Continued from Part 1
Refinancing activity in July fell to almost 50%, which is the lowest seen in almost two years. Plus, the new issuances related to mergers and acquisitions accounted for approximately 16% in July.
So what was the main driver of new issuance? Recapitalization and dividend transactions accounted for almost 18% of issuance. To put this in perspective, since the year started, recapitalizations and issuance of dividends accounted for less than 7% of all high yield (JNK) bond issuance.
Additionally, July was extremely busy for PIK bonds. These are bonds that Pay-in-Kind, which means they have an option to pay the coupon in cash or accrue it to their principal amount. These are generally riskier and have lower ratings for three reasons.
These bonds are usually rated low single B or CCC. These are in the lowest range among the below-investment-grade family.
Learn about issuance by rating
Continue to Part 3
© 2013 Market Realist, Inc.