Americas Leveraged Finance Weekly: Market Participants Gather in Miami for JPMorgan LevFin Conference as Geopolitical, AI Volatility Stalls New Issuance

The primary market slowed to a near standstill this week as leveraged finance participants traveled to Miami for the annual JPMorgan Global Leveraged Finance Conference, with geopolitical volatility surrounding the Iran war mixed with continued AI-related concerns further dampening dealmaking activity.

Octus tracked just one leveraged loan deal this week, totaling $900 million in principal. High-yield bond activity was a little more active, with six deals, totaling $5.6 billion of principal.

New issuance was scarce this week, sources said, as market participants were busy at the highly anticipated conference and new geopolitical dynamics put a pause on the market. Investors pointed to developments with the Iran war and AI disruption to the software sector as factors weighing on sentiment, causing several leveraged loan and high-yield bond deal processes to be paused while markets take a “wait and see” approach.

Despite the slowdown, market participants said deals in the pipeline are still moving forward in the coming weeks, including Electronic Arts’ multibillion-dollar loan and bond offering, which is expected to launch next week with wider pricing as a result of the AI-induced software selloff, as reported.

Pricing on the syndicated debt, which will be denominated in U.S. dollars and euros, has widened out about 100 bps in recent weeks, sources said, due to the software sector selloff. Initial price talk on EA’s leveraged loans is now SOFR+350 bps-375 bps and 98.5 to 99 OID, according to sources, while the high-yield bonds are being talked in the low- to mid-7% area.

Among the few deals this week, Arclin priced its $1.1 billion loan financing an acquisition of Dupont’s business, which was downsized by $150 million after the deal stalled past the Feb. 26 deadline. The offering faced cold reception from buy-siders in recent weeks, causing final pricing to widen to SOFR+450 bps and 92 OID.

Another deal to struggle recently is AMC Entertainment’s $2.3 billion leveraged loan and high-yield bond refinancing package, which has drawn mixed views from investors because of the company’s stressed history, as reported. Investors said they are expecting new terms on the offering by next week, after it passed its Feb. 26 commitment deadline.

Alliance Ground International also widened pricing this week on its $890 million term loan B to finance its acquisition by Lone Star Funds. Commitments were due March 5, with price talk at SOFR+450 bps and 98 OID.

Meanwhile, Qualtrics’ highly anticipated roughly $5 billion debt offering backing its acquisition of Press Ganey Forsta has prompted concerns from leveraged finance participants due to worsening AI fears tied to the SaaS industry, Octus reported this week. The JPMorgan-led deal is expected to launch as soon as this month, though investors said timing will be dependent on market conditions.

Elsewhere, Blackstone and Warburg Pincus are among the firms interested in acquiring Thoma Bravo-owned digital identity software developer Imprivata, Octus reported this week. Interested firms would likely tap the broadly syndicated loan market to finance the potential deal, though sources cautioned that a potential sale of Imprivata was not guaranteed and subject to change.

For more information on potential deal activity, see Octus’ Deal Origination Pipeline.

We recorded $6.5 billion of loans and bonds that were announced in the last week, as shown in the tables and summaries below.

Issuance volume year to date for leveraged loans and high-yield bonds is below:

Issuance by Use of Proceeds, Ex-Repricings

Issuance by use of proceeds for both loans and bonds but excluding repricings is shown in the charts below. For year-over-year comparisons, Octus provides data for the last 13 months.

Pricing by Rating

Average spreads and coupons for loans and bonds, respectively, by rating band are detailed in the charts below. Because of the limited activity of CCC rated issuance, only the months with issuance are shown.

Pricing by rating category is shown below:

In the secondary market, Wilsonart’s bonds edged up 2 to 3 points today after the company disclosed fourth-quarter earnings, which were “better than feared” amid ongoing challenges in the building products sector. The uptick in the company’s notes due 2032 follows an 11-point slide prompted by the recent departure of CFO Dave Rodgers and weak earnings results across the sector.

Top daily loan decliners and risers can be found in Octus’ Credit Cloud. A search for the largest bond decliners is HERE.

Average high-yield bond spreads sit at 300 bps, wider than last week, according to ICE BofA data. The LSTA Leveraged Loan Index was indicated today at 96.68, up slightly from last week.

Moody’s Ratings and S&P Global Ratings downgraded the following companies this week:

• Cano Health Inc.
• Rackspace Technology Inc.
• Foresight Energy

Octus Covenants’ analyses of the documentation for new loan transactions can be found HERE.

Octus’ Private Company Analysis recent reports can be found HERE.

Octus’ Fundamentals Coverage Weekly Update highlights new-issuer coverage in Fundamentals for the syndicated credit universe, alongside transcripts for syndication calls.