Leveraged Loan Market Shows Signs of Life After August Slowdown

  • Berry Plastics, Beacon Roofing plan to syndicate M&A loans
  • About $47 billion of loans for mergers in deal pipeline

The leveraged loan market in the U.S. is showing signs of revival after the weakest August for issuance since 2011.

At least four companies are said to be meeting with lenders this week for loans backing acquisitions. Issuers marketing debt include Berry Plastics Group Inc., which is meeting lenders Wednesday to discuss a $1.9 billion loan backing its purchase of Avintiv Inc. and Beacon Roofing Supply Inc., which will do the same on Sept. 10 for a financing backing its $1.1 billion takeover of Roofing Supply Group.

While loan issuance typically slows down in late summer, this year many borrowers chose not to start syndicating their deals as news of a slowdown in China roiled markets worldwide. The number of companies to begin marketing term loans plunged 65 percent last month to 22, according to data compiled by Bloomberg.

“You had a challenging summer when it came to the new-issue market,” said Jason Rosiak, head of portfolio management at Newport Beach, California-based Pacific Asset Management. “Finally the calendar has turned around, and it’s a welcomed opportunity for investors to get a little new blood in their portfolios.”

There are about $47 billion of dollar-denominated leveraged loans backing acquisitions under mandate, Bloomberg data show.

Berry, a maker of consumer packaging, is buying Avintiv for about $2.45 billion from private-equity funds managed by Blackstone Group LP. Beacon, a U.S. supplier of building materials, is purchasing Roofing Supply from Clayton, Dubilier & Rice.

Another company that may start marketing loans this week is Universal Fiber Systems LLC, which is meeting with lenders Sept. 10 to discuss $205 million in term loans, according to a person with knowledge of the deal.

Other M&A financing may be further out.

Sycamore Partners is planning to fund its buyout of department-store chain Belk Inc. in part with a $1.775 billion term loan, a person with knowledge of the deal said last week. Timing is still fluid on when the Morgan Stanley-led deal may be marketed to investors, said the person, who asked not to be identified because the financing details are private.

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