Bank of America-Led Group Prepares Largest Leveraged Loan Sale Since Virus

(Bloomberg) -- A group of lenders led by Bank of America Corp. is preparing to launch the largest leveraged loan sale in two months, the latest test of investor appetite for a market that has struggled to regain full strength in the wake of the pandemic.

The banks, which also include Royal Bank of Canada and Barclays Plc, may officially begin syndication of a $1.1 billion term loan to finance the merger between technology companies Xperi Corp. and TiVo Corp. as soon as next week, according to a person with knowledge of the matter. Plans are still fluid and the timing could change depending on market conditions.

The loan is expected to receive ratings in the BB range -- the highest tier of junk -- that may make it more appealing in the still fragile leveraged loan market, the person said, asking not to be named because the details are private.

Representatives for the three banks declined to comment. Xperi and TiVo didn't respond to requests for comment.

U.S. leveraged loans issuance started to come back to life in April with more than $10 billion of deals launching, but that was still the second-lightest month by volume since December 2018, according to data compiled by Bloomberg. The pace is lagging that of high-yield bonds, which saw more than $37 billion sold in the same month.

Average loan prices are also still trading almost 10 cents below levels seen at the start of March, closing Tuesday at 85.89 cents on the dollar. Still, the Xperi loan would be the largest carrying high-yield ratings to hit the market since early March, the data show.

Junk-rated T-Mobile US Inc. and Delta Air Lines Inc. have both tapped leveraged loan investors for larger amounts in recent weeks, but the debt from both issuers was structured in a way that allowed it to receive investment-grade ratings.

Lower down the ratings spectrum, issuance of leveraged loans has mostly provided liquidity lifelines to companies whose businesses were hit hard by Covid-19.