North America High-Yield Bond: Truist Insurance’s US$3bn seven-year bond
Buyout bet
The US$3bn bond to help fund Truist’s sale of its remaining stake in its insurance unit stood out in a year when high-yield investors were mostly fed a dull menu of refinancings. Not only was it the largest single US buyout bond of 2024, but it also successfully backed one of the year’s biggest LBOs when demand for acquisition trades of this size was far from certain.
When an investor group led by private equity firms Stone Point Capital and Clayton Dubilier & Rice announced in February that it was increasing its ownership in Truist, some questioned whether the public markets could absorb financing for an acquisition valued at US$15.5bn.
The prospect of monetary easing in the US may have started to stir animal spirts in early 2024. But the broadly syndicated markets for junk-rated bonds and loans were still convalescing from two tough years following the Federal Reserve’s aggressive rate-hiking cycle. And the appetite for sizeable buyouts had yet to be tested.
“At the beginning of the year one of the main themes was [whether] there was enough depth in the market for a US$9bn–$9.5bn financing from a low to mid-Single B rated credit,” said Wissam Kairouz, co-head of North America leveraged finance at Morgan Stanley, lead-left on the Truist bond.
“[But] this team had a very strong conviction that, structured properly, there was significant appetite.”
That market read proved correct. Investors had been starved of new money opportunities and were now keen to participate in buyouts in a market that looked to be on the mend. And Truist, one of the largest insurance brokers in the US, was seen as a favourable frontrunner to help kickstart a revival in LBO activity.
Even so, the question was how best to tap different pockets of demand for what was a hefty US$9.175bn LBO. In March, leads lined up a US$4bn first-lien term loan B and a US$2.1bn seven-year non-call three bond, rated B/B3/B. The rest of the financing package took the form of a senior unsecured bridge loan.
The shape of the transaction evolved as leads sought to optimise pricing and flexibility for the issuer, eventually upsizing the bond to US$3bn at the expense of the loan, which shrunk to US$3.1bn. Demand from high-yield investors also allowed the issuer to sell a US$1.9bn second-lien term loan to replace the bridge.
That change made it the largest single junk bond sale to hit the US market since April 2023. Truist was also the biggest LBO bond tranche ever led by Morgan Stanley.
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