Americas Leveraged Finance Weekly: Late Summer Push Keeps Market Humming With AI and Refinancing Credits

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With summer nearing its end, the leveraged finance market remained active this week, with several drive-by deals and offerings that had spent weeks in marketing finally reaching the finish line.

One investor said they were surprised by the level of activity this late in the summer but said the steady flow of deals has also given cuspier borrowers with riskier credits, such as software issuers, an opportunity to test the market for favorable terms. Among the more active areas of the market lately have been financings tied to AI infrastructure, software amend and extends and refinancings that move debt from private credit into the broadly syndicated loan market.

The appetite for leveraged loans tied to AI infrastructure was on full display with cloud-computing provider Lambda, which upsized its loan to $926 million to finance graphics processing unit acquisitions and installations tied to an Nvidia contract.

The Morgan Stanley-led loan was significantly oversubscribed at launch, with the book size topping over $5 billion during the week, underscoring investors’ continued demand for neocloud and other AI-infrastructure credits. Lambda’s loan tightened to SOFR+300 bps and 99.5 OID due to the strong response.

Among other AI-related financings emerging in the BSL market, Crusoe is premarketing a roughly $509 million special purpose vehicle-backed GPU loan, Octus reported this week. Goldman Sachs is leading the financing, with Jane Street serving as an offtaker. Zenith Arc also came to market this week with $2.25 billion of senior secured green notes to finance data center construction, with the offering pricing at 8.875% coupon and 99.5 OID.

Meanwhile, the software sector remains active with refinancings, with a handful of issuers testing investor appetite on select credits with upcoming maturities. Veritas-backed Gainwell Technologies launched the high-yield bond tranche as part of its $4.34 billion loan and bond package to refinance its entire capital structure. Final terms for the $2.6 billion loan tranche landed at SOFR+450 bps and 98 OID with significantly tighter documentation after it added an omni blocker and several LME protections.

The Knot Worldwide, a wedding planning technology company syndicated a $670 million amend-and-extend, with wider pricing, including a PIK component, pushing the maturity on its existing term loan from 2028 to 2030. The JPMorgan-led loan priced at SOFR+525 bps.

Broadly syndicated refinancings of private credit also continued this week as insurance broker The Fidelis Partnership’s $2.04 billion leveraged loan closed, pricing at SOFR+275 bps and 99 OID.

However, investor selectivity has held out on deals with less borrower-friendly structures, such as PureStar’s $975 million loan package. The offering was still in the market today after failing to price by its Aug. 10 commitment deadline, with document changes expected imminently from lead arranger Citizens Bank, Octus reported.

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 Aug. 6 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 Aug. 6 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:
 

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 97.24.

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

• Hertz Global Holdings Inc.
• Skillsoft Corp.
• Cogent Communications Holdings Inc.
• Ingevity Corp.
• Medical Properties Trust Inc.
• Quidelortho Corp.
• The Knot Worldwide Inc.
• AL GCX Holdings

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.