Americas Leveraged Finance Weekly: Paramount Wraps Mega Debt Package While Strong Loan Demand, Softer High Yield Make for Mixed Start to October 

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The primary market got an early taste of October’s tricks and treats this week, as Paramount wrapped up its historic debt financing package alongside the ongoing stream of acquisition and refinancing deals.

Reflecting back on September, typically one of the busiest months for leveraged finance, high-yield bond issuance fell short of expectations, despite a handful of mega deals, according to market participants.

The market is a mixed bag, according to a leveraged finance banker, who noted that high-yield issuance is particularly challenged as base interest rates rise, while issuing leveraged loans becomes more attractive. There was roughly $70 billion of loan issuance in September, while the calendar is expected to remain robust into October and through the year-end, with new issue demand bolstered by “staggeringly strong” order books, according to the banker.

Paramount finalized terms this week on its $12.4 billion-equivalent second lien notes and $9.45 billion-equivalent of leveraged loans, closing out the monumental $57 billion-equivalent leveraged buyout financing package for its Warner Bros. Discovery acquisition that has been in the works since February.

Paramount’s high-yield bond offering included $6 billion in notes maturing in 2031 with an 8.25% coupon, $4 billion due 2034 with an 8.875% coupon, $1.4 billion due 2036 with a 9.125% coupon and €885 million due 2031 with a 7% coupon. The final loan offering included an $8.5 billion tranche that was upsized by $2 million before pricing at SOFR+275 bps and 99.75 OID.

The newly issued high-yield bonds and legacy Paramount-side bonds traded down in the first days after pricing. Market participants pointed to numerous reasons for the secondary activity, including tight final pricing, optimistic synergy scenarios and interest rate timing.

The digital infrastructure sector was active at the latter end of the week, with Volta Infrastructure Holdings launching a $4.9 billion leveraged loan offering to cash collateralize a letter of credit for its data center lease in Norway as well as graphics processing unit capex. JPMorgan scheduled a lender call for Monday, Oct. 5, for the offering, which includes a $1.3 billion term loan C and a $3.6 billion GPU term loan.

Several acquisition-related financings launched this week, including H.B. Fuller’s $969 million term loan B and a $500 million incremental term loan B, alongside $950 million of unsecured debt, to fund the acquisition of Advanced Medical Solutions and refinance 2027 notes. The loans are talked at SOFR+175 bps-200 bps and a rolled OID of 99.75 and new-money OID of 99.5, with commitments due Thursday, Oct. 8.

Also in the market was MacLean Power Systems’ $1.65 billion loan to fund its Delta Star acquisition. Commitments on the Barclays-led deal were due Oct. 1, with price talk coming at SOFR+250 bps. Forge also launched a $325 million loan for its acquisition of Becker’s Healthcare, with price talk at SOFR+350 bps and 99.5-99.75 OID and commitments due today, Friday, Oct. 2.

Refinancings kept up their pace in the market this week, including Apex Service Partners’ $2 billion term loan B and $300 million delayed-draw term loan to refinance existing private credit debt, as well as Kenan Advantage Group’s $1.61 billion loan to refinance debt. Meanwhile, Integra Life Sciences held a lender call this morning for its $600 million term loan B to refinance existing debt, talked at SOFR+375-400 bps and 99 OID.

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. 2, 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. 2 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:
 

 

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 324 bps, according to ICE BofA data. The Loan Syndications and Trading Association Leveraged Loan Index was indicated at 97.13.

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

• City Brewing LLC
• Cornerstone Building Brands Inc.
• JELD-WEN
• Skillsoft Corp.
• AAR Corp.
• Torrid Holdings
• Talen Energy Corp.
• AHF Products
• Oldcastle BuildingEnvelope Inc.
• Caesars Entertainment Inc.

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.