[Stay on top of transportation news: Get TTNews in your inbox.]
QXO Sees Improved Terms on Buyout Deal After Solid Demand
Final Terms Cut Spread by 25 Basis Points to 2 Percentage Points Over Benchmark Rate
| Updated:
Key Takeaways:
- QXO Building Products reached tighter final terms on a $3 billion seven-year loan backing its planned $17 billion purchase of TopBuild, people said.
- Investor demand topped $6 billion for the loan and $14 billion for a junk-bond sale, allowing a 25-basis-point spread cut to 2 points over benchmark.
- The $3 billion bond deal has $1.5 billion tranches due 2031 and 2034.
QXO Building Products Inc. saw terms improve on a $6 billion financing package to fund its purchase of rival TopBuild Corp., which attracted more than three times the amount of demand from investors.
The building products firm reached final terms on the $3 billion loan tranche of the offering, trimming the spread by 25 basis points to 2 percentage points above the benchmark rate, according to a person with direct knowledge of the matter. The term loan was offered at a discounted price of 99.75 cents on the dollar, also tighter than initially pitched, the person added, asking not to be identified disclosing private information.
The seven-year loan received at least $6 billion of investor orders, with a similarly sized junk-bond offering drawing $14 billion of demand, according to people with direct knowledge of the matter.
The transaction underscores how companies are seizing on strong investor appetite for risky debt to secure improved terms. The offering is also helping fill a gap in the market for debt backing mergers and acquisitions, as most issuance activity in recent weeks has been focused on refinancing and extending maturities of existing obligations.
The QXO bond sale consists of two tranches, each sized at $1.5 billion, with maturities of 2031 and 2034. The five-year notes were priced at par to yield 6.5%, with the eight-year ones at 6.875%, one of the people said. That’s less than initially discussed and compares with a 5.94% average yield for similarly rated bonds tracked by a Bloomberg index.
Brad Jacobs-led QXO ranks No. 70 on the Transport Topics Top 100 list of the largest private carriers in North America.
Greenwich, Conn.-based QXO, which markets everything from drywall panels to gutters, in April agreed to buy insulation company TopBuild for about $17 billion. The transaction will “significantly improve QXO’s scale, diversification and profit margins,” offsetting a temporary increase in the firm’s debt burden, S&P Global Ratings said in a June 1 note to clients.
S&P assigned a BB- rating on QXO, three notches below investment grade, and a BB+, one notch below investment grade, on the loan.
Morgan Stanley, which is managing the bond sale, declined to comment, as did Wells Fargo & Co., which is running the loan sale. QXO also declined to comment.
