Banks Sell Leveraged Loans for Apollo-Owned Covis
Banks Sell Leveraged Loans for Apollo-Owned Covis
(Bloomberg) -- After a five-week struggle, a group of banks led by Barclays Plc has finally sold the biggest part of a $1.26 billion debt package for a pharmaceutical company owned by Apollo Global Management Inc.
The banks priced $945 million of first-lien loans for Covis Pharmaceuticals Monday, according to a person with knowledge of the matter, after offering one of the steepest discounts seen in the leveraged loan market in years to try to lure buyers. The financing stumbled several times amid volatility that’s caused investors to shun some risky companies as the Federal Reserve moves closer to hiking rates.
Demand for floating-rate loans, whose interest payments rise as rates increase, has held up relatively well compared to bonds. But investors had shied away from the Covis debt sale partly due to concerns that more than 60% of the company’s revenue is generated from three pharmaceuticals that, according to Moody’s Investors Service, each face headwinds such as competition from generics.
The $595 million first-lien Covis loan, as well as a euro-denominated first-lien offering equivalent to $350 million, sold at a discounted price of 90% of face value, said the person, who asked not to be identified because the transaction is private. That’s the biggest discount seen in the U.S. market since mid-2019, according to data compiled by Bloomberg.
Representatives for Barclays, the lead manager on the loan deal, and Apollo declined to comment.
The banks, which had already been stuck with $312 million of second-lien loans that they couldn’t sell, made multiple changes to the financing package to win investor demand. The latest came Friday, when they delayed selling the first-lien loans until this week.
A protection, known as a most-favored-nation clause, was removed Monday. That term, which would have given investors a better rate if banks were forced to offload the first-lien loans at an even bigger discount within three months, was no longer needed because the first-lien debt was fully sold to investors, according to the person.
The Covis loans will help refinance existing debt incurred to buy products from AstraZeneca.
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