Perelman’s Vericast to Price New Deal as Leveraged Loans Shine

The leveraged loan market will continue in full swing next week as investors continue to look for assets that can perform well during a period of rising yields. In junk bonds, Ronald Perelman’s Vericast Corp. is in the market.

Funds that invest in the risky loans added $686 million in the week ended Feb. 24, according to Refinitiv Lipper. That’s the seventh consecutive reporting period of inflows and the longest streak since a 15-week run of incoming cash starting in July of 2018. The influx comes as money increasingly shifts into asset classes that offer floating interest rates like leveraged loans from the fixed payments on most conventional bonds.

There are at least six lender meetings scheduled next week and nearly 20 deals totaling over $14 billion have commitments due. Applied Systems is scheduled to wrap up its EZLynx acquisition-backing offering on Monday.

Fresh off a new monthly record for February, the high-yield market is also expected to keep up the issuance frenzy in March, making it the busiest start of the year ever. Only about $5.5 billion more in supply would make this the most active first quarter ever, according to data compiled by Bloomberg.

Companies are still seeing strong demand for new issues and more deals are on deck. Perelman’s Vericast is in the market with a two-part offering. Mattel could refinance its 6.75% senior notes due in 2025, which are the most expensive in their capital structure, according to Bloomberg Intelligence.

Rush for Cheap Debt

The U.S. corporate investment-grade primary market had its busiest February ever as well, surpassing the previous high of $113 billion set in 2015, and faces a loaded issuance calendar for next week.

More than $50 billion of sales may price in the next five trading days, according to an informal survey of high-grade bond dealers. Graphic Packaging International LLC and National Retail Properties Inc. each conducted investor outreach events Thursday.

This week’s rates rout pushed borrowing costs for U.S. companies to an eight-month peak, compelling bankers to urge their clients to sell more debt now before costs go even higher. The surge in the benchmark 10-year Treasury yields pushed the Bloomberg Barclays investment-grade bond index -- a proxy for blue-chip borrowing costs -- to 2.16%, the highest since last June.

Perelman’s Vericast to Price New Deal as Leveraged Loans Shine

Telecom giants Verizon Communications Inc. and AT&T Inc. have arranged a total of about $40 billion of bank loans to help buy 5G wireless airwaves. Once drawn, the loans are expected to be largely repaid with new notes, which could buoy investment-grade bond issuance.

Latin American corporations may also issue more debt in foreign markets in March as companies emerge from voluntary earnings blackouts, according to Andre Silva, head of Latin America capital markets for BNP Paribas. One or two nations may also bring new deals, he added. Peru mandated banks to arrange fixed-income investor calls in Asia, Europe and the U.S. this week, with a euro and dollar-denominated note deal with intermediate-to-long maturities expected to follow.

A handful of energy companies are set to report earnings next week, making them candidates to sell junk bonds. Oil and natural gas provider W&T Offshore Inc. reports its fourth-quarter results on Wednesday, followed by Summit Midstream Partners Thursday. Energy companies have already been active borrowers this year amid rising crude prices and the recent energy crisis in Texas.

Sinclair Broadcast Group Inc. and Community Health Systems Inc. are among debt-laden borrowers to present at JPMorgan’s Global High Yield & Leveraged Finance Conference.

©2021 Bloomberg L.P.

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