Schaeffler AG, the maker of bearings used in airplanes and vehicles, borrowed 2.3 billion euros ($2.5 billion) from banks to pay off leveraged finance and cut its debt costs by two-thirds.

The deal comprises a 1 billion euro, five-year term loan and 1.3 billion euros of revolving credit facilities, according to a statement. The German company will use the funding from 15 international banks to prepay a 400 million euro leveraged loan maturing in May 2020 and a 600 million euro bond due in 2018.

Schaeffler, whose components are found in Airbus Group SE A380s, said it was able to replace the leveraged finance with cheaper bank loans because it has cut debts over the past two years. The switch compounds a slowdown in Europe’s leveraged-loan market, after a 32 percent slump in issuance this year.

“It’s a positive for the issuer, securing competitive alternate relationship pricing,” said Desmond English, a London-based fund manager at Pioneer Investments, which oversees 221 billion euros. “However, it’s a negative for the leveraged-loan market, which loses another large quality issuer.”

The initial margin on the new term loan is 1.7 percent, which compares with 4.25 percent interest on the loan and bond it replaces, Schaeffler said.

German cosmetics retailer Douglas AG is also seeking cheaper financing with investor commitments due July 26 for a leveraged loan, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified.

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