“Buyout Barons” on Wall Street are upping their risk-taking and using the leveraged loan market to finance takeovers and dividends, a Bloomberg report says, with the bank mergers and leveraged buyouts shooting up to $70 billion in the first quarter of this year.
That’s the most since 2018, according to the report, and it was a 60 percent boost from last year.
Those with a dividend component surged to $13.4 billion, which was the most since 2014.
The leveraged loan market has long been a source for private equity firms looking for financing, as they look to juice returns to reward themselves with payouts prior to selling them off.
Buyout firms are seeking to take advantage of the positive macro backdrop and bolstered demand for floating-rate debt, and right now it looks to be a relentless full-speed-ahead charge.
Dividend-backed deals are also hitting the market from companies including obstetrics and gynecology services firm OB Hospital Group and fiber optic network provider SubCom. And there’s Organon & Co., which is offering $3 billion in loans and $4.5 billion in bonds to pay a spinoff related dividend to Merck & Co.
In the U.S., dealers are calling for around $25 billion in high-grade supply this week, and sales are expected to rise on Tuesday and Wednesday (April 6 and 7). The month’s forecasts are expected to hit $90 billion to $100 billion.
In Europe, the Easter holiday over the weekend is expected to limit the issuance activity this week, and high-yield bonds with over 6.95 billion euros are trading above upcoming call prices.
And in Asia, Warren Buffett’s Berkshire Hathaway kicked off a multi-tranche yen bond deal Monday, while China’s central bank has asked lenders to rein in credit supply, concerned it could be fueling asset bubbles.
There’s been a boom in special purpose acquisition companies (SPACs), which hit $1.3 trillion in the first quarter. They made up a quarter of all deals in the U.S., and showed overall how deal making has recovered in spite of the economic woes of the pandemic.
Selected by EFXA