Bolstered by jumbo deals, September leveraged loan issuance challenges records

Leveraged loan issuance exploded in September for $69 billion, the third-largest monthly volume on record, behind January 2017 ($78.0 billion) and March 2021 ($73.4 billion), according to LCD.

This surge of institutional supply was fueled by deals supporting M&A, which hit an all-time high of $42.5 billion during the month. Acquisition-related issuance from borrowers backed by private equity firms, including LBOs, was also a record, at $33.4 billion. LBO volume alone tallied $23.9 billion, marking the highest monthly output since October 2007.

Those M&A totals are bolstered by the Medline deal, which included a $7.27 billion U.S. dollar denominated term loan B in its massive loan-and-bond LBO financing package. That is the largest single U.S. dollar tranche in the institutional loan market since Broadcom in 2015, and when coupled with the $500 million equivalent euro-denominated term loan, it is the fifth-largest cross-border loan financing of all time, and the largest since Refinitiv in 2018.

Of course, jumbo deals are not new to the loan market, as these are also being issued at record pace in 2021. In the year to date through Sept. 30, there have been 147 deals at least $1 billion in size, smashing the prior full-year high of 125 in 2017 (these numbers are based on the first-lien term loan size). There have been 32 deals between $2 billion and $5 billion, already good for the second-highest tally ever, and another four deals totaled $5 billion or more.

And there's more of this activity en route, including a $5.28 billion-equivalent term loan ($4.28 billion in dollars and $1 billion-equivalent in euros) supporting MKS Instruments' acquisition of Atotech.

That trend is mirrored in deals backing LBOs, where 42 loans that launched to finance buyouts this year totaled at least $1 billion, versus a prior full-year high of 34 in 2007. The growth came from the $1 billion to $2 billion bucket, while the number of loans to fund mega-buyouts (more than $2 billion) remains below 2007 levels. Indeed, the average size of term loans in the $2 billion-or-higher category stood at $4.4 billion in 2007, versus $2.9 billion so far in 2021, according to LCD. Overall, LBO issuance has been on a tear this year. The total dollar volume over the first three quarters of the year, $123.9 billion, is more than for any comparable period on record.