Loan Investors Signal Fatigue as Cengage Scraps Repricing Deal

Cengage Learning Acquisitions has abandoned its effort to lower the rate on a $2 billion loan that it got last year to support its exit from bankruptcy as investors show signs of fatigue.

The educational company had been seeking to cut its interest rate by as much as 1.5 percentage point amid a jump in refinancings that have reduced payments to investors. The loan declined Wednesday to 99.938 cents on the dollar, down a cent from this year’s high in April, after the decision Tuesday to scrap the repricing attempt, according to quotes compiled by Bloomberg.

“Due to market conditions, we have made the decision to no longer pursue the repricing at this time,” Josef Blumenfeld, a spokesman for Cengage, said in an e-mail.

Borrowers have sought to lower rates on more than $63 billion of leveraged loans this year, squeezing yield from lenders as they take advantage of the drop in new deals in the market. Investors last week pulled $223 million from U.S. funds that buy leveraged loans, the most since the period through April 1, according Lipper.

Cengage, rated five levels below investment-grade, proposed as little as 4.5 percentage points more than the London interbank offered rate, with 1 percent minimum on the lending benchmark, said a person with knowledge of the deal, who asked not to be identified citing lack authorization to speak publicly on the matter.

High-yield loan prices have fallen amid the surge in refinancings, to 95.6 cents on the dollar, the lowest since early February, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index.

Companies this month have sought to lower the rate on about $9 billion of leveraged loans, following about $35.2 billion in May and $19.2 billion in April, according to data compiled by Bloomberg.

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