Banks Clear $22 Billion of Buyout Debt Following Record Equity Acquisition

Leveraged Buyout Debt Sales Total $22 Billion

Key Figures:

• $30 billion: Total buyout junk debt sold by Wall Street banks
• $15 billion: Amount of risky debt sold on Tuesday to fund the Electronic Arts Inc. (EA) leveraged buyout
• $45 billion: Total orders received for the EA deal
• $8.13 billion: Amount of loans sold at an interest rate of 3.5 percentage points above the benchmark
• $6.63 billion: Amount of bonds priced at par
• $7.25%: Yield on the largest tranche of bonds
• $6.9 billion: Amount of debt sold in the Bank of America Corp.-led transaction to back Nexstar Media Group Inc.'s acquisition of Tegna Inc.
• $22 billion: Total value of the two deals

Market Update

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Wall Street banks have sold nearly $30 billion of buyout junk debt since the start of the week, with the bulk of it now offloaded. The sales included a $15 billion deal to fund the Electronic Arts Inc. (EA) leveraged buyout, which was led by JPMorgan Chase & Co. and involved a consortium of private equity firms. The deal was oversubscribed, with $45 billion of orders received.

The EA debt financing was sold in two tranches: $8.13 billion of loans at an interest rate of 3.5 percentage points above the benchmark, and $6.63 billion of bonds priced at par. The bonds yielded 7.25%, a premium to the average yield of 6.19% for similarly rated bonds tracked by Bloomberg.

Another significant deal was the Bank of America Corp.-led transaction to back Nexstar Media Group Inc.'s acquisition of Tegna Inc., which totaled $6.9 billion. The deal was also subject to some reworking during marketing, with portions shifting between loans and bonds as banks navigated fluctuating demand.

Market Conditions

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The leveraged finance market has been under pressure in recent weeks due to concerns about AI disruption and the economic impact of the widening Middle East conflict. Investors have been dumping US junk bonds, with funds that buy the debt seeing $3.34 billion of outflows in the week ended March 18. Loan funds have also had four straight weeks of outflows.

Despite these challenges, the closing of the two deals should bring some relief to the market. The deals are part of a $100 billion cross-border pipeline of LBO financings that banks have been working through since the beginning of the year.

Deal Details

• Electronic Arts Inc. (EA) leveraged buyout: $15 billion deal to fund acquisition by a consortium of private equity firms
• Bank of America Corp.-led transaction: $6.9 billion deal to back Nexstar Media Group Inc.'s acquisition of Tegna Inc.
• Clayton Dubilier & Rice acquisition of Sealed Air Corp.: $4.7 billion debt sale
• Janus Henderson Group Plc purchase by Nelson Peltz's Trian Fund Management and General Catalyst: $2 billion debt sale