Private equity groups are taking advantage of ultra-low borrowing costs to fund a wave of acquisitions that will burden indebted companies with even more loans, underscoring concerns about the threatens posed by excessive leverage.

BC Partners is expected to borrow $ 480 million on Thursday on two loans to fund its takeover of healthcare provider Women’s Care Florida. The deal would bring the company’s adjusted debt to more than nine times its earnings before interest, taxes, depreciation and amortization, according to S&P Global Ratings’s preferred leverage measure, which cuts cash and adds things like as leases.

Odyssey Investment Partners is also using first and second lien loans totaling nearly $ 600 million to finance its purchase of Protective Industrial Products, a provider of personal protective equipment, leaving the company more than seven times in debt. Meanwhile, Clearlake Capital is buying the technology division of healthcare software company nThrive with debt totaling $ 600 million.

Following a massive rise in debt prices, all three deals are marketed with an overall yield of less than 6% for senior loans. This marks a radical departure from the coronavirus-induced market tumult last year, where average yields on leveraged loans soared to over 13% in March, according to data from the Loan Syndications and Trading Association. .

Matt Mish, credit analyst at UBS, said the fervor of the deals “could see companies move aggressively from increasing liquidity and taking their balance sheets into account in favor of stockholders. through aggressive buybacks. This could sow the seeds for further problems in the credit markets. “

Partners Group, Oaktree Capital Management and Lindsey Goldberg are also in the market with deals for the companies they buy.

Issuers have largely shunned the leveraged loan market in favor of the corporate bond market in 2020, leaving a shortage of supply and hungry investors ready to accept the handful of aggressive deals that have entered the market.

The favorable environment for issuers is expected to continue into 2021, with low borrowing costs creating attractive funding opportunities for lower-rated leveraged companies to be bought and sold by private equity groups. So far, however, the deals have been largely limited to companies more isolated from the Covid-19 crisis, analysts said.

“We’ve done a ton of mergers and acquisitions,” said John Gregory, head of leveraged capital markets at Wells Fargo Securities, noting that some of the deals won’t go to market until later in the year.

Guaranteed loan bond issuance, which bundles leveraged loans to support the sale of new bonds and new stocks, picked up in the second half of 2020. This fueled demand for new loan issuance, allowing U.S. private equity groups to deploy some of the $ 860 billion capital accumulated last year, up from $ 760 billion at the end of 2019, according to data from Preqin.

“There is significant capital on the sidelines within private equity funds and the costs of funding are always extremely low,” said Steve Columbaro, loan portfolio manager at Columbia Threadneedle. “It’s a formula for a lot of aggressive trades.”

Odyssey Investment Partners and Clearlake Capital declined to comment. BC Partners did not respond to a request for comment.