Americas Leveraged Finance Weekly: Market Volatility Complicates LevFin Deals; AI Infrastructure Debt Stalls

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After a busy start to October, the primary market settled into a slower pace this week but still with a steady stream of leveraged loans and high-yield bonds supporting M&A activity and refinancings. Nonetheless, getting deals across the finish line proved more challenging for some issuers as rising interest rates and challenging market conditions have heightened investor selectivity.

A growing pipeline of new-money transactions is shifting the supply-demand dynamics in the leveraged finance market, giving investors more room to differentiate between credits, according to a leveraged finance banker.

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Several financings this week required structural and documentation changes, particularly for weaker or riskier credits, while other deals were pulled altogether from the market, Octus reported. Higher Treasury yields and weaker credit spreads have also pushed up borrowing costs, prompting some issuers to delay planned refinancings.

Among the choppy activity this week, Attindas Hygiene Partners had to make numerous changes to its loan backing its acquisition of Activ Medical Disposal after facing lukewarm reception from investors, including downsizing the loan and adding tighter liability management exercise protections. Pricing on the $825 million loan came in at SOFR+450 bps and 97.5 OID.

The high-yield bond market has also come under pressure in recent weeks, making prospective issuers more hesitant to launch deals, an investor said. He pointed to particular reluctance among borrowers considering tapping the leveraged loan market as financing conditions become less favorable.

Grant Thornton Advisors also made several term changes on its $3 billion-equivalent loan and bond package this week to finance its acquisition of CBIZ, including scrapping both the euro and Australian dollar-denominated loan tranches.

Investors had mixed reviews on Grant Thornton’s offering this week, flagging concerns with the “aggressive” nature of the deal despite receiving strong demand in the U.S. market, Octus reported. The final allocated package included an upsized $800 million loan at SOFR+475 bps and 97 OID, as well as $1.7 billion and €450 million notes priced at 10.5% and 9.5%, respectively.

As the high-yield bond market continues to digest the massive volume of deals launched in September, in addition to the ongoing market volatility and recent weakness in secondary trading, several expected bonds financing AI infrastructure have been delayed.

Goldman Sachs has paused premarketing efforts on a $3.5 billion high-yield bond offering for Applied Digital’s Delta Forge 1 and an $800 million high-yield offering for Novva Data Centers, Octus reported this week. Numerous bond financings supporting data center construction are stalled in the pipeline of expected issuance this year, and market participants warn that issuance will remain slow while the high-yield market stabilizes.

Elsewhere, acquisition financings continued to move forward in the loan and bond markets. Crescent Energy priced a $1.5 billion term loan at SOFR+225 bps and 99.5 OID to fund its acquisition of Devon Energy’s Eagle Ford Assets, while Radiology Partners replaced a $485 million add-on term loan with a high-yield bond to support its acquisition of Everlight Radiology. The new $485 million secured notes priced at 9.75% and 98.86 OID to yield 10%.

Amwins Group also finalized terms for its roughly $2 billion loan and bond package to fund its acquisition of Steadfast AgenciesCo. The offering included an upsized $1.45 billion loan at SOFR+250 bps and 99 OID and a downsized $500 million 7.375% secured notes offering. Sabert Corp. is expected to price its $1.12 billion term loan today, Oct. 23, to fund its acquisition by Butterfly Equity, with current price talk at SOFR+425 bps and 98-98.5 OID.

Refinancing activity was a mixed bag this week, with AVI-SPL pulling its $690 million leveraged loan from the market after the Wells Fargo-led deal intended to refinance the company’s private debt failed to price by its deadline, Octus reported. Autokiniton launched an amend-and-extend of its $1.049 billion term loan offered at SOFR+450 bps-475 bps and 99 OID, with commitments due Oct. 27.

Meanwhile, Ares Management-backed LaserAway was recently premarketing a roughly $675 million term loan with Jefferies to fund a refinancing and dividend payout, but ultimately opted to shelve those plans due to market volatility, Octus reported this week.

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

Issuance by Use of Proceeds, Ex-Repricings

Issuance by use of proceeds for both loans and bonds, but excluding repricings, as of Oct. 15, is shown in the charts below. For year-over-year comparisons, Octus provides data for the past 14 months.
 

 

Pricing by Rating

Average spreads and coupons for loans and bonds, respectively, by ratings band as of Oct. 15 are shown in the charts below. Because of the limited activity of CCC rated issuance, only the months with issuance are shown.

Pricing by ratings category is shown below:
 

 

 

Zenith Arc notes traded up on the conditional approval of the data center’s floodplain permit that had delayed construction of the 149-megawatt data center in Okmulgee County, Oklahoma, Octus reported this week.

The $2.25 billion of 8.875% senior secured bonds backed by triple-net lease payments from Jane Street traded up to 86.7 on Oct. 19 from a three-month low of 82 on Oct. 15, according to IHS Markit. The notes exchanged hands at 85.75, yielding 12.9% on Oct. 21.

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 340 bps, according to ICE BofA data. The Loan Syndications and Trading Association Leveraged Loan Index was indicated at 96.60.

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

• Symplr Software Intermediate Holdings Inc.
• Planview
• Interior Logic Group
• Mega Broadband Investments LLC
• Learning Care Group
• Liberty Communications PR Holding
• Jadex
   

Octus Covenants’ analyses of the documentation for new loan transactions are HERE.

Octus’ Private Company Analysis recent reports are HERE.

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

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