Yet primary markets are telling a different story. Issuers are routinely getting tighter pricing on bonds and loans — highlighting how much investors need paper in a market with persistent net negative new issuance.

That disconnect also has some sellsiders scratching their heads: “I don’t think anyone was thinking we would be doing Single B loans inside 400bps or repricings,” said one banker.

Despite strength in primary, some levfin issuers have given cause for concern this week. First up, Poundland owner Pepco announced a second profit warning in little over two weeks.

A high yield manager we spoke to when the retailer issued its debut bond back in June praised Pepco’s competitive position in the market: “You either want to be discount or aspirational (luxury/high-end).”

Nevertheless, the 5NC2s are down almost three points over the week as Pepco management aims to get its Central and Eastern Europe business back on track — citing “record warm weather” which led to poor demand for clothes in Poland and the Czech Republic.

Betting company Entain didn’t have luck on its side either as new UK safer gambling rules meant it took a larger than expected hit — leading to the Ladbrokes owner saying it will miss its full-year revenue guidance. 

All that is to say, cracks are forming in the world of levfin (if they weren’t there already) — even if it doesn’t feel like that when you look at the primary market.

High yield

Budget gym chain PureGym tightened pricing on both legs of its dual-currency bond deal; you can find 9fin’s full write up here.

The firm, owned by Leonard Green & Partners, saw its £475m tranche settle at 10% (from IPTs in the low 10s) while the €380m notes landed at 8.25% (from IPTs in the mid 8s).

A buysider said: “Why would I buy this at 10% when I can buy Iceland 28s at 10%? That’s a staple rather than a discretionary name. If it was 11% pricing, maybe I could be tempted.”

Nevertheless, the deal got done without any issues, further evidence of a market which has swung towards borrowers vs investors — especially when compared to the start of the post-summer primary window.

“Deals are slowly getting worse. We started this primary window strong with names like Rexel but now we’re seeing names like this. Not in my portfolio, but these hairier deals will get done,” said the buysider.

Vespa maker Piaggio also saw tighter pricing for its 6.5% €250m 7NC3 SUNs — starting with IPTs in the high 6s, before moving to 6.5% (+/-0.125%) price talk. We dig into the deal in greater detail here.

A second buysider said: “The company has been healthy, despite the negative effect of inflation on costs and current visibility indicates that demand will remain solid in all markets.”

Shifting to secondary, EHY saw the largest outflow in 15 months according to Barclays Credit Research — the ninth outflow in the last ten weeks — “driven entirely by ETFs”.

Looking ahead to Q4, expectations for high yield look rosier than lev loans as Goldman Sachs strategists wrote in their latest Credit Strategy Research note.

“High yield bonds over loans, neutral on CCCs in HY but underweight in the leveraged loan market,” they noted, with “still healthy” fundamentals for bond issuers but “much less so for their peers in the leveraged loan market.”

Leveraged loans

Repricings have been a big theme in lev loan world this week, but signs of strong markets are all around, with some deals seeing major upsizing. 

“Deals are generally 2.5/3x oversubscribed, nobody drops even when you tighten the price,” said a second banker. 

Technicals were yet again highlighted as a reason for the loan surge.

“There's simply not enough supply to meet demand. CLOs are in that moment where they have to buy whatever there is to provide returns for their equity tranches,” they added.

As 9fin’s Owen Sanderson wrote in Excess Spread, September has already seen €2.78bn of new CLO supply with another six deals in bookbuilding, while many of the loans in primary have been A&E or refinancing transactions which aren’t adding to market supply.

Galileo Global Education's €300m 2028 TLB was one of the first repricings in nearly two years after a market dominated by A&Es.

Pricing landed at E+400bps vs E+425bps IPTs, with OID at par and a 0% floor. The deal was marketed on 4x total leverage, and offered a 101 soft call protection for 6 months.

“I would expect more repricings going towards Q4,” a third banker said, adding that the current market environment is “far and away the best since 2021”.

