LevFin Issuance Heats Up as Hung Deals Retest Market Participants’ Risk Appetite

Leveraged finance dealmakers are bringing previously hung loan deals to market this month as investor appetite for riskier-rated credit has ramped up amid an open window for primary issuance, according to market participants.

Following the successful syndication of several larger M&A deals earlier this year, such as Electronic Arts, geopolitical volatility from the Iran war and fears over software instability caused new issuance activity to be muted in April but picked up heading into May once market participants grew more comfortable with the macroeconomic backdrop.

Now in June, issuers are taking advantage of an open market, dominated mostly by opportunistic refinancings, to launch deals for credits that have been stuck on banks’ balance sheets before summer vacations ramp up following the July 4th holiday.

“Overall, market conditions feel better today than they did a few months ago,” said one investor this week, who pointed to earnings “feeling decent” as a factor to stronger conditions. Nonetheless, there is a bit of interest rate uncertainty, the source added, which is a factor other investors are taking notice of.

Although there is strong demand in the market currently, investors are still cautious of making mistakes and are evaluating riskier credit with scrutiny, one leveraged finance banker said this week. As a result, many deals are coming back with steep discounts.

One such example in the market this week is a $775 million leveraged loan to refinance debt for Pellera Technologies that has been hung since tariff-related market volatility in 2025. A group of banks led by BMO were forced to fund a $1.1 billion loan in April 2025 to finance H.I.G. Capital’s acquisition of Converge Technologies, which merged with Mainline Information Systems to form Pellera.

The debt has been hung on banks’ balance sheets since, despite an unsuccessful attempt to relaunch a leveraged loan in August 2025. Pellera’s current offering, a five-year first-out term loan led by BMO, launched last week to refinance an $845 million first-out term loan along with a paydown from cash on the balance sheet. The information technology company offers services for digital infrastructure and artificial intelligence, areas that have seen high demand in the debt markets recently. Price talk on the loan is coming at SOFR+450 bps and 92-93 OID with commitments due Tuesday, June 30.

While the market has been busy with repricings and refinancings, this has ultimately led dealmakers to sneak in somewhat riskier-rated deals that have not had success in the past, market participants say. “The capital markets are wide open, which obviously leads to a wider range of issuance across credit,” the investor said on the array of deals to hit the market recently.

Elsewhere, a Barclays-led $400 million leveraged loan is also in market this week to pay down hung debt tied to KPS Capital Partners’ purchase of Ketjen earlier this year when it acquired the catalyst solutions business without syndicating debt to investors.

The seven-year loan is coming at price talk of SOFR+475 bps and 92-93 OID with commitments due Wednesday, July 1. A banker familiar with Ketjen’s offering said that it is not a bad deal but that there are liquidity constraints around it given the smaller size. The market has also favored fewer sponsor-backed acquisitions recently, which caused the deal to see thinner support from investors in premarketing.

Other recent examples of deals addressing hung debt include IVC Evidensia’s leveraged loan part of a cross-border offering, which will be used to refinance existing debt after its amend-and-extend loan was pulled from the primary earlier this year due to market volatility. The offering was upsized, with the final terms including a $975 million tranche priced at SOFR+400 bps and 99 OID.

UBS also led a $780 million leveraged loan earlier this month to fund Echo Global Logistics’ acquisition of ITS Logistics and repay debt, after the debt to fund the acquisition was originally set to launch earlier this year.

Meanwhile, formerly stressed credits are also testing the market. Sound Inpatient Physicians is currently in market with a $960 million leveraged loan to refinance its debt, two years after it went through a liability management exercise. The loan is coming at wider price talk of SOFR+500 bps and 98.5 OID, with commitments due June 30.

An investor noted that although loan activity slowed this spring while the market digested the Iran conflict, market participants have grown more comfortable with geopolitical volatility. That resilience has allowed for a faster recovery than during previous conflicts and is reflected in the bounce-back in riskier credit deal flow, the investor added.

Despite investors showing openness to a wider range of credit quality, however, the software sector continues to face scrutiny for businesses that are vulnerable to AI displacement. Over $5 billion of debt tied to Qualtrics’ acquisition of Press Ganey Forsta is still hung after a group of banks led by JPMorgan funded the deal earlier this year amid the software selloff.

Still, market participants are optimistic that macroeconomic stabilization will lead to a flurry of new deals in the coming months.

“The war is over and oil is down, so every bank is prepping to bring back deals this summer,” another investor said. “But [deals] will still be slightly wider with stronger terms. I don’t think it’s going back to where we were before the war.”