Goldman Sachs and JPMorgan Test Investor Appetite with $2.9B Worldpay Bond Sale

Goldman Sachs and JPMorgan Test Investor Appetite with $2.9B Worldpay Bond Sale

Goldman Sachs Group Inc. and JPMorgan Chase & Co. have initiated the sale of $2.9 billion worth of bonds. This significant move aims to fund the acquisition of a majority stake in payment processor Worldpay Inc. by private equity firm GTCR.

BNN Breaking understands that this sale acts as a substantial test of investor appetite for risky debt intended to finance leveraged buyouts. The sale, which will be split across two tranches of $2 billion and £700 million ($866 million), is anticipated to conclude on Wednesday.

In July of this year, GTCR agreed to acquire a 55% stake in Worldpay, a unit of Fidelity National Information Services Inc. that handles card payments for global businesses. This deal valued the company at $18.5 billion. FIS will retain the remaining 45% stake. This buyout financing is the largest since Wall Street agreed to lend $13 billion to fund Elon Musk’s takeover of Twitter last year.

Implications for Mergers and Acquisitions

The progress of this sale is under close scrutiny as its success could potentially lead to a rebound in mergers and acquisitions, and possibly more large-scale deals. The $2 billion tranche of bonds is being offered with initial price talk in the high 7% area, while the £700 million notes are offered at a yield in the high 8% area. This indicates a nascent return to risk-taking by banks that have cleared much of the commitments stuck on their balance sheets since last year, albeit at significant losses.

A Favorable Market Environment

This sale comes at a crucial time when the junk debt bond market has shown signs of revival due to the expectation that central banks will contain inflation without triggering a painful recession. This, coupled with a lack of M&A supply this year leading to investors having cash piles they are looking to invest, has created a favourable environment for this deal. Banks are also capitalizing on this positive sentiment to bring refinancings from higher-rated issuers, along with other more opportunistic deals.

Reviving the Junk Debt Bond Market

The junk debt bond market has been coming back recently, fueled by the belief that central banks will manage to keep inflation under control without causing a severe recession. This resurgence, combined with the absence of M&A options this year leading to investors accumulating cash that they’re eager to invest, has created an ideal climate for this transaction.

Banks are also seizing this opportunity to bring refinancings from higher-rated issuers, along with other more opportunistic deals to the table.