Banking Law News

Private Equity-Owned Companies Sell New Bonds in Credit Rally

April 16, 2020, 8:00 PM

Emboldened by Federal Reserve backing, companies owned by private equity firms are looking to get in on the global rally in the credit market.

Surgery Partners Inc., which is majority owned by Bain Capital, is bringing just the fourth U.S. leveraged loan in the past month, while Verisure Holding AB, a Swedish security systems maker owned by Hellman & Friedman, reopened Europe’s high-yield market Thursday with the first deal in nearly two months.

Just a week after the Fed said it would expand its bond-buying program to include some junk-rated securities, sponsored companies are the latest to capitalize on a supercharged credit rally. Bankers have been talking to issuers that were waiting for the market to improve before launching new deals, and to private equity firms about options for their portfolio companies, according to people familiar with the matter.

The U.S. market was quicker to thaw, but European investors are now showing readiness to take bigger risk as the coronavirus may be peaking in hard-hit countries like Italy and Spain. Some of the companies most affected by the virus continue to tap the U.S. market, including hotel chain Hilton Worldwide Holdings Inc., which is closing in on a $1 billion bond sale, up from an original $500 million.

Surgery Partners has total leverage above 10 times and could potentially see negative earnings this quarter, according to Bloomberg Intelligence, even while furloughing employees to cut costs. Verisure, however, is considered a safer borrower, which hasn’t been as affected by the virus. It boosted the size of its bond sale to 200 million euros ($218 million) from 150 million euros.

“We are certainly in a place where risk is more palatable than it was a few weeks back,” said Mark Benbow, a fund manager who helps oversee around $1.5 billion across high-yield strategies at Kames Capital. “We’ve seen a huge amount of deals in the U.S. already so it’s a natural transition for European HY to follow suit.”

Verisure is ending Europe’s worst junk sales drought in eight years. It’s a small sale and the company is well-known to investors, similar to how the U.S. market initially rebooted with safe, secured offerings. The Fed then said it would support some junk bonds, encouraging the U.S. market to price several riskier offerings with double-digit yields, and paving the way for a record weekly inflow into the asset class.

In Europe, “we have yet to see the harder deals for companies that need additional liquidity to make it through,” said Vivek Bommi, a London-based senior portfolio manager at Neuberger Berman Group LLC.


There were some safer offerings in the U.S. market Thursday too, including a $4 billion deal from Costco Wholesale Corp., its first in nearly three years. U.S. junk bond funds saw a record $7.66 billion fund inflow in the week ended April 15 as investors followed the Fed.

  • For deal updates, click here for the New Issue Monitor
  • Wall Street banks are lending billions of dollars to desperate companies these days, like Marriott and concert producer Live Nation Entertainment. Now, a host of those companies are turning around and asking the banks to waive or loosen financial markers that help ensure the debt will be paid back


Verisure intends to use deal proceeds to repay revolving credit facility drawings, according to an offering memorandum seen by Bloomberg News. JPMorgan Chase & Co., Goldman Sachs Group Inc., Deutsche Bank AG, Morgan Stanley and Nordea Bank Abp arranged the sale.

  • Marketwide primary market activity has slowed Thursday, with just four deals offered, including a Telstra 500 million euro 10-year note. The deals have pushed weekly sales toward 25 billion euros
  • The cost to insure euro IG company debt against default fell after surging more than 9% on Wednesday
  • A former senior portfolio manager and founding partner at CVC Credit Partners is forging ahead with plans to launch an investment firm focused on credit markets. Jonathan Bowers and a team of banking colleagues set up Acer Tree Investment Management LLP at the end of 2019 and plans to start operating in early May
  • Low-cost airline EasyJet Plc has secured 400 million pounds ($500 million) of loans against its jet fleet, with talks also underway to raise as much as 550 million pounds from selling planes to leasing firms as it seeks to boost cash reserves


Primary market issuance stayed quiet on Thursday, with just one dollar bond offered in the region.

  • The scale of the recovery task facing China’s policy makers will be laid bare Friday when first quarter gross domestic product data is expected to show an historic slump

--With assistance from Hannah Benjamin, Marianna Aragao, Chris Vellacott, Davide Scigliuzzo and Natalie Harrison.

To contact the reporters on this story:
Molly Smith in New York at msmith604@bloomberg.net;
Tatiana Darie in London at tdarie1@bloomberg.net;
Davide Scigliuzzo in New York at dscigliuzzo2@bloomberg.net

To contact the editors responsible for this story:
Nikolaj Gammeltoft at ngammeltoft@bloomberg.net;
Vivianne Rodrigues at vrodrigues3@bloomberg.net

Larry Reibstein, Allan Lopez

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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