Wall Street buyout barons are rushing to the leveraged loan market to finance takeovers and dividends as they dial up risk-taking amid a brightening economic outlook. Loan launches that back mergers and leveraged buyouts spiked to $70 billion in the first quarter of 2021, the most since 2018 and a 60% jump from a year ago. Those that have a dividend component surged to $13.4 billion, the most since 2014, according to data compiled by Bloomberg.

The leveraged loan market has long been the favored financing source for private equity firms looking to juice returns on corporate takeovers and to reward themselves with payouts before selling their acquisitions. As buyout firms seek to take advantage of the positive macro backdrop and increased demand for floating-rate debt to raise funding, there’s little sign of a let-up ahead.

Already this month RSA Security started the selling $2 billion of term loans for its purchase by Clearlake Capital Group and Symphony Technology Group. The loan for Apollo Global Management Inc.’s buyout of retailer Michaels Cos. is due to wrap up this week. And CoreLogic Inc.’s $4 billion deal to fund its its takeover by Stone Point Capital and Insight Capital is currently in market.

Dividend-backing deals are also hitting the market from companies including obstetrics and gynecology services company OB Hospitalist Group Inc. and SubCom, a fiber optic network provider. They join Organon & Co., which is offering $3 billion of loans and about $4.5 billion of bonds to pay a spinoff related dividend to Merck & Co.


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Source: BNN Bloomberg

By Lisa Lee