Patterson Tries to Price Debt Financing for Patient Square LBO Amid LevFin Market Volatility From Tariff Policies

Patterson Cos.’ buyout financing to support its acquisition by Patient Square Capital received mixed feedback prior to tariff-induced market volatility. As the market struggles to find its footing following President Donald Trump’s rollout of global tariffs, Patterson’s take-private financing risks hanging on banks’ balance sheets until a more stable investing environment returns, according to sources.

A $1.35 billion leveraged loan and $1 billion high-yield bond for the pet health company has been marketed since last week via lead lefts UBS and Citi. Price talk on the loan is coming at SOFR+450 bps and 95-96 OID while the bond is coming at 9.5%.

Investors were skeptical of Patterson’s business prior to the tariff shock last week, noting that performance declined in the year leading up to its acquisition by Patient Square. Dental and animal health revenue peaked in fiscal year 2022 and has since deteriorated, worrying investors.

In Octus’, formerly Reorg’s, primary analysis on Patterson, analysts said they believe that fair value for the bonds is in the 9.5% to 11.5% range, wide to mid-9% initial whispers. The company is facing weakened growth prospects in its dental equipment and companion animal business lines stemming from price pressures, which has pressured its EBITDA margin, according to Octus’ report.

“We believe that in the event of an increasingly uncertain trade environment, an operating backdrop that has already been difficult may become harder,” Octus analysts said in the report. Pricing on the deal is expected today, Wednesday, April 9.

Patterson is not the only primary deal that has faced tough market conditions amid Trump’s decision on new tariff policies last week. Deals in the market last week that were caught in the crosshairs of tariff volatility, such as ABC Technologies and CEC Entertainment, which owns the Chuck E. Cheese franchise, have remained quiet since the April 2 announcement. Meanwhile, Converge Tech’s merger deal was pulled from the market, according to Bloomberg.

For deals “without the need to get done,” the market is on pause, sources have voiced in unison. Meanwhile, others have shown signs of a lack of investor participation, including deals for Mohegan Gaming and Owens & Minor. Even as the U.S. administration lessens the tariff burden faced by many trading partners, the leveraged finance market is likely to remain closed for highly levered names and leveraged buyouts, according to sources.

Other sources have pointed out that historically, amid market dislocation, private credit has outperformed other asset classes as it has less volatility in valuations and more execution certainty. As a result, there could be more deals that have struggled in the primary broadly syndicated loan market that may shift toward the private market in hopes of a more favorable fate.

In December 2024, the Nasdaq-traded Patterson announced it would be acquired by Patient Square Capital for $31.35 per share in cash, or $4.1 billion, according to a press release. The transaction will be financed through a combination of committed equity financing provided by Patient Square Equity Partners LP as well as committed debt financing to be led by Citi, UBS Investment Bank and Wells Fargo Bank NA, according to the release. The deal is expected to close in the fourth quarter of Patterson’s fiscal year 2025, according to the release.

Moody’s Investors Service assigned a B2 rating to Patterson and a B2 rating to the proposed loan. The ratings agency said the B2 corporate rating is based on “the company’s solid position as a leading distributor of products to the dental and animal health markets.” Additionally, the ratings agency said Patterson’s leverage is 6.3x.

Octus concluded a primary analysis of Patterson Cos.’ loan, which can be found HERE. Octus’ Covenants’ legal analysts have completed an analysis of the documentation for Patterson, which can be found HERE.

Citi and UBS declined to comment. Patterson and Patient Square did not respond to requests for comment.