2024-12-03 02:37:00 :
(Bloomberg) — More than $56 billion in U.S. leveraged loans were launched on Monday as borrowers flooded the market after the Thanksgiving holiday, breaking the previous record of $34 billion set two weeks ago.
The record was driven by deals initiated by 40 companies including Jane Street Group and natural gas and oil discoverer Discovery Energy Holding Corp., most of which would reprice existing loans, according to data compiled by Bloomberg. . The largest deals include a $4.23 billion repricing of Dunkin’ Donuts parent company Inspire Brands and a $4.68 billion repricing of water treatment company Culligan International Co. To date, the campaign totals $56.8 billion.
Sales were strong in response to strong demand from investors, who are increasingly convinced that interest rates will remain higher than previously expected. Leveraged loans have floating interest rates and generate more income when interest rates increase.
“Higher interest rates continue to be a driver for loan assets,” said Michael Marzouk, loan portfolio manager at Aristotle Pacific Capital. “Amid the economic downturn, it’s important to Strong demand across the asset class and a lack of genuine new issuance continues to drive repricing mechanisms.”
Monday’s rush to buy comes as the days for action in 2024 dwindle and uncertainty looms ahead of a December Fed meeting and possible tariffs.
John Cokinos, global head of leveraged finance at RBC Capital Markets, said: “Given that we are taking advantage of the post-election window where the market is very cooperative, we are seeing strong issuance in the U.S. leveraged loan space. A record high.”
Leveraged loan sales already set an annual record in October, surging beyond 2017 and marking 2024 as the busiest year for new issuance, according to data compiled by Bloomberg since 2013. This week is already the second-busiest on record for the leveraged loan market, trailing only $78 billion in January 2020 and one of only five weeks on record to have volumes top $50 billion.
Issuers have turned to repricing this year, slashing profit margins by a quarter to three-quarters of a percentage point, taking advantage of increased demand from lenders and little else to deploy capital. The Morningstar LSTA U.S. Leveraged Loan Price Index hovered at 97.22 cents to the dollar, a two-and-a-half-year high.
However, Monday’s trading volume provided “a slight respite from the deluge of repricing,” said Leland Hart, a partner at Warwick Capital Partners. He said the deals “provide a lot of opportunities for investors to put in new money and not just take on the same risk at a lower pay scale”. Deals unveiled Monday include EQT AB’s $500 million deal to acquire a stake in international schools operator Nord Anglia and a $1.35 billion term loan to support Apollo Global Management Inc.’s acquisition of Barnes Group Inc.
—With help from Lara Wieczezynski.
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