2020 and institutional deals accounted for just $20 billion of the $161 billion in covenant-relief volume, according to LCD.
As usual, we will note that because more than three-quarters of the roughly $1.2 trillion in outstanding U.S. leveraged loans are covenant-lite (and pro rata deals are required to have covenants), it stands to reason that most of today's cov-relief activity is for pro rata deals. For the record, in March, the cov-lite share of the S&P/LSTA Leveraged Loan Index was 84.4%, up from 82.1% in March 2020. For reference, at the end of 2008, before the peak of covenant amendment activity during the last financial crisis, the cov-lite share was just 15.5%.
