US companies are increasing debt levels to fund a $1 trillion wave of acquisitions, a shift from previous efforts to reduce borrowing. Keurig Dr Pepper Inc. is buying JDE Peet’s NV with a €16.2 billion bridge loan, while AT&T Inc. is purchasing spectrum licenses from EchoStar Corp. for $23 billion, partly with bonds.
Debt-to-earnings ratios have risen, nearing levels not seen since 2021. The Federal Reserve’s rate hikes made debt costlier, prompting companies to reduce borrowing. However, with potential rate cuts and clearer regulatory approval for acquisitions, companies are gaining confidence to pursue deals, leading to a surge in M&A activity.
Credit markets have seen a lack of acquisition financings, but the trend is shifting. Keurig Dr Pepper and AT&T’s deals are expected to close in 2026, with many more acquisitions likely. Companies may sell debt before finalizing deals, anticipating lower rates and tighter spreads, indicating a busy 2026 for high-grade firms.
Bondholders of EchoStar Corp. saw debt values rise after selling spectrum licenses to AT&T. Banco Santander SA is leading a $2.7 billion debt deal for Thoma Bravo’s acquisition of Verint Systems Inc. Private equity firm GTCR is seeking financing for a bid on generic drugmaker Zentiva, while other banks are relaunching loans for various acquisitions.
Spirit Aviation Holdings Inc. filed for bankruptcy again, and Saks Global Enterprises’ commercial-property bonds face challenges. Keurig Dr Pepper may sell debt in the European bond market, French companies are raising funds despite political risks, and Europe’s first defense spending bond was well-received. Perpetual bond rally raises concerns, and Altice France SA’s restructuring triggers $28.5 million payout to credit insurance holders.
Country Garden Holdings Co. reports widened losses, while Agricultural Bank of China pursues unpaid debt from Shimao Group Holdings. In employment news, Zev Garell joins Barclays as Head of Leveraged Finance EMEA, and Citigroup reshapes its team with the addition of Rob Cascarino.
Read more at Yahoo Finance: US Corporate Leverage Poised to Rise With $1 Trillion Deals Deluge