US LevFin Wrap — Refi and some new supply

Sasha Padbidri
+William Hoffman

19 April 2024•6 min read

The refinancing wave is still going strong in the leveraged finance market even despite this week’s overall market volatility.

“We had a 3.5% correction in the S&P. If it becomes more like 10%, I think a lot of new issue will be tougher to get done,” said a portfolio manager. “A lot of companies are saying, ‘Why take that risk? The market is there for me now, let me just continue to refinance.’”

These issuers include Florida train operator Brightline, which made its high yield debut with $1.25bn of SSNs due 2030 to refinance existing municipal debt that financed the buildout of a line from Miami to Orlando. Theme park operators Six Flags and Cedar Fair also priced $850m of SSNs due 2032 and a $1bn term loan due 2031 respectively to refinance debt in anticipation of their pending merger. If you're wondering what that would look like, fear not, we already unpacked this back in November.

Outside of refinancing, some issuers took the opportunity to raise cash for acquisitions, such as gas station operator Sunoco, which priced $1.5bn of SUNs to fund its acquisition of NuStar Energy. The refinancing slashes NuStar’s previous annual interest burden and is expected to push the combined company towards an eventual IG rating.

Investors also piled into a bond and loan package from Rocket Software to finance its purchase of OpenText’s application, modernization and connectivity business, but not before the RBC-led bank group stripped out a portability clause and shifted $200m from the bonds over to the loan portion.

Given the strong demand for paper, some issuers of trickier credits decided to strike while the iron is still hot. Card producer American Greetings raised eyebrows this week with a loan offering that pays out a $300m dividend to its sponsor Clayton, Dubilier & Rice. Debt–funded dividends can be a tough sell, especially when the business is in secular decline, but some lenders said they would participate for the right price — check out the story here.

Global Medical Response launched an amend-and-extend transaction this week with support from more than 80% of existing debtholders. Sources said that the emergency medical transport provider is raising $948m of preferred equity alongside the A&E, which has drawn demand from its sponsor KKR and existing second-lien lenders, including Ares.

What we’re writing

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