Updates from US and Canadian companies

Investors are pushing back the riskiest US loans, demanding better terms, a sign that fund managers are getting more picky in a deluge of transactions.

Most deals are still sailing the market with soaring demand, as companies refinance old loans at very low interest rates and private equity groups take on cheap debt to finance acquisitions. But the average price of new loans in July fell to 99.22 cents on the dollar from 99.33 cents in June, according to data from S&P Global Market Intelligence, the steepest discount since December.

The timing of term loans, an indication of the amount of debt that is still expected to be raised in the market, hit more than $ 50 billion this month for the first time since January 2020. The lower prices reflected in the along with investor confidence that with opportunities continuing to flood in, they may be more selective about which offers to buy.

“When the market is as busy as it is now and there is a lot of choice, companies with a harder story to tell have to offer better prices,” said Jeff Bakalar, head of effect credit. leverage at Voya Investment Management. “The agreements are still in progress. Someone is willing to take the risk. It just needs to be at a better price.

Last week, the low-rated SVP Worldwide borrowed $ 370 million to fund Platinum Equity by taking a controlling stake in the holding company that owns the Singer and Viking sewing machine brands. The business experienced a bumper in 2020, as the number of new people starting to sew doubled during Covid-19 lockdowns compared to a normal year, according to S&P Global Ratings.

However, rating agencies and investors expect the reopening of global economies to slow growth. Doubts about the duration of the sewing craze ultimately pushed the loan price to 93 cents on the dollar, from 98 cents after three weeks of protracted negotiations with bankers at Bank of America, which conducted the deal.

“The company lacks significant scale and is narrowly focused on a mature industry that could return to below normal growth once global economies reopen,” S&P analysts noted in a rating report.

Roofing and commercial siding contractor Flynn Group also faced a rollback of its $ 300 million loan plan to fund share buybacks, a dividend for its owners and debt repayment. JPMorgan, which led the loan’s syndication, ultimately downsized to $ 250 million, with the price dropping to 97 cents on the dollar, from 99.5 cents when it was first marketed to investors.

Pharmaceutical company Alvogen Pharma borrowed $ 160 million at the end of last week, with Jefferies bankers selling the loan for 96.25 cents on the dollar.

Bank of America declined to comment. Platinum Equity, SVP Worldwide, Flynn Group, Alvogen, JPMorgan and Jefferies did not immediately respond to a request for comment.

John Gregory, head of leveraged capital markets at Wells Fargo, said that with so little resistance from yield-hungry investors for much of the year, banks had become “fearless” in their ways. attempts to syndicate substandard loans, with the handful of loans facing a setback contrasting with most transactions still enjoying high demand.

“Troubled transactions in the market don’t have the credit quality that people are looking for,” he said. “I think the underwriters maybe got carried away. “

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