A group of Wall Street banks led by Credit Suisse is set to offload the final chunk of credit extended to T-Mobile for its $66bn purchase of Sprint, unwinding one of the largest stalled debt deals since the coronavirus outbreak rattled global markets.

A total of 16 banks had been obliged to lend $23bn to T-Mobile once the merger was given the go-ahead on April 1. A revitalised debt market allowed the banks to sell $19bn of the debt through a bond issue that same week. But the remaining financing has sat on the banks’ balance sheets for close to a month as the loan market has been slower to recover from March’s sharp sell-off. 

In a sign of improving sentiment, investors looked to snap up the $4bn seven-year loan on Tuesday, marking the largest deal in the market since the onset of coronavirus, according to data from LCD, a division of S&P Global. It also stands out as the first new deal to hit the loan market to fund an acquisition since February; most deals completed so far have been designed to tide companies over during the tumult stemming from Covid-19.

Lenders had booked heady mark-to-market losses on so-called bridge loans in the first quarter, with some including Credit Suisse increasing their reserves for potential loan losses when markets gummed up. The rebound in the leveraged loan market in April and renewed investor demand are expected to help the Swiss bank avoid taking a loss on T-Mobile’s financing, which had been feared in the throes of the sell-off in March, according to people briefed on the matter. 

Telecoms companies are among the most insulated against the potential fallout from the virus. T-Mobile is expected to pay a modest interest rate of 3 percentage points above the benchmark interest rate Libor to raise the seven-year debt. 

The loan is likely to be sold at a discount of 98 cents on the dollar as bankers look to provide incentives to draw investors to the deal.

“I think T-Mobile is an indication that even in the uncertain environment there is ample capital in the market for businesses that are offering enhanced yield and that are deemed to be high quality,” said Steven Oh, global head of credit and fixed income at PineBridge.

Delta Air Lines, which issued a $1.5bn loan on Monday, also offered a discount to whet investors’ appetite. Despite both deals carrying investment-grade ratings, T-Mobile is set to pay more than one-third less in annual interest than the embattled airline.

“There is a lot more comfort here than with Delta, given the virus,” said Mr Oh. 

Confidence has been bolstered by a range of measures to support credit markets from the Federal Reserve, which have eased investors’ fears that companies may struggle to repay their debts. 

The average price of leveraged loans has risen from a low of 76 cents on the dollar in March to 86 cents on Monday.

“The term investors are using now is FOMO [Fear Of Missing Out],” said John Gregory, head of leveraged finance capital markets at Wells Fargo. “I didn’t know what it meant until a month ago. The government backstops have given investors confidence to go in and buy other stuff as well.”

Credit Suisse declined to comment. 

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