You wouldn't know it by today's busy M&A headlines, but a sizable slump in the prices of recent buyout loans, could threaten the pace of future deals.
Nearly half of the $75B in buyout loans arranged in the U.S. and tracked by Bloomberg are trading below their issue price, and leveraged loans could be headed for their first loss since 2008.
Investors have pulled cash from leveraged loan mutual funds for 12 straight weeks, and just $5.8B of CLOs were created last month, 34% below 2015's monthly average.
The result is underwriters forced to sell debt at the steepest discounts to par in four years and investors pushing for higher interest rates to buffer against possible principle loss. It didn't scare Western Digital away from SanDisk, but Dell could need to raise nearly $50B for its purchase of EMC.