Firms Crowd US Loan Market in Push to Cut Costs, Fund Deals

Companies are flocking to the US loan market as they seek to reprice large chunks of existing debt, with a pickup in leveraged buyout financing adding to the rush.

At least seven companies began marketing loan repricings on Tuesday as borrowers returned from a late-summer lull, including offerings of $2.9 billion from Global Medical Response Inc. and $2.5 billion from Heartland Dental LLC.

The move underscores how companies are seeking to capitalize on investor appetite for risky financings at a time when supply of new debt has been constrained by limited merger and acquisition activity, even as inflation concerns weigh on markets. Leveraged-loan funds saw their biggest inflows since January in the week ended Wednesday, a sign of strong demand for the floating-rate asset class. 

Global Medical Response’s repricing is being pitched at a spread of 2.75 to 3 percentage points above the benchmark, according to a person with knowledge of the matter. That compares with a current spread of 3.25 percentage points for the loan, which matures in 2032 and was originally issued a year ago. 

Heartland Dental is also seeking to slash borrowing costs on its 2032 debt by 0.5 percentage point, a separate person said, asking not to be identified because they aren’t authorized to speak publicly.

Other proposed repricing transactions include a $2.18 billion offering from liquefied gas exporter Freeport LLC and a $1.86 billion offering from brand-management firm WHP Global LLC. 

While repricings have dominated activity on Tuesday, the market also saw a pickup in loan supply tied to leveraged buyouts and acquisitions — a welcome trend for a market that has been hungry for new-money deals. 

Lenders launched a €2.8 billion debt sale to help finance Platinum Equity’s purchase of a stake in Nestle SA’s water business — which houses brands Perrier and S.Pellegrino — as well as a $1.25 billion transaction supporting Veritas Capital’s takeover of Saber Power Services LLC.

The offerings add to a $2.1 billion loan launched last week to help fund KKR & Co. Inc.’s acquisition of medical-device maker Integer Holdings Corp. The financing is being pitched at a spread of 2.75 to 3 percentage points over the benchmark and a discounted price of 99.5 cents on the dollar, according to a person familiar with the matter. 

At least 18 loan deals launched on Tuesday, the most since May 18, with activity picking up after a break in issuance in the past couple of weeks. 

With assistance from Kevin Kingsbury.

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