Risky, junior buyout loan comes back to market in largest deal on record

A GROUP of debt arrangers on Friday (Mar 1) launched the sale of a US$1.9 billion second-lien mortgage, turning to a type of financing that has fallen out of favor to assist fund the leveraged buyout of Truist Financial’s insurance coverage enterprise.

Second-lien loans have all however disappeared from the marketplace for dangerous company borrowing in latest months as firms rushed to exchange them with cheaper, extra senior debt. The debt sale launched Friday – led by Stone Point Capital Markets – marks a stark departure from that development. 

The proposed US$1.9 billion broadly syndicated mortgage can be the most important second-lien mortgage since no less than 2022 and sure among the many largest ever to assist a leveraged buyout, in keeping with Bloomberg-compiled information. Early discussions name for the mortgage to pay curiosity at 500 foundation factors over the Secured Overnight Financing Rate and value between 99.5 cents on the greenback and par, in keeping with folks conversant in the matter, who aren’t authorised to talk publicly. 

Second-lien loans give lenders a junior declare to a borrower’s belongings within the occasion of a chapter or different company meltdown, making the debt inherently riskier and costlier. The loans are so retro that they’ve almost vanished from the US leveraged mortgage index, Barclays strategists wrote in a observe final month.

This second-lien mortgage would substitute a US$1.9 billion unsecured bridge mortgage offered to assist Clayton Dubilier & Rice and Stone Point’s acquisition of Truist’s insurance coverage unit. The funding corporations lined up a debt bundle totaling US$9 billion to underpin the deal, together with a US$4 billion time period mortgage, US$2.1 billion secured bridge mortgage and US$1.175 revolving credit score facility, Bloomberg beforehand reported.   

Commitments for the second-lien mortgage are due Mar 7 at 12 pm New York time, and the first-lien financing is anticipated to launch shortly afterward, they mentioned. BLOOMBERG

Source: www.businesstimes.com.sg”