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US Debt Finance

Latest update: 22 October 2020

Key Trends in 3Q20:

  • US private equity activities saw a strong rebound in deal value in Q3, contributed mostly by the return of large-ticket transactions. A total of eight buyout deals with deal value above USD 2bn each were announced in Q3, accounting for more than half (53.7%) of the total buyout deal value in Q3. 
  • Inbound activity by deal count continued its downward trend in Q3, with a total of 22 deals (USD 7.1bn) announced, representing a 24.1% decrease compared to 2Q20 (29 deals, USD 2.8bn). 
  • At roughly USD 13.7bn, institutional loans backing LBOs decreased by 9% in the third quarter, representing a 66% slide from the first quarter figure. More recently, September issuance of just USD 3.6bn pushed year-to-date volume to roughly USD 72.8bn, a 39% drop from the year-ago figure.
  • High yield bonds backing buyouts amounted to just USD 1.6bn across two deals in 3Q20.
  • US buyout investment recorded a total of 260 buyout deals in Q3, valued at USD 69.5bn, hitting the highest Q3 buyout deal value since 2007. Deal count in Q3 also achieved a 12% increase compared to Q2 (232 deals worth USD 21bn). In the first three quarters of the year, there were a total of 871 deals valued at USD 141.7bn, down 22.6% compared to the same period last year by deal count (1,125 deals worth USD 190bn).
  • Margins on first lien institutional loans tightened to 433bps in the third quarter from 464bps in the second quarter, though they remain above the 415bps level seen in first quarter 2020. In addition, deeper OIDs (original issue discounts) and higher LIBOR floors have contributed to more expensive financing versus 1Q20 benchmarks.
  • Buyout deals with disclosed deal valuation in the range of USD 100m to USD 500m witnessed an increase in deal count compared to previous periods, accounting for more than half of the total volume of such deals. Between 2015 and 2019, the average deal value among disclosed LBO transactions in the US was USD 553m. So far this year, the average deal value for disclosed buyouts in the US is USD 422m, down over 23% comparatively.
  • The technology industry was the most active through the first three quarters of 2020, accounting for USD 23.4bn of LBO-related issuance across 32 leveraged loan and high yield bond deals, followed by the industrials & chemicals sector (USD 19.2bn across 29 deals).
  • Technology continues to be the most active sector for LBOs by both count and value in the first three quarters of 2020, totaling 244 deals worth USD 49.5bn. Business services was the second-largest sector by value, a total of 146 buyout deals (USD 22.2bn) were announced within the sector from Q1 to Q3 this year. Year-to-date, pharma, medical & biotech (PMB) is the only sector that grew by both deal count and deal value, recording a total of 131 deals worth USD 14.6bn.
  • The majority of loans now trade at levels closer to their pre-pandemic highs, with the share of term loans bid in the 95 and above category increasing to 71% in the third quarter, from just 3% at the height of the pandemic.

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