Americas Leveraged Finance Weekly: LBO Transactions Come to Market Amid Open Primary Full of Refinancings

The primary market continued to be busy with repricings and refinancings this week as well as a number of deals backing leveraged buyout transactions. Over $29 billion of loans priced or were set to price this week, while Octus is tracking another $20 billion of loans that were announced but have yet to price. $9.3 billion of high-yield bonds either priced this week or are awaiting pricing.

Flows turned negative for loans this week to $870 million, the biggest outflow in five months, from $950 million, according to a report by Bank of America. Meanwhile, inflows increased for high yield to $1.47 billion from $950 million.

Market participants said this week that investor sentiment feels risk-on, and the door is open for opportunistic activity.

“Given how hot the market is, we would expect to see more opportunistic issuance for dividends and refinancings over the next month or two,” said Robert Schwartz, a high-yield portfolio manager at AllianceBernstein. There has been talk of private equity sponsor activity, Schwartz added, though much of that deal flow remains to be seen.

Among notable LBO activity, Goldman Sachs is expected to launch a $6 billion debt financing package backing Thoma Bravo’s $12.3 billion take-private of HR software developer Dayforce imminently, Octus reported this week.

In addition, Apollo is premarketing a $950 million debt financing package to support its acquisition of IT consulting company Trace3, Octus reported this week. The debt financing package, which includes a term loan and an asset-based loan arranged by RBC Capital Markets, is expected to launch soon.

Market participants also highlighted that Summit Cos.’ deal funding its acquisition by Pinnacle was received well this week, having been well oversubscribed at launch. The $1.3 billion term loan B and $250 million delayed-draw term loan priced at SOFR+250 bps, tighter than original deal talk of SOFR+275 bps-300 bps. Meanwhile, Meade Pipeline also launched a $600 million loan this week, which will partially fund its acquisition by Ares Core Infrastructure. Commitments on the loan are due next Thursday.

One leveraged finance banker noted this week that though the primary market has still been more heavy on repricings post-Labor Day than anticipated, the banker expects new-money issuance in the coming weeks to help balance this. There is about $30 billion of launches expected in the next few weeks, the banker added, and a decent chunk of that will be new money, with some LBO acquisitions and dividends.

Elsewhere, the banker flagged that PlastiPak’s refinancing deal, which priced this week, was somewhat interesting given that food packaging has been a challenged sector.

A chart of leveraged loans with commitments due this week can be found below:

Additionally, loans that have yet to price are below:

A chart of high-yield bond issuance this week is below:

The LSTA Leveraged Loan Index was last indicated at 99.02 on Sept. 11, up from weeks prior. Average high-yield bond spreads sit at 287 bps, as of Sept. 11, tighter than last week, according to ICE BofA data.

Top daily loan decliners and risers can be found in Octus’ Credit Cloud. A search for the largest bond decliners is HERE.

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

• Forest City Realty Trust
• Kronos Acquisition Holdings
• NeoTech
• Service Properties Trust
• United Site Services
• Multi-Color Corp.

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.