Risk appetite in the credit markets may be cooling. JPMorgan has arranged a $500 million leveraged loan for Mativ Holdings Inc., pricing it at one of the largest discounts this year, signaling that investors are demanding greater protection as market volatility increases. According to sources familiar with the matter, the loan, intended to refinance existing debt, was priced at 95 cents on the dollar with a spread of 450 basis points over the benchmark rate. So far this year, only two other U.S. leveraged loans have been priced at steeper discounts, suggesting the market may be growing more selective.
This shift appears to be unfolding against an already fragile macroeconomic backdrop. Geopolitical tensions, including conflict involving Iran, and uncertainty over how artificial intelligence may affect certain economic sectors seem to be dampening demand for high-risk corporate credit. Borrowers are responding by offering more favorable terms to investors, and some deals have been withdrawn from syndication entirely. Even larger transactions are facing pressure—JPMorgan also adjusted pricing on a $7.2 billion debt package supporting Clayton, Dubilier & Rice LLC's acquisition of Sealed Air Corp., indicating lenders may be less flexible than they were at the start of the year.
For Mativ, the current environment adds to its already complex challenges. The company, which produces materials used in undersea cable tape, medical adhesives, and other applications, has been grappling with a high debt burden while also facing what CEO Shruti Singal described as "weak demand" in some of its industrial business segments. The broader credit market appears to offer little relief. JPMorgan recently helped distribute nearly $22 billion in junk bonds tied to acquisition financing for Electronic Arts Inc. and Nexstar Media Group Inc., and the pricing dynamics in the Mativ deal may indicate that future bond issuances could face higher costs as investors grow more cautious.
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