Article
Americas Leveraged Finance Weekly: Refinancings Score Again, Software Deals Test Market Reception
By: Mark Fischer
Investor appetite remains strong for a variety of sectors, even as the impact on credits from the continued Iran war remains unclear. Many investors are somewhat numb to the geopolitical volatility, sources noted, but the lack of normalization has exacerbated market bifurcation.
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Primary Tracker
The primary leveraged finance market kept the ball moving with a heavy slate of refinancings dominating the calendar this week, while a handful of acquisition financings joined the field.
Investor appetite remains strong for a variety of sectors, even as the impact on credits from the continued Iran war remains unclear. Many investors are somewhat numb to the geopolitical volatility, sources noted, but the lack of normalization has exacerbated market bifurcation.
Activity in the software sector remains mostly muted due to AI disruption fears, but market participants are devising new ways to address upcoming maturities for software companies in light of volatility. Potential changes include shorter maturities, amortization, higher pricing benchmarks and tighter documentation, according to sources.
A handful of software-related deals have begun to emerge in recent weeks to test the market’s appetite for certain credits in the sector. Among them this week was Cotality’s roughly $5.3 billion refinancing package, which underwent multiple covenant revisions beyond its July 16 pricing deadline after failing to attract sufficient demand. The JPMorgan-led offering ultimately tranched into a $2.8 billion first lien loan, $1.65 billion first lien notes and $800 million second lien notes, following investor pushback over the software company’s high leverage and disruption risk, Octus reported.
Another software deal facing investor pushback is Constant Contact’s $1.35 billion loan refinancing, Octus reported this week. The Clearlake-owned email marketing software company has been premarketing for several weeks, during which some investors are seeking higher pricing or a bond component to compensate for perceived risk.
Thoma Bravo-backed Proofpoint is also expected to launch a $4.7 billion leveraged loan as soon as next week to amend and extend its 2028 debt after strong demand in premarketing, Octus reported. Price talk on the Goldman Sachs-led offering is in the SOFR+ low-400s bps area and 98 OID.
As the AI infrastructure buildout grows, issuers are continuing to push into the leveraged loan market to fund deals.
Data center operator QTS Realty Trust upsized its loan to $3.25 billion this week, more than triple the original size. The JPMorgan-led offering was backed by 12 hyperscale data centers, with the proceeds intended to repay some of their construction costs.
Additionally in the loan market, Coreweave launched a $2.6 billion delayed-draw term loan to purchase GPUs and related equipment for newly signed take-or-pay customer contracts. JPMorgan is leading the loan at price talk of SOFR+425-450 bps and 99 OID, with commitments due July 30.
Elsewhere this week, equipment provider Protective Industrial Products was in the market with an upsized $1.995 billion term loan B to reprice its 2032 debt. Final pricing for the Goldman Sachs-led offering came in at SOFR+375 bps.
Numerous leveraged buyout deals have commitment deadlines next week including FDH Aero’s $1.075 billion loan package financing Bain Capital’s acquisition, as well EnergySolutions’ $1.1 billion TLB to fund its acquisition by Energy Capital Partners.
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 June 11 is shown in the charts below. For year-over-year comparisons, Octus provides data for the last 14 months.
Pricing by Rating
Average spreads and coupons for loans and bonds, respectively, by ratings band as of June 11 are detailed 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:
The average price of privately held Fortna’s $1.425 billion SOFR+550 bps first lien term loan due 2029 has sunk to about 20 cents on the dollar compared with 54 cents three months ago, Octus reported this week. The company is struggling with high leverage and cash strain, and is being advised by Paul Weiss and Evercore.
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 271 bps, according to ICE BofA data. The LSTA Leveraged Loan Index was indicated at 97.01, up slightly from last week.
Moody’s Ratings and S&P Global Ratings downgraded the following companies this week:
The 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.
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