Nov. 11 (Bloomberg) -- Colfax Corp., the pump and valve maker that’s acquiring Charter International Plc, is seeking $2.1 billion in loans to support the transaction as returns last month were the highest in two years.
HMS Holdings Corp., a provider of claims management services for the health care industry, was also in the market this week seeking $450 million in loans for its purchase of HealthDataInsights Inc. and American Dental Partners Inc. is getting $256 million in debt for its buyout by JLL Partners Inc.
Even as concern over the European sovereign debt crisis sent yields on Italian government bonds to record levels this week, returns on the S&P/LSTA U.S. leveraged loan 100 Index rose to 1.2 percent Nov. 9 and were at a two-year high for October. Global mergers and acquisitions announced this year are up 6.3 percent from 2010 when they totaled $2.22 trillion, according to data compiled by Bloomberg. The value of the 23,368 deals this year totals $2.02 trillion, compared with $1.79 trillion in the same period in 2010.
“The leveraged buyout calendar had thinned out considerably and it was expected to be slow for the rest of the year,” Darin Schmalz, a director at Fitch Ratings in Chicago, said in a telephone interview. “Given the market volatility stemming from the European crisis and increase in spreads here in the U.S. over the last couple months it’s surprising to see this amount of activity.”
The S&P/LSTA Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, fell 0.03 cent to 91.9 cents on the dollar yesterday. It’s up from a low of 59.2 cents on Dec. 17, 2008, three months after Lehman Brothers Holdings Inc. collapsed. The index fell 5.66 percent in August, the biggest monthly decline since Nov. 2008.
Leveraged loans and high-yield bonds are ranked below Baa3 by Moody’s and less than BBB- by S&P.
Colfax met with lenders yesterday in New York to discuss $2.1 billion in loans it’s seeking to support the company’s acquisition of Charter International, according to a person with knowledge of the transaction.
Deutsche Bank AG, HSBC Holdings Plc, Barclays Plc, SunTrust Banks Inc., Royal Bank of Scotland Group Plc and KeyBank NA are arranging the deal, said the person, who declined to be identified because the terms are private. The financing will include a $900 million term loan B due in seven years, a $900 million term loan A and a $300 million revolving line of credit, the person said.
Colfax, based in Fulton, Maryland, agreed to buy Europe’s biggest welding equipment maker for 1.53 billion pounds ($2.42 billion), according to a Sept. 12 company statement.
HMS Holdings’ financing package includes a $350 million term loan and a $100 million revolving line of credit, the company said in a Nov. 7 statement. Citigroup Inc. is arranging the financing for the New York-based company.
American Dental’s financing will include a $220 million term loan and a $36 million revolving line of credit, according to a Nov. 7 regulatory filing. KeyBank NA, CIT Group Inc. and NXT Capital LLC are arranging the deal for the Wakefield, Massachusetts-based company.
A term loan B is sold mainly to non-bank lenders such as collateralized loan obligations, bank loan mutual funds and hedge funds. A term loan A is sold mainly to banks. In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan, it can’t.
Jobless claims fell by 10,000 to 390,000 in the week ended Nov. 5, the Labor Department said. The median forecast of economists in a Bloomberg News survey called for 400,000 new claims. Another report showed the U.S. trade deficit unexpectedly narrowed in September to the lowest level this year as exports surged to a record high.
The European Commission said yesterday in a report that Italy’s recovery was stalling and its deficit will be 1.2 percent of gross domestic product in 2013. Italy’s bond yields yesterday remained near the 7 percent threshold that prompted Greece, Portugal and Ireland to seek bailouts. The commission forecasts a contraction of 0.2 percent in the fourth quarter, which will limit economic growth to 0.5 percent this year, less than the commission’s September estimate of 0.7 percent.
“Foreign and U.S. banks are highly intertwined with the global financial markets,” said Fitch’s Schmalz. “So much so that the outcome in Europe does have a direct impact on activity in the U.S. debt capital markets, which eventually does have an effect on lending capacity,”
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