Sep 30, 2022 - Economy & Business

Private equity's debt spiral deepens

Illustration of a close up of a tower of cards made out of money.

Illustration: Aïda Amer/Axios

Wall Street banks have canceled a $3.9 billion debt sale tied to Apollo Global Management's $7.5 billion deal for the ILEC assets of Lumen Technologies, after failing to find enough investor interest.

Why it matters: This is a rapid devolution of the "debt ceiling" we discussed on Monday, after banks took a $700 million loss on Citrix debt, and creates new questions for other existing agreements (including Elon Musk's limbo deal for Twitter).

Details: Bank of America and Barclays were leading a bank consortium that planned to sell a $2 billion leveraged loan and a $1.9 billion high-yield bond, per Reuters.

  • Brightspeed, the Apollo-owned platform in which the Lumen assets would sit, said in a statement that it still plans to close on the acquisition "in early October using an equity contribution from Apollo and proceeds from the committed financing obtained at the time of deal announcement."

The bottom line, per Bloomberg: "Wall Street banks face significant losses on tens of billions of dollars in high-risk leveraged buyout debt that they’re trying to offload, and are finding it increasingly tough to lure investors as yields surge."

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