Investors in telecom company Virgin Media O2's 2031 TLB saw the OID land at 99, the tight end of original 98.5-99 talk, with an E+350bps margin. The company opted to take size, though, increasing the facility from the original €500m to €600m and then on to land at €700m. 

Speciality pharmaceutical company Theramex gave buyers a headache by tightening pricing on its new 2029 fungible add-on to E+450bps at 99.75 vs E+525bps at 99.75-100 IPTs. 

Banks then massively increased the deal to €790m vs €240m, opting to also refinance the company’s outstanding €550m TLB. The loan will be in the market until October 3. 

Also scoring a massive upsize is BME Group, the Blackstone-owned building supplies company that upsized and tightened its original 2029 €750m A&E.

The size was increased to €1.35bn, with the additional proceeds used to address BME's 2025 TLA and 2026 maturities. Margin landed at the tight end of the E+475-500bps talk, with a 98 OID.

Rocket Software was also in the market with an A&E, extending the maturity of $2bn-equivalent of euro and dollar loans from 2025 to 2028. The new cap stack is mostly dollars, but the company, unusually, increased the euro leg and downsized the dollars during syndication, taking the euros up from €400m to €575m and pricing at E+475bps and 98.5.

On the smaller end, Belgian provider of digital services Team.Blue launched a €150m new fungible add-on due in 2028 to repay RCF drawings, with PT at E+320bps at 97. The deal was later upsized to €175m and priced at 97.5 OID. Also adding on was wired telecom operator Circet, with a €150m fungible add-on TLB at E+375bps (with ratchet) IPT or E+325bps (effective) with OID guidance at 98-98.5.

Palex is in the market with a €350m TLB to finance takeover of the company by private equity firms Apax and Freeman Capital. 

The medical equipment distributor is offering the 2030 facility at E+475bps at 98-98.5. 

Infra Group followed through and tightened its own €600m TLB to support the PAI Partners acquisition of the business in June. 

The deal was priced on E+400bps at 99.5 (from IPTs of E+450bps and 98-99), with size revised to €620m vs €600m IPT. 

Pricing was marketed on €132m LTM June 2023 financing EBITDA, giving 4.6x total net and 4.8x total leverage, per buyside sources, on €25m of cash.

Infra came shortly after Cegid's €700m dividend deal giving buyers a back-to-back of accelerating and tightening.

“How is anyone meant to make money out there?” complained a third buysider, with another investor admitting “people are scrambling for primary paper”.

The Altice complex continues to keep 9fin busy. According to buyside sources, Altice International could defease its 2025 SSNs from the proceeds of a €500m TLB marketing this week (upsized to €800m on Friday afternoon).

Instead of a straight refinancing the €600m 2.25% January 2025 SSNs and repaying them upon receipt of the fresh €500m non-fungible ‘mirror’ TLB due October 2027, Altice may defease its obligations on the SSNs.

The group is in the process of selling three-out-of four assets within Altice International (the four are telecoms units in Portugal, Israel and the Dominican Republic, as well as the advertising company Teads), according to buyside sources. 

This creates big questions over the use of sale proceeds, particularly any excess funds. Management stressed in the lender call that the priority is paying down Altice International debt, but also mentioned “flexibility” over the possibility to upstream the proceeds and use this cash to deleverage the more troubled Altice France.

Our whistle-stop tour through primary closes with INEOS Enterprises, the UK-based chemical company that came in with a late deal on Friday morning.

INEOS Enterprises is now in the market with a €650m 2030 dual currency TLB, offering E+400bps for the euro tranche A and SOFR+CSA+375bps for the USD tranche B.

Loan portfolios were also actively offered in the secondary market this week, with a couple of notable BWICs in the market. One list was the liquidation of Alcentra’s Jubilee CLO 2017-XVIII, while another is said to be an old warehouse liquidation.

Notable lines include a €5m clip of German nursing home company Alloheim, and €7.6m of Altice France’s July 2025, a stub left following January’s monster A&E transaction.

Forward pipeline