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Americas Leveraged Finance Weekly: AI and Energy Demand Drives Primary Issuance as Calendar Thins
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Primary Tracker
The primary leveraged finance market remains open but is settling into its seasonal slowdown, with refinancings dominating issuance and investor demand becoming increasingly selective.
“We’ve got a few larger deals that hit the market but overall, the pipeline doesn’t feel that big at all,” one investor said. “It’s mostly like repricings and refinancings, and some of the repricings are getting too tight.”
Sector selection is driving investor demand, with the gap between favored and out-of-favor credits widening further, said market participants.
The AI infrastructure buildout continues to absorb whatever supply reaches the market.
“Overall, I’m not looking at a ton of giant deals right now,” said a banker. “But the market can’t seem to get enough of some of this data center or energy paper, so we’re a little busier than we thought.”
In AI-related financings, CoreWeave is in the market with 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 offering, talked at SOFR+425 bps-450 bps and 99 OID, with commitments due Thursday, July 30.
Meanwhile, Nexus Data Centers, the developer behind a 2,900-acre data center campus leased to AI giant Anthropic, is eyeing a roughly $15 billion bridge loan to finance its buildout, Octus reported this week. A group of banks is arranging the loan, which is expected to be taken out via bonds or loans in the fall, according to sources.
In energy, Blackfin Pipeline, a joint venture between Venture Global and WhiteWater Development, launched a $1.07 billion term loan B, talked at SOFR+200-220bps, this week via MUFG to refinance its existing $1.05 billion SOFR+325 bps loan due 2032.
“There are definitely haves and have-nots in terms of market activity,” a lawyer said. “Obviously software is taking a beating.”
One of the most notable software deals this week is Proofpoint, a Thoma Bravo-backed cybersecurity company, which launched a $5.035 billion amend-and-extend to extend its first lien SOFR+300 bps term loan debt due 2028 by two years. Price talk on the Goldman Sachs-led offering is SOFR+425 bps-450 bps, while commitments are due Tuesday, July 28.
The cybersecurity angle is a positive for the credit, especially in a sector investors have otherwise been reluctant to touch.
“Even though anything software is a little concerning, we still like this name because anything security related has a better focus and moat against disruption,” a second investor said. “Cybersecurity is actually very attractive and is gaining traction with AI growth because more companies are vulnerable to technology threats. I think this deal will go well.”
On a lender call this week, Proofpoint’s management announced the company’s plans to IPO in the coming years, according to sources. The company noted it would aim to delever below 3.5x before an IPO – the company currently sits around 6.5x leverage, they added. Thoma Bravo declined to comment on IPO comments and leverage.
Software loans, once considered a stable investment due to recurring revenue and reliable cash flow, are now facing uncertainty due to fears of AI disruption, Octus reported. This has led to expectations that credit deal structures will have to undergo changes, including shorter maturities, higher pricing benchmarks and tighter documentation.
Elsewhere this week, Ancestry launched a $1.75 billion five-year TLB, guided at SOFR+400 bps-425 bps and 98.5-99 OID, and $500 million senior secured notes talked in the mid-8% area. Proceeds from the Bank of America-led offering, which commits July 28, will repay outstanding borrowings and fund general corporate purposes.
Family Dollar is also in the market with a $400 million five-year first lien TLB at SOFR+550 bps-575 bps and 98 OID. The JPMorgan-led deal, alongside $450 million of other secured debt and a $300 million draw under a new ABL facility, will repay the existing first-in-last-out and ABL facilities and fund a distribution to shareholders. Commitments are due Wednesday, July 29.
On the acquisition financing side, FDH Aero priced a loan package to back its acquisition by Bain Capital. The debt deal included an $875 million seven-year funded term loan and $200 million delayed-draw facility, priced at SOFR+275 bps and 99.5 OID.
In the coming weeks, issuance is expected to enter its annual summer slowdown, before picking up again in the fall.
“It’s become pretty clear to the private equity world and to a lot of issuers that the market is really strong as long as you’re not in one of these out of favor sectors,” the banker said.
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 EchoStar subsidiary Hughes Satellite Systems’ secured notes have sunk to 75.3, down nearly 12 points since June 19, while the price of the unsecured notes has fallen to below 50 from 63.5 over the same time period, Octus reported this week. The company is expected to file for chapter 11 bankruptcy protection as soon as next weekend.
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 268 bps, according to ICE BofA data. The LSTA Leveraged Loan Index was indicated at 96.95, down 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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