US LevFin Wrap — Chobani PIKs a dividend, Rise and Aspire offer investors a bake-off

David Bell
+William Hoffman

18 October 2024•4 min read

This is our weekly newsletter on all things US leveraged finance, from the latest trends to in-depth coverage, to people moves. Explore all our market wraps here.

There is no shortage of demand for US credit as deals for the likes of Chobani and PointClickCare flew off the shelves this week to support sponsor dividends, while banks are pushing M&A financing through the market to support deals for Rise Baking and Cohesity, among others.

Strong order books and increasing M&A supply have been the story of the primary market since the Fed started its rate cutting path, as we highlighted in our US LevFin Primary Review for Q3 earlier this week. But there’s still not enough paper to satisfy demand as investors are upbeat on the economic outlook, leading credit spreads to some of their tightest levels in almost 20 years — the spread on the ICE BofA HY index is now just 289bps, tightest since mid-2007.

“This Goldilocks narrative is still very prevalent and you're now in a Fed-cutting environment,” said John Lloyd, lead of multi-sector credit strategies at Janus Henderson. “The Fed is likely to go with 25bp cuts from here on out, which is very supportive of levered credit as long as the economy stays strong.”

That said, analysts at BofA point out that investor demand for paper has not yet opened up capital for the weakest segment of credits in the space (see chart). And in a fairly busy and largely receptive primary market, lenders are having to prioritize their resources which often at the expense of deals from smaller or less known issuers, such as Sunbelt Solomon (B2/B/-) which widened pricing on a $450m TLB this week.

Primary highlights this week included Chobani’s $650m PIK toggle holdco senior note which will ultimately fund the repurchase of preferred notes held by Healthcare of Ontario Pension Plan.

The PIK holdco structure, triple-C ratings and the dividend aspect of the deal deterred some lenders, but others were drawn to the hefty coupon — as well as the strong growth and deleveraging that the yogurt maker has delivered. The bonds were priced at 99 but have since rallied above 102 in the secondary.

Trading firm Jane Street printed a new $1.15bn SSN due 2032 that was upsized from $1bn and priced at 6.125%, inside price talk of 6.25% area. It also shaved 50bps from $3.2bn of TLBs due 2028 with a repricing that brought the coupon down to 200bps.

Healthcare tech firm PointClickCare priced a $1.625bn term loan to fund an $850m dividend to its sponsors Hellman & Friedman, JMI Equity and Dragoneer Investment Group, as well as pay down its 2027 term loan debt. Pricing and timing accelerated by several days as investors remained receptive to dividend deals from companies that are performing well.

Looking ahead, JP Morgan announced on Friday a $2.8bn TLB to fund privately-owned IT company Cohesity’s combination with the data protection unit of Veritas Technology, which is owned by Carlyle, in a deal valued around $7bn.

There are also two deals from bakery companies vying for attention. Rise Baking is offering $650m senior secured notes due 2031 and a $650m TLB due 2031 to fund its acquisition by Platinum Equity (see our Credit QuickTake and Bond Legal QuickTake).

Meanwhile Aspire Baking is in the market with a $608m TLB add-on as part of a recapitalization, as sponsor Lindsay Goldberg rolls its investment in the business into a continuation vehicle.

“We have the elections coming up so I think we’ll see the calendar slow down pretty quickly and into the holidays,” Lloyd said. “I still think we'll see some repricings as they roll off their six-month call period given the number of loans that are trading above par.”

Hurricane impacts

Hurricane Milton has had some spillover into the leveraged credit space, as we highlighted in this report.

9fin’s search tool highlighted two HY names that flagged an impact on operations: Walgreens and NextEra Energy. We also highlight a number of other names that were affected by other recent storms that took a similar path across the state.