Leveraged Loan Market’s $56 Billion Day Smashes Record
More than $56 billion of US leveraged loans launched Monday, as borrowers stormed the market after the Thanksgiving holiday, shattering a $34 billion record set two weeks ago.
(Bloomberg) -- More than $56 billion of US leveraged loans launched Monday, as borrowers stormed the market after the Thanksgiving holiday, shattering a $34 billion record set two weeks ago.
The record was driven by 40 companies, including Jane Street Group and gas and oil discovery firm Discovery Energy Holding Corp., launching deals, the majority of which are set to reprice existing loans, according to data compiled by Bloomberg. Some of the biggest include a $4.23 billion repricing deal from Dunkin’ Donuts owner Inspire Brands and a $4.68 billion repricing for water treatment firm Culligan International Co. The activity totals $56.8 billion so far.
Sales are heavy to meet strong demand from investors increasingly convinced that rates will stay higher for longer than previously expected. Leveraged loans carry floating rates, generating more income when rates are elevated.
“Rates staying high continues to be a tailwind for loan assets,” Michael Marzouk, a loan portfolio manager at Aristotle Pacific Capital, said. “Strong demand for the asset class and a lack of true new issuance continues to propel the repricing machine absent a hiccup in the economy.”
Monday’s rush came as actionable days in the 2024 calendar year dwindle and uncertainty looms ahead of December’s Fed meeting and possible tariffs.
“We are seeing record offerings in the US leveraged loan space given we are taking advantage of a post-election window with very cooperative markets,” said John Cokinos, the global head of leveraged finance at RBC Capital Markets.
Leveraged loan sales already hit an annual record in October, soaring past 2017 and marking 2024 the busiest year for new issuance, according to data compiled by Bloomberg dating back to 2013. This week is already the second-busiest week ever for the leveraged loan market, behind just $78 billion in January 2020, and one of only five weeks on record where volume has topped $50 billion.
Over the course of this year, issuers have turned to repricings to cut margins by between a quarter to three-fourths of a percentage point, taking advantage of elevated lender demand that has few other places to deploy capital. The Morningstar LSTA US Leveraged Loan Price Index is hovering at 97.22 cents on the dollar, a two-and-a-half year high.
But, Monday’s volume offers a “slight degree of respite from the repricing deluge,” according to Leland Hart, a partner at Warwick Capital Partners. The deals offer “many opportunities for investors to put new money to work, not just roll into the same risk at a lower level of compensation,” he said. Among Monday’s launches were a $500 million deal for EQT AB’s acquisition of a stake in international school operator Nord Anglia and a $1.35 billion term loan to support Apollo Global Management Inc.’s buyout of Barnes Group Inc.
--With assistance from Lara Wieczezynski.
More stories like this are available on bloomberg.com
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First Published:3 Dec 2024, 02:37 AM IST
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