Debt Download

Welcome to Debt Download, Goodwin's monthly newsletter covering what you need to know in the leveraged finance market. Have a healthy and prosperous Year of the Snake!

Note: Some of the links in this newsletter may redirect you to a subscription-only resource.

In the News

• The broadly syndicated loan (BSL) market began this year as it left off last, with strong activity in repricings and dividend recapitalizations but relatively quiet in acquisition financing—though that too showed gains toward the end of the month. The month through January 24 saw $136.9 billion in new loans, or $12.4 billion net of associated repayments, according to Covenant Review. The average all-in single B spread dropped to S+324 (S+320/99.9 OID), the lowest spread in almost 10 years, down from S+335 (S+331/99.9 OID) in December. The market continued to heavily favor borrowers on flex terms, with 24 pricing cuts to two pricing increases, against an 8.0:1 ratio in December. European debt markets also enjoyed a strong start to the year, with 35 public launches in the month to January 23, compared with 32 in January 2024, according to Debtwire. This activity was, again, dominated by repricings.
• With secondary prices hitting levels not seen in years, PitchBook concludes this environment "bodes well for opportunistic activity," with an estimated $105 billion in potential repricing targets. While still quiet, PE firms are "sharpening their pencils" in hopes of a resumption in M&A activity, according to Octus. Debtwire echoes the conclusion that "market participants are bullish on 2025 new issuance volumes." Until then—and the resumption of a robust IPO market—dividend recapitalizations are expected to remain popular, according to Bloomberg. In fact, dividend recaps are off to a strong start with the launch of "a couple bulky deals backing dividends."
• After "attracting the attention of regulators" in 2024, private credit is looking forward to a "big new role" in 2025, according to several reports. With calls for tighter regulation now muted, private credit is poised to expand beyond traditional acquisition financings and into other sectors, such as infrastructure projects, in addition to continuing to tap huge pools of capital managed by insurance companies and expanding its reach through consolidation, according to Financial Times. In fact, this consolidation began in earnest in 2024, and now the top 10 private credit shops account for 32% of capital raised, a figure that is only expected to go up, according to PitchBook. Already this year, private credit has made gains by lending to fast-growing tech companies awaiting more favorable IPO conditions and partnering with regulated banks to provide asset-backed loans to investment-grade borrowers, according to Bloomberg.
• The healthcare industry is expected to continue to pose challenges to private equity firms in the new year, according to the Wall Street Journal. Private equity firms had successfully stitched together smaller practices into large physician networks, bolstering the negotiating power of these newfound medical specialty chains. However, higher interest rates, a tight labor market and new regulations, especially the No Surprises Act, have wiped out profits, leading to a doubling of debt defaults and bankruptcies among healthcare providers in each year since 2022.
• The U.S. Court of Appeals for the Fifth Circuit ruled that Serta Simmons' debt exchange in 2020 did not comprise "open market purchases" and was therefore unfair to excluded lenders. The decision hinged on the open-market-purchase exception to pro rata treatment among lenders in the company's loan documents, finding that such an exception required a transaction to take place on "the secondary market for syndicated loans." The Supreme Court of the State of New York Appellate Division on the same day ruled in favor of an uptier transaction for Mitel Networks, finding the 2022 debt exchange complied with its loan arrangements. Xtract distinguished this decision from Serta because Mitel "was atypical in that it imposed minimal guardrails on borrower purchases of its loans." Bloomberg Law quotes experts saying that the Serta decision is "like a grenade dropping into almost everyone's practice who does restructuring," while Octus downplays the significance, noting the jurisdictional limitation to the Fifth Circuit, the challenges of opposing prior liability management exercises (LMEs) even with this new precedent, the relative scarcity of non-pro-rata treatment in current LMEs, and the fact that the impact is on loans only rather than bonds as well. In any event, we have already seen loan documentation to possibly account for the Serta decision.

Goodwin Insights – Life Sciences M&A Boom and Other Trends to Watch in 2025

In mid-January, Goodwin and KPMG brought together innovators, practitioners, regulators, and others for an annual symposium on the future of life sciences and healthcare. This event marked the sixth year that Goodwin co-hosted the symposium, which occurs during the annual J.P. Morgan Healthcare Conference in San Francisco. The symposium covered a range of topics, including prospects for stronger M&A activity, the increasing popularity of dual-track processes, and PE firms' growing interest in life sciences. Panelists discussed how regulatory changes under the Trump administration could reshape the life sciences field with new opportunities and challenges. They explained how life sciences companies are harnessing the power of AI. Check out our five takeaways from the event.

In Case You Missed It – Check out these other recent Goodwin publications: What's Next for Fintechs in 2025? Key Regulatory Developments to Watch; Fundraising Strategies for Early-Stage Medtech Startups; Credit Bidding: Converting Secured Loans to Winning Bids; CFPB Finalizes Rule to Remove Medical Bills from Credit Reports; Seven Success Factors for Winning Section 363 Acquisitions; A Look Ahead in Life Sciences: What We Are Tracking in the First Quarter of 2025 and Beyond; CFPB Finalizes Rule Relating to Overdraft Fees for Large Banks

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.