Bond-selling frenzy

Private equity firms are expected to begin selling bonds to help fund the leveraged buyout of Medline Industries Inc, the biggest buyout since the financial crisis.

NEW YORK: A deluge of leveraged buyout debt has been building up for months and is finally set to hit the high-yield market this week.

Private equity firms are expected to begin selling bonds to help fund the leveraged buyout of Medline Industries Inc, the biggest buyout since the financial crisis.

The sale will potentially include US$4bil (RM16.7bil) of unsecured notes and US$3.8bil (RM16bil) of secured bonds, on top of US$7bil (RM29bil) of leveraged loans that banks have already started selling.

Medline, a health-care product firm, will hold a lender call for the leveraged loans, one of the largest offerings of the debt in the past decade, in New York, according to a person with knowledge of the matter.

Specialty chemical maker Solenis LLC is scheduled to price US$2.4bil (RM10bil) of bonds split between dollar-and euro-denominated portions that will help finance its buyout by Platinum Equity.

The United States dollar portion of the deal is being discussed with a yield of as much as 7%, according to people with knowledge of the matter.

It’s also in the leveraged loan market with a US$1.4bil (RM5.8bil) – equivalent cross-border sale.

DexKo Global Inc will kick off investor outreach today for a US$665mil (RM2.8bil) high-yield note sale.

Proceeds from the offering will fund the acquisition of the vehicle-parts supplier by a unit of Brookfield Asset Management Inc

The company is also offering leveraged loans as part of the financing.

Crescent Capital, Carlyle Group, KKR & Co and Pretium Partners will be joining reporters from Bloomberg News to discuss the risks and opportunities that lie ahead in the US$1.2 trillion (RM5 trillion) leveraged loan market on Sept 28 in New York.

At least six leveraged loan deals have meetings set for this week, with Medline by far the largest.

Commitments are due for 32 loan deals, the most in any week since February. Investors have been expecting a surge of acquisition financing this month.

As much as US$110bil (RM459bil) of US high-yield bond and leveraged loan sales are predicted to hit the market in September, according to a recent poll of bankers by Bloomberg, which would make it one of the busiest months in years.

A hunt for higher yields amid rock-bottom rates elsewhere is helping underpin demand for the risky debt.

In distressed debt, lenders to Yak Access LLC are organising after the maker of mats for construction projects posted a steep drop in earnings and weak liquidity in the second quarter, according to people with knowledge of the situation.

High-grade bond supply should moderate next week, with Wall Street calling for US$20bil to US$25bil (RM83bil to RM104bil) of sales, according to an informal survey of debt underwriters.

An extraordinary US$115bil (RM480bil) has priced over the last two weeks.

September supply will likely approach monthly forecasts of US$140bil (RM584bil) this week.

“Credit markets have weathered the pickup in supply well, with spreads tighter so far in September,” Barclays Plc strategists led by Bradley Rogoff wrote in a report Friday.

“Deals continue to be oversubscribed, and concessions have been minimal.”

Still, Barclays sees further gains for high-grade credit as tough to come by.

“With spreads still close to multi-year tights, we think that further tightening from current levels will be challenging and that spreads could drift slightly wider into year-end,” the strategists wrote. — Bloomberg

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