(Bloomberg) -- The US leveraged-loan market had a record $64.3 billion of deal launches Monday, nearly doubling the prior high set just two weeks ago, as firms take advantage of a still-friendly environment to borrow.
Most of the 43 transactions brought were to reprice existing loans. Some of the biggest, topping $4 billion each, were from Dunkin’ Donuts owner Inspire Brands and water-treatment firm Culligan International Co. Meanwhile, Jane Street Group unveiled a $4.2 billion deal to extend a loan and raise fresh cash.
Seven more launches occurred Tuesday morning, meaning the market has already topped its prior weekly record of 46 set in January 2020, according to data compiled by Bloomberg.
The activity is meeting 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,” said Michael Marzouk, a loan portfolio manager at Aristotle Pacific Capital. “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 this year’s calendar 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 hit an annual record in October, topping $1 trillion for the first time according to a Bloomberg-compiled data series dating back to 2013. This week is already the second-busiest week ever for the leveraged loan market, behind just the $78 billion notched one week in January 2020. It’s also just one of five in which launches topped $50 billion.
Over the course of 2024, 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 near two-and-a-half year highs.
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.
Also 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.
(Updates with final figures in first two paragraphs, adds Tuesday activity in the third paragraph.)
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