High yield debt issuance resurges in the primary market


Nov. 26 2019, Updated 9:47 p.m. ET

Deals and volumes in the high-yield debt primary market

New issue volumes for high yield debt rose 13.3% week-over-week to $6.8 billion across nine issues in the week ending October 31. Issuance had come in at $6 billion across 12 deals in the week ended October 24.

Primary market activity in U.S. high yield (HYG) debt had picked up over the past couple of weeks. Markets grew less wary as high yield debt market conditions improved. This was primarily due to upbeat economic data. Secondly, better-than-expected corporate earnings for the third quarter also allayed market risk concerns. You’ll read more on the market risks and rewards in parts 4 and 5 of this series.

Purpose of issuance: Refinancing transactions are more attractive now

Acquisition-related funding accounted for four out of the nine high yield transactions in the week. Two deals came to market for funding general corporate requirements.

The recent spike in yields a few weeks ago had all but dried up refinancing-related issuance. However, with the yield environment lower last week, three new refinancing-related transactions came to market.

Issuance by quality: B-rated issues re-emerge

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The decline in relative risk perceptions last week had ensured lower yields for junk-rated debt (PHB). This also ensured that lower-rated junk bond (JNK) issuers found it easier to obtain debt at favorable terms in the primary market. Six out of the nine issuers last week were rated below BB. These included media company Charter Communications (CHTR) and chemicals firm Huntsman International (HUN). The more upbeat economic and corporate environment enabled lower-rated credits to find financing on more advantageous terms.

You can read the details of these and other deals in the next part of this series.


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