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US LevFin Wrap — Darktrace, BMC deals kickstart the second half in holiday week
David Bell
•3 min read
Happy Fourth of July to those who celebrate! It was a quiet week for obvious reasons with yesterday’s holiday, but there were still a few things to catch up on if you were away from the desk.
BMC Software priced a hefty refinancing this week with a new $4.31bn TLB and €1.475bn TLB due 2031, and $750m second lien term loan due 2032, all of which priced at the tight end of talk. In our preview of the deal, lenders said the company’s steady as she goes mainframe business was appealing to credit investors even if it lacks growth potential.
Also in the software space, cybersecurity company Darktrace raised $2.145bn in the loan market to fund its leveraged buyout by KKR. Lenders said they were keen to increase their exposure to the hot cybersecurity and AI spaces, even if some are yet to be convinced by the company itself.
Foundation Building Materials priced a $600m add-on to its SOFR+400bps TLB due 2031 at 99.5 to fund M&A. This follows a string of bolt-on acquisitions by the building product distributor, which is backed by American Securities and new investor CD&R. Some lenders said they were caught off guard by the M&A news, but $190m of new sponsor equity helped sweeten the deal.
Vodafone Spain launched a €3.4bn-equivalent cross border syndication of bonds and loans to fund the €5bn acquisition of Vodafone’s Spanish unit by Zegona, a listed acquisition shell run by a group of experienced telco executives.
It’s the largest European LBO since Refresco in 2022, and a rare new money opportunity. Yet investors speaking with 9fin’s team in Europe said it was a tough ask, citing its turnaround story, an unusual sponsor, heavy competition and low valuation. Separately, we noted the disparity between the company’s high double-B ratings, and price talk closer to single-B credits around 400bps-425bps and 99.5.
Altice USA creditors are set to strike a three-year co-operation agreement this week, 9fin reported. Investor support for the agreement had surpassed the minimum 60% threshold earlier this week, according to sources.
We also reviewed primary market activity over the first half of the year this week, noting that over $164bn of gross US high yield bond issuance priced in the first half of the year, which has already surpassed 2022 full-year volumes ($125bn) and is well on pace to overtake last year’s supply ($209bn), according to 9fin data.
The volume jump is even more extreme in leveraged loans where banks have priced $688bn of gross supply through the first half of the year, which is more than the last two full years combined.
FOMC minutes and other employment data released this week pointed to some moderation in the pace of job growth, which could bolster hopes of interest rate cuts.
“This was not a strong employment report when you remove government hiring and it solidifies the odds the Fed starts cutting rates in September,” said Jack McIntyre, portfolio manager at Brandywine Global. “The sharp decline in temporary help may portend future weakness in the labor market this summer. This clearly increases the Fed’s confidence level that policy rates are too restrictive, and they need to cut.”
