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This week was punctuated by hot economic data reports as well as an actual earthquake in New York on Friday, but the action in leveraged finance primary markets was a little less than seismic.

Debt syndications for Herbalife and Genesee & Wyoming highlighted some shifts in the tectonic plates of bond and loan markets. Both issuers shifted the structure of their deals, with G&W boosting the loans and downsizing the bonds, and Herbalife doing the opposite.

Leaving Herbalife’s specific credit issues to one side for a minute, some observers think more generally that the climb higher in Treasury yields this week — and expectations of higher rates for longer — might encourage higher rated borrowers to tap into the strong CLO bid in the loan market to have more flexibility to prepay expensive debt more quickly.

“Credit markets are wide open and the technical environment is extremely strong,” said Jono Peters, a director at Union Square Advisors. “It has been a fairly quiet week with economic data coming out but you’ve got a very good technical backdrop to go and access both [BSL and private credit] markets right now.”

Despite an aggressive covenant package with numerous off-market terms, loan investors scrambled to get a piece of the Genesee & Wyoming railroad story to fund a dividend to sponsors Brookfield and GIC.

The deal is part of the company’s plan to carve out its more volatile and capital-intensive European business into a separate entity to focus on its more stable bulk commodity rail freight operations in North America — see our Credit QuickTake for a deeper dive on the credit story.

Strong demand helped leads upsize the loan portion by $300m to $2.725bn and tighten the pricing through IPTs; the bonds meanwhile were downsized by an equivalent amount to $700m with the coupon printed in line with IPTs.

Herbalife however was a different story. After launching the loan portion last week, investors seemed to sour on the refinancing after the company held calls with bond investors this week. Several investors said they found the company’s pitch unconvincing.

Tepid sales metrics and a tight labor market are concerning, and financials suggested that raising over a billion dollars of debt at double-digit yields will seriously crimp free cash flow.

The company drastically boosted the yield and investor protections on offer and launched the bonds and loan on Friday, shifting $100m from the loan portion to increase the bond.

The $400m loan was priced at an OID of 93 and 675bps over SOFR. Meanwhile the 12.25% coupon (and 13% yield with the 97.298 OID) on the $800m 2029 senior secured bonds makes them the highest yielding double-B bond in the market, according to 9fin data, narrowly beating DISH.

Similarly, Japanese conglomerate Rakuten was able to raise $2bn in an upsized bond deal this week, by offering a 9.875% coupon — roughly three percentage points wider than average double B credits.

“Other than Genesee, deals have just been low quality,” said a high yield portfolio manager. “Rakuten getting $2bn done at just under 10% tells you something.”

On a similar note, a $1.16bn PIK loan for Russell Investments limped to the finish line two weeks after the initial commitment deadline, forced to leave a $20m stub outstanding to accommodate holdouts.

MyEyeDr on the other hand was able to tighten the pricing through initial talk on a $1.4bn TLB due 2031 to refinance existing debt. A new slug of preferred equity encouraged lenders, alongside the privately held vision care company’s improving financial performance after it cooled the jets on an aggressive expansion plan.

Another sign of how open credit markets are for the right names is GEO Group, which successfully priced $1.725bnof bonds and loans to refinance around $1.5bn of existing debt.

Less than two years ago the company had to do a distressed debt exchange and sell assets as its financing options shrank in the face of ESG pressure. But times have changed since then and investors and bankers seem less squeamish about private prisons than they were — as shown by CoreCivic’s blowout bond deal earlier in the month. GEO Group also did a private exchange with some holders of its 6.50% convertibles.

A good test of market conditions will be Broadcom EUC’s $2.6bn TLB due 2031 to fund KKR’s acquisition of the software business from VMware. Led by UBS, the loan is talked at S+400bps-425bps with a 98.5 OID, with commitments due 17 April.

Some lenders have already expressed doubts about KKR’s experience in the software industry, as well as a wide range of interpretations on the marketed EBITDA figure. Then again, the CLO machine is roaring after the busiest Q1 since 2021, fund inflows are piling in, and new money deals remain scarce.

“I probably have to play,” said one analyst looking at the deal. “The market is too hot. Everything is flippable.”

Primary situations were a little thin this week but there was no shortage of M&A news to keep track of for the potential financing pipeline.

Silver Lake announced a $13bn take-private deal for talent and entertainment agency Endeavor, in the largest private equity sponsor take-private in 10 years and largest ever in the media and entertainment sector, according to the sponsor

Liberty Media announced a €4.2bn deal to acquire Dorna Sports, the rightsholder to MotoGP World Championship, adding to its motor sports stable alongside FormulaOne

Apollo saw its $26bn bid for Paramount spurned, but is reportedly in talks with Sak’s Fifth Avenue to finance the company’s potential acquisition of rival Neiman Marcus (add that to the list of potential retail LBOs including Macy’s and Nordstrom)

Authentic Brands reportedly has a deal to buy clothing brand Champion from Hanesbrands for over $1bn

Carlyle is said to be considering selling US aircraft maintenance provider StandardAero in a deal that could be valued up to $10bn including debt

The Deal reported that Dallas-based family office MNC’s bid to acquire Vista Outdoor, the maker of Remington rifles, is backed by $1.5bn in equity and $1.5bn in debt committed from a “large private equity firm” and about 10 family offices as well as commercial banks and other financial institutions. This comes after Vista already lined up a deal last October to sell its sporting goods business, including rifle maker Remington, to Czechoslovak Group for $1.91bn. That deal still requires regulatory approval, but MNC wants to keep the assets under US ownership

Summit Partners is said to be working with investment banks Raymond James and Centerview Partners to explore a sale of grooming company Dr Squatch that it hopes will fetch around $2bn

The push to get deals done comes with private equity firms under pressure to put cash to work or make distributions to LPs, a narrower bid-ask between buyers and sellers compared with last year, and the upcoming US election.

“The bid ask has narrowed but there's still a lot of deals that are not getting done even at the two yard line,” said Peters at Union Square Advisors.

On top of that, there’s still a lot of potential volatility for financial markets to navigate in the next few months that may impact whether transactions come to fruition.

“Whether you’re right, left, center or otherwise, the election is going to bring a whole lot of other things from a macro perspective back into the fold after a couple of years where people haven’t necessarily been focusing on as much,” said Peters.

FTAI Aviation — Capitalization and relative value

Comstock Resources — Capitalization and relative value

Genesee & Wyoming Inc — Bond Legal QuickTake

Comstock Resources — Bond Legal QuickTake

Skydance’s unique offer for Paramount Global would give it a large stake while keeping the company public (CNBC)

General contractor Tutor Perini hires Goldman to refinance debt (Bloomberg)

Boeing, Airbus exploring framework to divvy up Spirit Aero's operations (Reuters)

Gildan sets April 10 deadline for initial takeover offers (The Globe and Mail)

Dividends outstrip cash flows at Blackstone’s flagship property fund (Financial Times)

Billionaire Steve Cohen sees four-day work week coming (Bloomberg)

Trump got his $175 million bond from a billionaire fan’s company (Bloomberg)

How Hertz’s bet on Teslas went horribly sideways (Bloomberg)

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