Americas Leveraged Finance Weekly: M&A Fuels Loan Issuance; Volta Infrastructure Prices Loan Despite AI Jitters

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M&A activity in the primary market stole the spotlight this week among a packed calendar of leveraged loans, alongside a more unique AI financing for Volta Infrastructure’s inaugural primary offering.

The strength in issuance with loans did not extend across the broader leveraged finance market this week, however, as seen by the lack of new high-yield bond issua;nce despite a growing pipeline of expected deals. Volatility has gripped the high-yield market and new supply has dried up considerably since the start of the month, a leveraged finance banker said this week.

Leveraged loan demand, however, remains robust and should keep its momentum as investors look to hedge against rising interest rates from the Fed, the banker added. Order books for BB and strong single-B credits are oversubscribed, even as investors are showing more caution on lower-quality and complex credits, creating a gap in pricing, they said.

This week, Volta Infrastructure’s roughly $5 billion leveraged loan slipped past its Oct. 14 deadline and priced a day late, as investors weighed the roughly 11% yield against mounting caution over AI-related exposure, Octus reported.

Volta’s loan priced on the wide end of talk at SOFR+650 bps and 95 OID for both the $1.3 billion term loan C and a $3.712 billion graphics processing unit term loan. The JPMorgan-led offering went through several term and document revisions due to investor pushback, despite the deal reaching book size. Delays in Volta’s pricing came as secondary market volatility this week dampened leveraged finance participants’ sentiment on AI infrastructure credit, with CoreWeave’s unsecured notes trading into distressed territory.

Elsewhere in the loan market this week, leveraged buyouts and M&A financings flooded the calendar. MyEyeDr launched a $650 million loan to fund its acquisition of EyeCare Partners’ optometry division, which is offered at SOFR+300 bps and 99.03 OID with commitments due today.

Final pricing is also expected today for Flow Control Holding’s $1.05 billion loan tied to Blackstone’s acquisition of a majority stake. Other LBO financings this week included Crescent Energy’s $1 billion loan, which will fund the acquisition of Devon Energy’s Eagle Ford Assets, as well as AmWINS Group’s $1.2 billion loan to fund its acquisition of Steadfast Group’s underwriting business.

Meanwhile, refinancing loans kept their pace as well, including IT software provider Ensono’s $1.4 billion loan and Healthcare software firm WellSky’s $1.97 billion loan to refinance its 2028 debt. Ineos Energy also priced $700 million senior notes at 9.125% to repay term loan A debt and fund a shareholder distribution.

With light bond issuance recently, market participants are focusing on the forward pipeline, which continues to build with expected AI infrastructure debt, despite recent volatility. A growing supply of high-yield issuance in the behind-the-meter space is expected following the massive electricity demand from data centers and the strain on existing power grids, Octus reported this week. Although the power sector has lagged data center financings this year, multiple issuers are considering high-yield financings to power data centers over the next six months.

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 Oct. 15, is shown in the charts below. For year-over-year comparisons, Octus provides data for the past 14 months.
 

 

Pricing by Rating

Average spreads and coupons for loans and bonds, respectively, by ratings band as of Oct. 15 are shown 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:
 

 

 

Elevated market volatility driven by inflation fears has worsened leveraged finance participants’ view of AI infrastructure credit, with credits in the secondary market such as CoreWeave feeling the greatest pain, Octus reported this week.

CoreWeave’s unsecured notes traded into distressed territory on Oct. 14, and Oct. 15, with three of its four dollar-denominated notes trading at a spread above 1,000 and some issues trading at or below 80 cents. Among data center bonds, the Jane Street-leased Zenith Arc and CoreWeave-linked Galaxy Helios bonds led the declines.

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 323 bps, according to ICE BofA data. The Loan Syndications and Trading Association Leveraged Loan Index was indicated at 96.82.

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

• Warner Bros. Discovery
• 1440 Foods
• Corus Entertainment Inc.
• Springs Window Fashions
   

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.