June 18, 2010, 8:30 AM EDT

June 18 (Bloomberg) — Cablevision Systems Corp. announced this week it would turn to leveraged loans to fund its $1.37 billion acquisition of Bresnan Communications Co., following at least six other companies to the market even as high-yield bond sales abated.

Gentiva Health Services inc. marketed a reworked $925 million loan package this week to fund its buyout of Odyssey Healthcare inc. and Michael Foods inc. shopped $865 million in loans to back its sale to a fund run by Goldman Sachs Group inc.

Acquisitions have increased this year, following rebounding leveraged-loan prices and with buyout firms holding $484 billion of unspent investors’ money as of this month, according to the research firm Preqin ltd. about $30.9 billion of new buyouts have been announced this year, according to data compiled by Bloomberg, up from $6 billion in the year-ago period.

“Merger and acquisitions activity is slowly picking up,” said Andrew O’Brien, co-head of syndicated and leveraged finance at JPMorgan Chase & Co. in new York. “The size of the financing market versus last year has increased while the cost of borrowing has come down.”

The S&P/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, rose for a fourth consecutive day, to 88.67 cents on the dollar yesterday, down from 92.9 cents on April 26. Prices are up 50 percent from Dec. 17, 2008, when the index closed at 59.2 cents.

Europe’s sovereign debt crisis and volatility in the markets hurt riskier asset classes last month, which widened leveraged-loan and high-yield bond spreads in the secondary market and forced companies to boost payouts on new deals.

Junk Bond Spreads

The extra yield investors demand to own junk-rated debt instead of Treasuries was 6.91 percentage points yesterday, up from a low this year of 5.42 percentage points April 26, according to Bank of America Merrill Lynch data.

“One of the reasons you’ve seen spreads widen out on new issues is you’ve got a calendar building, with a couple of bigger LBO deals in the pipeline, and you don’t have a lot of new money coming in,” said Elizabeth MacLean, partner and portfolio manager of bank loans at Lord Abbett & Co. in Jersey City, new Jersey, which has $94.8 billion in assets under management.

Many companies have added incentives to complete transactions. Last week, TransUnion LLC increased the interest rate it offered on a $950 million term loan by as much as 33 percent to 5 percentage points more than Libor and offered a one-year soft-call protection of 101 cents on the dollar in the event of repayment in the initial 12 months. Libor is the rate banks charge each other for loans.

Mutual Fund Inflows

for the week ending yesterday, loan mutual funds had an inflow of $77 million, according to Lipper FMI data. High-yield bond funds took in $68 million. High-yield, high-risk loan returns fell to 1.58 percent this year, as of June 16, down from a high of 5.28 percent on April 26, according to the S&P/LSTA Index.

“From the start of 2010, the secondary market has been well-bid and the primary market was the only real place to put money to work,” O’Brien said, referring to the sale of new debt. “But now that more paper is available on the secondary side, it’s become a more valid competitor to the primary market.”

Cablevision, the new York-area cable-television provider, will use loans arranged by Citigroup inc. to finance its $1.37 billion acquisition of Purchase, new York-based Bresnan Communications from Providence Equity Partners inc., according to a person familiar with the deal.

Bank of America Corp. will be the lead arranger on the bond portion of the financing, said the person, who declined to be identified because the transaction is private.

Cablevision Financing

Bank of America and Citigroup have provided commitments for the debt financing, Bethpage, new York-based Cablevision said June 14 in a statement.

The deal will be financed with about $1 billion in non- recourse debt and an equity investment by Cablevision of less than $400 million, according to the statement.

about $26 billion of U.S. leveraged loans were arranged last month, down from $38 billion in April, according to data compiled by Bloomberg. High-yield bond issuance fell to $6.8 billion last month from $33.4 billion in April.

“From a new-issue perspective, it’s still going to be a very challenging market,” Lord Abbett’s MacLean said. “We think that people will look back at the deals done in this time frame and there will be some really good value there.”

–With assistance from Kristen Haunss and Emre Peker in new York. Editors: Michael Weiss, Faris Khan

To contact the reporter on this story: Richard Bravo in new York at rbravo5@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.

Cablevision Seeks Loan as Wave of Buyout Deals Comes to Market