Leveraged Loan Supply Outpaces Investor Demand, Causing Mallinckrodt-Endo, Nouryon Refi Deals to Be Pulled From Primary Market

While the primary leveraged finance market has been wide open for issuers to refinance debt this fall, buy-side participants are still holding conviction on investing in certain credits if the price is not right.

As a result, several recent primary deals have received lackluster demand from investors and in some cases have been pulled from the market altogether.

Within the last month, pharmaceutical company Mallinckrodt-Endo pulled its $1.5 billion loan, while chemical producer Nouryon did the same with its dual-currency $5.8 billion loan, according to sources. Both deals were in the primary to refinance debt but did not receive enough investor demand to get across the finish line, sources said.

Market participants have noted that supply is outpacing demand for the first time in months, giving investors room to be more selective and push back on deal pricing.

Mallinckrodt’s repricing loan, led by Goldman Sachs and talked at SOFR+325 bps-350 bps, was an opportunistic move and not a capital raise, a source familiar with the deal said, noting it will eventually come back when the time is right.

An investor who passed on the Mallinckrodt loan noted that timing was not ideal given a busy few weeks of primary loan activity from September into October while the last two weeks have slowed down in the market. In September, leveraged loan volume represented the third-highest monthly issuance so far this year, at $121.5 billion in volume, according to Octus data.

Nouryon also pulled its $3.86 billion loan, led by JPMorgan and talked at SOFR+325 bps-350 bps and 99.5 OID, which, along with a euro-denominated €1.69 billion loan, was being issued to refinance debt, according to sources. Investors’ dissatisfaction with pricing for the Carlyle-backed chemicals producer’s loan led to a lack of investor demand that ultimately caused the deal to get pulled, sources said.

Nouryon operates in the chemical sector, which investors said they have been cautious about in recent months as it has struggled with earnings volatility and higher energy prices. Still, one investor noted that Nouryon is a good company in the sector and said if the deal comes back to market once investor demand ramps up, “it should get done more easily.”

One source familiar with Nouryon’s deal said that it was a highly opportunistic trade, adding that the company is in good financial shape, despite the volatility that some chemical companies are seeing in the credit market.

Elsewhere in the primary, other loan deals have pushed back commitment deadlines and in some cases sweetened terms in the hope of getting offerings wrapped up.

One example is gaming operator Bally’s Corp., which extended its A&E deadline to tomorrow, Friday, Oct. 17, while also eliminating a minimum threshold this week, Octus reported. And a $1.5 billion loan financing Thoma Bravo’s acquisition of Verint Systems, which will be combined with Calabrio, also had changes made to the deal after its premarketing period, Octus reported. Commitments are now due on Oct. 17, extended from the original Oct. 15 deadline, according to sources.

Carlyle and JPMorgan declined to comment. Nouryon did not respond to a request for comment.

Goldman Sachs declined to comment. Mallinckrodt and Endo did not respond to requests for comment.