Leveraged loans are generating their biggest losses of the year as investors pull back from even the safest debt in a company’s capital structure on concern that Europe’s financial crisis will spark a global slowdown that diminishes the creditworthiness of borrowers.
Syndicated loans of speculative-grade borrowers lost 1.22 percent last month, the most since November, snapping the longest rally since the eight months ended February 2011, according to the Standard & Poor’s/LSTA U.S. Leveraged 100 Loan index. The last time investors lost money in the debt of companies such as Energy Future Holdings Corp. was in November, when the market fell 1.34 percent.
Deere’s offering will be of benchmark size, typically at least $500 million, according to a person with knowledge of the transaction who asked not to be identified because terms aren’t set. Proceeds from the benchmark sale will be used for general corporate purposes, according to a regulatory filing by the Moline, Illinois-based tractor maker.
“Even if on a retail level you have outflows,” there is still “steady” interest from institutional investors such as collateralized obligations, said John Popp, head of Credit Suisse Group AG’s credit investment group, which manages $16.2 billion.
Gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a previous estimate of 2.2 percent, according to revised Commerce Department figures released last week. The report also showed corporate profits rose at the slowest pace in more than three years and smaller wage gains at the end of last year.