Article/Intelligence
Leveraged Finance Weekly: Consumer Discretionary Deals Dominate Primary Market; Tariff Concerns Ease in Secondary
The primary market was relatively quiet this week from a new issuance perspective. Still, $7.9 billion bonds priced and $8.1 billion of loans priced. Inflows accelerated for high yield to roughly $2 billion from $0.13 billion, as well as for loans to $0.69 billion from $0.39 billion, according to a report by Bank of America.
Among notable primary activity this week, Patterson’s $1.35 billion loan financing its leveraged buyout by Patient Square Capital was pulled from the market by UBS due to lack of investor participation and market volatility caused by tariffs, Octus, formerly Reorg, reported this week.
This week also saw a substantial amount of consumer discretionary related transactions. Notably, Sizzling Platter priced its $500 million high-yield bond and $505 million leveraged loan package financing its acquisition by Bain Capital after document changes were made to appease investor pushback, Octus reported this week.
In the same vein, Skechers’ $6.4 billion loan and bond deal backing its leveraged buyout by 3G Capital is expected to have a number of changes as a result of investor concerns over high leverage, Octus reported. Market participants looking at Skechers’ offering had expressed mixed opinions about the deal, weighing the sneaker brand’s strong position in budget footwear against its significant tariff risk, Octus reported.
Elsewhere, Vista Equity Partners-backed Accelya is pre-marketing a $675 million refinancing package via Deutsche Bank as the airline software provider looks to replace its existing private credit loan in the broadly syndicated loan market, Octus reported this week.
In addition, ITG Communications launched a $540 million loan to refinance certain debt and to fund a dividend. ITG joins Actus Nutrition, which is also in the market looking to both refinance existing debt and fund a dividend.
Leveraged loans that priced this week are shown in the chart below:
Additionally, loans that have yet to price but are currently in the market are below:
A chart of high-yield bond issuance this week is below:
As mentioned, the consumer discretionary sector was more active in the primary market this week, despite facing significant pressure over the course of this year from macroeconomic concerns and ratings agencies’ substantial downgrade pressure in recent months. This week’s debt offerings were less drive-by-focused than in recent weeks, with Sizzling Platter and Skechers among top-performing debt offerings in the secondary market, according to sources. Radiology Partners was another deal that required several days to be finalized, pricing at the wider end of talk following changes to terms and a slight upsize. However, Radiology is among a few debt offerings this week that are weaker in the secondary market, according to sources.
On June 26, the LSTA Leveraged Loan Index was indicated at 98.55, the highest in weeks.
This week in the secondary market, investors noted that names that were trading down on tariff concerns have largely recovered, adding that the market feels generally less reactive to news related to tariffs. Some cited Harbor Freight Tools as an example of a company that has significant tariff risk yet remains generally favorable among investors given its competitively priced products and strong track record with withstanding tariffs under President Donald Trump’s first term.
One investor also noted that Herbalife Nutrition has been trading fairly well after paying down $50 million of its 7.78% senior notes due 2025 in recent weeks. The investor added that the dietary supplement company has strong liquidity and is a real improvement story from its controversy in the last two years.
Top daily loan decliners and risers can be found in Octus’ Credit Cloud. A search for the largest bond decliners is HERE.
Moody’s Ratings and S&P Global Ratings downgraded the following companies to CCC this week:
Octus Covenants’ legal analysts have completed analyses of the documentation for the following new loan transactions: ADT, Actus Nutrition, Centuri Holdings, ITG Communications, MyEyeDr., Radiology Partners, Sazerac, Sizzling Platter and Skechers.
Octus’ Private Company Analysis team this past week released reports on companies including Kereis, FNZ, Pretium Packaging and At Home Group.