Buyout Debt Worth $138 Billion Set to Land in Credit Markets

(Bloomberg) — Credit investors look set to be spoiled for choice as bankers gear up to offload in excess of $138 billion of buyout debt in coming months.

The volume in the US is at the highest since a peak in 2007, just before the great financial crisis, and in Europe it’s the most since the pandemic in 2021, according to JPMorgan Chase & Co. Some deals are already being launched to get to the front of the queue with investors, while the bulk is set to come before US elections in November.

“The pipeline on both sides of the Atlantic is the largest it’s been for a long time as M&A has picked up over the course of 2026,” said Noah Roth, JPMorgan’s head of EMEA leveraged finance. “We expect this supply to come starting at the end of September into early October and we do expect there to be a first mover advantage.”

The market is expected to have enough liquidity to absorb the debt overall, amid strong inflows into credit funds and a surge in the issuance of collateralized loan obligations, the main buyers of leveraged loans. But such abundance is likely to make investors more discerning, with borrowers scrutinized by business, sector and private equity sponsor.

The debt will include financing for take privates, corporate carve-outs and secondary buyouts. The most popular deals are likely to price tighter and secure more borrower-friendly terms, while those with greater risks could face steeper pricing and more restrictive documentation.

“Lenders will continue to be discerning on credit selection, including around the relevant industry and appropriate capital structure,” said Jeremy Duffy, chair of Cahill Gordon & Reindel LLP’s European leveraged finance practice.

Broad Menu

In total, there’s nearly €40 billion ($46 billion) in the European pipeline and about $92 billion in the US for financing leveraged M&A activity, according to JPMorgan figures. That excludes debt to fund data centers, which could add as much as $80 billion in the US.

One of the first deals up is Citigroup Inc. marketing a $2.1 billion loan to fund KKR & Co.’s acquisition of medical-device maker Integer Holdings Corp. And on Tuesday, lenders including Bank of America Corp. and Deutsche Bank AG launched a €2.8 billion sale to help Platinum Equity’s purchase of a stake in Nestle SA’s water business.

Next, bankers are preparing to offer a jumbo loan backing Advent International LP’s buyout for Polish parcel-locker company InPost SA, people familiar with the matter said. Advent didn’t immediately respond to a request for comment.

The menu of forthcoming deals is broad. Jumbo cross-border plays include £5 billion ($6.8 billion) to back EQT AB’s acquisition of Intertek Group Plc, while other big offerings include €6 billion of high-yield bonds to finance the acquisition of Italian drugmaker Recordati SpA as part of a wider package.

“Companies want to get funding and refinancing out of the way before those US mid-term elections and whatever that will bring,” said Catherine Braganza, high-yield portfolio manager at Insight Investment Management. “Investors have cash to deploy and the tone is positive.”

Leveraged loan funds saw their biggest inflows in the US since January in the week ending Sept. 2, according to LSEG Lipper. That signals strong investor appetite for risky financing, despite renewed concerns about inflation since the war in Iran is still ongoing.

Given that macro-economic backdrop, bankers may end up adjusting premarketing processes to get to market quickly and limit risk.

Bankers are wary of getting caught out by bad timing, like the kind that left them nursing losses on billions of dollars of unsold “hung” loans stuck on their balance sheets in 2022’s bear markets or during the recent selloff in software. A group of banks led by JPMorgan is still looking to offload about $5.3 billion in financing for software firm Qualtrics International Inc. later this year.

Spread Risk

Well-regarded single B-rated term loans in Europe are likely to launch around 325-350 basis points over Euribor and tighten to 300 basis points if syndication goes well. The less popular deals could see pricing of around 375-425 basis points, market participants say.

“While the supply has been well telegraphed and the investor base has cash to put to work, with so much supply there is a risk of pressure on spreads going wider as the market absorbs the new paper,” JPMorgan’s Roth said.

The dealflow is still picking up in the US, as bankers kept busy over the summer. Victory Capital Holdings Inc. said at the end of August it will acquire First Eagle Investments, with financing to include a $3.5 billion term loan B, while Goldman Sachs Group Inc. will lead $1.95 billion of secured financing for Amwins Group Inc.’s acquisition of Steadfast Group Ltd’s underwriting-agency business.

And the pipeline is expected to grow well into 2027. Some deals are already on next year’s agenda, including a £4 billion euro and sterling-denominated financing backing the take-private of Mitie Group Plc by OCS Group International Ltd.

–With assistance from Amedeo Goria, Jeannine Amodeo and Kat Hidalgo.

(Updates with details on deals and additional context on markets.)

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