US LevFin Wrap — Endeavor sparks royal rumble for allocations in sparse new issue market
- David Bell
- +Dan Milka
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It’s a seller’s market for US leveraged credit, with strong demand for a complicated debt structure backing Silver Lake’s buyout of sports media business Endeavor Group, a flood of lower rated repricing and add-on activity for the likes of Focus Financial and RealTruck, and high yield bond spreads touching new all-time tights this week.
Demand for Endeavor’s sizeable $3bn TLB was in part driven by the success of the brands owned by its subsidiary TKO (more on that later), but it’s also down to the general lack of supply and the amount of demand for floating-rate debt in particular, as shown by the amount of loan repricings coming through.
“Borrowers have the BSL market over the barrel,” said one buysider. “There is no end in sight to the technicals that are driving the market.”
These positive tailwinds may allow banks holding the debt that backed Elon Musk’s buyout of Twitter/X to offload their holdings at a discount next week, according to reports.
Alongside Endeavor, several other deals set the tone of the primary market this week:
- CD&R and Stone Point Capital’s wealth advisory business Focus Financial accelerated the timing by one day to Monday on a $3.8bn TLB repricing that included a $500m add-on to fund its second dividend deal in the past five months
- Insurance distributor AmWINS dropped a $500m bond tranche in favor of upsizing a loan by the same amount to $4.635bn to refinance existing debt and fund a dividend to sponsor Dragoneer
- Utz Quality Foods launched a repricing exercise but ultimately turned it into an amend-and-extend, to cut 25bps from the 275bps coupon and push out the maturity to 2032 from 2028
- Blackstone banking services company IntraFi tacked on a $100m fungible add-on to its $2.46bn TLB repricing via Morgan Stanley to fund its fifth dividend to the sponsor since December 2023 (see our previous reporting in November)
- Lower rated B3 credits such as MedRisk, Ardonagh, Exeter Finance and RealTruck hit the loan and bond market for repricings, refinancings and add-ons in some cases, as exceptionally tight spreads on higher rated debt encourages investors to hold onto high yielding paper
While volumes are still modest overall, the influx of these lower-rated deals signals that some issuers are taking advantage of the lack of new money supply to lock in cheaper financing, according to a buysider. Check out 9fin’s loan and bond screeners for a full list of deals that priced this week.
Investors also said that the higher for longer rate outlook is encouraging for loans. Spreads available in the loan market are also still offering a pick-up to fixed rate high yield bonds, which are trading at all time tights. Analysts at JP Morgan said HY funds increased their allocations to loans by 23bps in Q4 2024 to a three-year high of 3.94%, given the increasing prospect of less Fed easing.
If loan supply is light, it’s even worse in the bond market, where new issue has all but dried up. The JP Morgan analysts said this is the slowest start to a calendar year for HY since 2016, with less than $10bn issued month-to-date.
“New issue flow [for HY markets] has been extremely light and it does not look like it will pickup between now and the month’s end,” said a buyside trader.
Bank of America strategists noted that HY has become an “IG-like market” due in part to increasing rate sensitivity and close correlation to institutional grade returns. The weaker quality of the sponsor-heavy loan market is also a factor behind the yield pick-up.
“IG and HY bonds are trading at 15-year tights but CLOs and loans have attracted demand as spreads are not yet at those kind of tights, plus underlying rates have only increased,” a CLO manager said. “There’s a lot of pressure to deploy cash but everyone wants loans at the same time. We are only able to ramp slowly at the moment.”
The slowest start to a HY new issue calendar since 2016, according to JPM. (Via 9fin bond and loan screeners) (Image)
Smackdown
Investors have shown strong interest in Silver Lake’s $7.25bn debt package to take the sports and entertainment company Endeavor Group private, despite loose docs and a complicated holdco structure that includes asset sales and margin loans tied to TKO Group, the owner of World Wrestling Entertainment (WWE) and Ultimate Fighting Championship (UFC) sports leagues.
That demand bodes well for the $1.9bn debt financing backing Stonepeak’s acquisition of air cargo leasing company Air Transport Services Group, which we reported this week is being pre-marketed by a group of banks led by Barclays.
The transaction, which comprises a $1.4bn term loan B due 2032 and $500m of senior secured notes due 2032, is being shopped with pro-forma net leverage of 3.2x based on $592m of LTM EBITDA through Q3 2024. Sources cautioned that the structure may change depending on demand.
A jumbo financing is also percolating for Quikrete’s $11.5bn acquisition of Summit Materials. Lead left Wells Fargo is holding a lender call on 27 January for a $3bn TLB due 2032, which will come alongside $3.95bn of other secured debt, $2.25bn of other unsecured debt, cash on hand, and ABL borrowings.
Morgan Stanley meanwhile is looking to tempt the buyside’s tastebuds with a debut $745m TLB and $75m delayed draw term loan to back Advent International’s acquisition of Sauer Brands, which is most known for owning Duke’s Mayo.
Flava Flav approved. Via ESPN/YouTube
Ready for takeoff?
VistaJet could be nearing the finish line on a deal to raise new funding that has been long in the making.
As we reported this week, Singaporean investment firm RRJ Capital is in late stage talks to support a proposed convertible preferred equity raise of around $800m for the private jet operator. Pricing is expected in the mid-teens with a multiple on invested capital of at least 2x, sources said. Proceeds would help boost free cash flow by funding principal payments on VistaJet’s aircraft financing arrangements, as we’ve previously reported.
Fintech company Finastra meanwhile is considering options for its $5.3bn private debt stack, which could involve a refinancing or repricing, or even a pivot back to the broadly syndicated debt market.
Another company that’s broadening its options is EQT and Digital Bridge-backed fiber company Zayo, which launched its debut $1.46bn fiber ABS transaction earlier this week. The company has been eyeing the ABS market to help address its chunky debt load, which includes nearly $8bn of outstanding secured debt and a further $1.08bn of senior notes
Finally, we had a look at the 2026-2027 debt maturity wall and which publicly traded issuers have the biggest refinancing needs in those years — primarily those in the Communication Services and Consumer Discretionary industries.
Via 9fin (image)
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