High Yield Debt Issuance Gains Momentum



Deal and flow analysis in the high yield bond markets

Issuance volume had slowed down in the previous week, as the US Federal Reserve was to announce its monetary policy stance. Following that announcement, issuers of junk bonds, or high yield debt, returned to the market in the week leading up to March 27. With a rate hike looming in 2015, issuers returned to raise debt at still-cheap rates. The SPDR Barclays Capital High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG) track high yield debt.

According to data from S&P Capital IQ/LCD, dollar-denominated bonds amounting to $7.3 billion were issued across 16 transactions in the week ended March 27. The issuance volume rose by 49.0% from the week ended March 20. Issuance was evenly spread across the week.

Last week brought the total US dollar issuance of high yield bonds to $90.1 billion in 2015 year-to-date. This is up 22% from the corresponding period of 2014. The number of transactions jumped from six to 16 week-over-week.

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Refinancing deals surge

Refinancing remained the purpose of choice for the seventh successive week. Refinancing-related issues accounted for nine out of 16 transactions in the week. While six deals were for corporate purposes, one deal was for acquisition purposes.

Though the number of refinancing deals overshadowed the number of deals for corporate purposes, the largest deal of the week was for the latter. Ally Financial (ALLY) issued senior notes worth $1.25 billion last week.

The largest refinancing deal last week was by oil and gas company Whiting Petroleum (WLL), which issued senior notes worth $750 million.

Other notable deals came from Germany’s Schaeffler Group and from Cliffs Natural Resources (CLF).

We’ll analyze these deals and pricing trends in detail in the next part of this series.


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