Buyout Barons pushes M&A loans to $ 70 billion as demand increases

(Bloomberg) – Wall Street buyout barons are rushing into the leveraged loan market to fund takeovers and dividends as they increase risk-taking in an improving economy.

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Loan launches that support mergers and leveraged buyouts hit $ 70 billion in the first quarter of 2021, the highest since 2018 and a 60% jump from a year ago. Those with a dividend component jumped to $ 13.4 billion, the most since 2014, according to data compiled by Bloomberg.

The leveraged loan market has long been the preferred source of funding for private equity firms seeking to maximize returns on corporate buyouts and reward themselves with payments before selling their acquisitions. As buyout companies look to take advantage of the positive macroeconomic backdrop and increased demand for floating rate debt to raise funds, there are few signs of a slowdown ahead.

Already this month, RSA Security began selling $ 2 billion in term loans for its purchase by Clearlake Capital Group and Symphony Technology Group. The loan for Apollo Global Management Inc.’s takeover of retailer Michaels Cos. must end this week. And CoreLogic Inc.’s $ 4 billion deal to fund its Stone Point Capital and Insight Capital buyout is currently on the market.



chart, bar chart, histogram: Dividend Spigot


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Dividend pin

Dividend backing deals are also coming to market with companies such as obstetrics and gynecology services company OB Hospitalist Group Inc. and SubCom, a fiber optic network provider. They join Organon & Co., which is offering $ 3 billion in loans and about $ 4.5 billion in bonds to pay a spinoff dividend to Merck & Co.

Firms looking to raise funds for takeovers are finding buyers willing to offer floating rate loans as Treasury yields continue to climb and inflation expectations accelerate. Leverage loan funds posted inflows of $ 12.7 billion in the first quarter, as the 10-year Treasury rate jumped 83 basis points.

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Dealers are asking for up to $ 25 billion in high-quality supply this week, with sales set to pick up on Tuesday and Wednesday. The forecast for the month is $ 90-100 billion.

Marvell Technology is in the market with a quality three-part offering to help fund its acquisition of Inphi Corp. The economy continues to recover from the pandemic The relentless rally in the US high yield bond market has pushed spreads to an almost 14-year low as risk premiums for CCCs, the riskiest junk bonds, fell to 526 basis points – a level last seen almost three years ago For transaction updates click here for the New Issue Monitor For more information click here for the Credit Daybook Americas

Europe

Primary market players expect the Easter holidays to limit broadcast activity this week, according to a Bloomberg News survey on March 26.

High yield bonds with over 6.95 billion euros ($ 8.2 billion) in circulation are trading above future call prices, making it attractive for issuers to buy back the securities at over the next three months

Asia

Warren Buffett’s Berkshire Hathaway Inc. launched a multi-tranche yen bond agreement Monday, several months after the announcement of investments in Japan’s largest trading companies.

China’s central bank has asked lenders to curb the supply of credit, fearing the surge in lending could fuel asset bubbles, the Financial Times reported. All economists in Bloomberg survey expect Reserve Bank of India to keep interest rates unchanged

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