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US companies are taking advantage of blistering conditions in the debt market to slash their borrowing costs, underscoring how many investors are willing to back even risky deals as uncertainty over tariffs eases.
Borrowers repriced more than $153bn of leveraged loans in July as of Tuesday, eclipsing the previous record of $152.9bn set in December, according to data from PitchBook LCD. Leveraged loans are made to already heavily indebted companies, often backed by private equity.
Companies’ moves to reprice their loans, typically under existing facilities, comes at a time when a strong rally across US markets has pushed the premium investors demand to hold corporate debt lower.
The strong demand for corporate debt marks a comeback for a market that sputtered in April when Donald Trump’s “liberation day” tariff announcements shook investor confidence.
“There is demand for risk assets and there has been no supply,” said Lauren Basmadjian, Carlyle’s global head of liquid credit. “And what happens with that backdrop, the market reprices.”
Overall, borrowers were able to reduce their borrowing costs by around 0.42 percentage points on average in July, according to PitchBook. The reduction in yields echoes a shift for risky debt on the secondary market.
Leveraged loan spreads, at 4.34 percentage points as of Wednesday, are below the five-year average of 5.08 percentage points, according to data from JPMorgan Chase and PitchBook LCD.
Meanwhile, the gap between yields on junk bonds and US Treasuries recently has fallen to 2.82 percentage points from a high above 4.5 percentage points in April, Ice Data Services data shows.
Investors’ upbeat sentiment has also helped banks offload debt offerings they were unable to sell just months ago.
UBS and Citi on Thursday raised $1.9bn to finance private equity firm Patient Square Capital’s takeover of Patterson Companies, a dental and veterinary health group, according to people briefed on the matter. The banks, along with a host of other lenders, had tried to sell that debt in April, but scrapped the deal because of the market volatility.
In Wall Street parlance, the debt was hung — meaning the banks had to wire their own money to Patient Square instead of raising it from traditional investors. The banks have cleared the debt now but are still expecting to take a loss on the deal, selling $500mn of secured notes with a 5.5 per cent discount and offering about $1.4bn of term loans with a 10 per cent discount.
Those discounts were reduced from last week, when bankers had offered even larger haircuts to try to attract investors.
Private equity firm Vista Equity Partners also took advantage of the rally, reviving plans to refinance about $3.6bn worth of debt tied to Finastra, a financial technology company it owns. The company had marketed a debt offering in March, but shelved the plans during the sell-off.
Efforts to refinance Finastra’s debt follow a deal in May to sell its treasury and capital markets arm to private equity firm Apax Funds. The company plans to put the proceeds of that deal, which is set to close in 2026, towards paying down its remaining debt, according to Fitch Ratings.
UBS did not immediately respond to requests for comment. Citi, Patient Square, Vista and Finastra declined to comment.
