That’s where reverse inquiries can give a money manager a leg up. Investors wanted to buy debt from companies seen as benefiting from the pandemic, and asked for bonds from US LBM, Bloomberg earlier reported. That inquiry helped the company sell $400 million of notes in January whose proceeds will go directly to private equity owners led by Bain Capital LP.
PetSmart sold $4.65 billion of bonds and loans in January after receiving about $20 billion of demand for the debt. Ten investors had agreed to buy approximately 90% of the sale before the deal was announced, according to one of the people with knowledge. The revived offering, financing the company’s split from online seller Chewy Inc., included a key feature debt buyers had demanded: collateral for the loan and the secured bonds in the form of Chewy shares.
PetSmart didn’t respond to a request for comment. Representatives for Barclays Plc, which led the bond sale, and JPMorgan Chase & Co., which led the loan, declined to comment.
Cheap Debt
Gas drilling company Chesapeake recently sold bonds as part of its exit financing from bankruptcy. The $1 billion deal already had about $2 billion of orders before launching Tuesday, according to the people with knowledge of the transaction. The deal attracted more than $12 billion of orders by the end of the day, which allowed the company to tighten pricing from initial discussions.
Representatives for Chesapeake and Goldman Sachs Group Inc., which led the deal, declined to comment.
Many recent reverse inquiry deals have been refinancings. Money managers initiating deals are aiming to get as big a piece as they can of the transaction.
For example, cloud technology company Rackspace sold a $550 million bond on Tuesday to help refinance its existing leveraged loan, and already had $1 billion of interest from investors before launching the offering, according to other people familiar with the matter. (The company also sold $2.3 billion of loans on Wednesday.)
Representatives for Rackspace and for Citigroup, which led the deal, declined to comment.
Money managers that engage in reverse inquiries often hold the company’s bonds or loans to begin with, and may even own the debt that’s being refinanced. But rolling over a bond into a new security with a lower yield can still be attractive for investors, said Jeffrey Baxter, director of research for leveraged finance at PineBridge Investments.
Baxter said he expects to see more reverse inquiry than usual until acquisition financing activity picks up.
“If you wait for general syndication, your allocations are going to be much worse than the guys who came in early and helped structure and price the deal,” Baxter said.
--With assistance from Gowri Gurumurthy, Carolina Gonzalez and Jeannine Amodeo.
This article was provided by Bloomberg News.