Yahoo has successfully refinanced $1.6 billion of its buyout debt that originated from Apollo Global Management's 2021 acquisition. This new debt package replaces loans that were set to mature in September 2027 and pushes the maturity out by five years.
The refinancing comes at a much higher cost. The new $1.1 billion leveraged loan portion of the package priced at 5.5 percentage points over the US benchmark, at 98.5 cents on the dollar. The remaining $500 million in secured debt is yielding closer to the high 9% range. This is a substantial increase compared to the original Apollo-era debt, which benefited from a period of lower interest rates and cheaper money.
This development is significant for investors as it highlights the rising cost of capital for private equity deals from the 2021 vintage. With higher interest rates and a tighter risk appetite, the financial math for these buyouts is becoming more challenging. While some companies may absorb these increased costs without issue, others may struggle, and the leveraged loan market is pricing this risk on a deal-by-deal basis.
Royal Bank of Canada played a key role, leading investor meetings to gauge demand for Yahoo's new debt package. The repricing of this debt is seen as an indicator for how 2021-vintage buyout debt is being assessed in the current financial climate, where refinancing is no longer inexpensive. Apollo, with its assets under management recently exceeding $1 trillion and a large private credit business, attracts significant attention from lenders when one of its portfolio companies seeks financing.
