Americas Leveraged Finance Weekly: Primary Market Takes a Vacation as Data Center Pipeline Builds

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The leveraged finance market hit its late-summer lull this week, with just a handful of deals pricing as activity thinned out ahead of Labor Day.

Little new issuance is expected before the holiday, leaving issuers and lenders looking toward the fall pipeline where a slate of lofty data center and AI infrastructure financings are drawing much of the attention. However, as AI-related issuance grows, investors are evaluating concentration more and are looking for incremental concessions given the volume of supply hitting the market, one investor said this week.

Among the fall pipeline of data center financings, Goldman Sachs is expected to lead a number of deals related to the AI infrastructure buildout, including a $1.085 billion secured note offering to fund Digital Drive’s buildout of its CoreWeave-leased data center campus, Octus reported this week. The notes are currently premarketing and are expected to be issued through a financing vehicle affiliated with developers PowerHouse Data Centers and Chirisa Technology Parks.

Applied Digital is gauging investor interest on a roughly $3.5 billion high-yield bond offering to fund its Delta Forge 1 AI factory campus in Louisiana, Octus reported this week. The proposed Goldman Sachs-led deal is whispered to come in the mid-to-high 7% range, though the deal is in the early stages and terms are subject to change. The debt financing would fund a 15-year take-or-pay lease, with Meta or Amazon likely to serve as a high investment-grade tenant.

Meanwhile, Goldman Sachs is sounding out investor interest in an $800 million high-yield bond offering to finance the data hall buildout in two Novva Data Center campuses in Nevada, Octus reported this week. The proposed notes are expected to launch after Labor Day, with early price whispers in the mid-8 to 9% range.

Recently, most market activity has still been driven by refinancings rather than new money, according to an investor. He added that the technical remains supportive, with some spread widening starting to emerge for 2028 and 2029 amend-and-extends, particularly in software and AI-related names. Disagreements between software issuers and creditors came to light this week when Idera cleansed discussions with its lenders on its attempted A&E, Octus reported.

Only a handful of deals priced in the market this week, including Draftkings’ $700 million leveraged loan to refinance debt, tightening to SOFR+200 bps and 99.5 OID, and GFL Environment’s $1 billion leveraged loan to fund an acquisition, pricing at SOFR+200 bps. Northern Oil and Gas also launched $500 million of senior notes due 2034, talked at the 7.5%-7.75% area.

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:
 

Term loan and high-yield bond debt for WestJet fell earlier this week after the company disclosed weak demand metrics and lower third-quarter guidance, Octus reported. The Canadian budget carrier saw quotes on its nearly $1.5 billion SOFR+275 bps term loan due 2031 fall to 94.75, down three points prior to the earnings release and subsequent call, while quotes on its $500 million senior secured notes due 2031 fell to a similar range.

EBITDA is expected to decrease between 60 million Canadian dollars and 95 million Canadian dollars (about $43.4 million and $68.8 million) in the third quarter following a strike earlier this month. WestJet cutting transborder capacity by 20% on an annual basis in the second quarter, alongside higher jet fuel costs, also were cited as factors that impacted the company’s performance.

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 275 bps, according to ICE BofA data. The LSTA Leveraged Loan Index was indicated at 97.39.

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

• Veracode
• Avaya Inc.
• Balcan Innovations
• Robertshaw
   

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.