Hot demand let KKR sweeten the terms on financing for Integer. A person familiar with the deal said the interest margin came in at 2.5 percentage points over a benchmark, up to 0.5 percentage point tighter than early discussions. The loan was ultimately placed at par after first being shown at 99.5 cents on the dollar, according to the same person, who asked not to be named because they are not authorized to speak publicly. Citigroup Inc. led the sale.
Investors want LBO paper, but there has not been much of it. Only 15% of US leveraged loan launches this year have funded acquisitions or buyouts, Bloomberg data show, leaving buyers hungry. Loans have also outpaced much of the US credit market, helped by floating rates while bond yields climb. A Bloomberg index shows a 3.33% return so far this year, and loan funds have seen 11 straight weeks of inflows, according to LSEG Lipper.
As deals announced earlier in the year head toward closing, market watchers anticipate that bankers in the US and Europe will offload north of $100 billion in buyout debt in the coming months. In the US this week, 22% of a record $40 billion in new launches were tied to acquisitions and buyouts, including financing for the purchases of BGIS, the water unit of Nestle SA, and Utz Brands Inc.
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KKR agreed last month to acquire Integer, which makes products ranging from catheters to components used in defibrillators, in an all-cash transaction worth about $5.7 billion. The transaction is projected to wrap up before the year is over. For investors, this wave of LBO financing signals that credit markets are open for business and that demand for floating-rate exposure is still strong.
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