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High-Yield Bond Issuance Plummets in 3Q15

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Deals and flows analysis in high-yield bond markets

High-yield bond issuance fell in 3Q15 compared to 2Q15, with July and August seeing muted issuance activity. Both of these months saw the least issuance in 2015 year-to-date. High-yield debt is tracked by the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG).

According to data from S&P Capital IQ/LCD, dollar-denominated high-yield debt amounting to $39.6 billion was issued in 3Q15. The issuance volume in the quarter nosedived 57.8% compared to 2Q15, which had seen issuance worth $94.0 billion.

The total US dollar-denominated issuance of high-yield debt stands at $225.2 billion in 2015 year-to-date (or YTD). This is lower by 13.0% compared to the corresponding period of 2014.

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Acquisition deals dominate in 3Q15

Acquisition was the purpose of choice for high-yield debt issuers in 3Q15. Of the 59 deals that were priced in 3Q15, 29 were for acquisitions. In 2Q15, this figure was 38 of 163 total deals.

Among other deals, 19 were for refinancing, six were for corporate purposes, and five were for leveraged buyouts. There were no deals for spin-offs or dividend/recapitalization in 3Q15.

The deal for acquisition was the biggest in terms of volume in 3Q15. Frontier Communications (FTR) issued junk bonds worth $6.6 billion in September. It was not just the biggest deal of 3Q15, but it was the fifth biggest issuance ever. Frontier issued these bonds to acquire wireline properties of Verizon Communications (VZ) in California, Florida, and Texas.

Among other notable deals, Netherlands-based Altice N.V. issued junk bonds worth $4.8 billion in September. SoftBank Group (SFTBY), a Japan-based holding company operating mobile and fixed-line telecom, broadband, Internet, and other businesses, issued dollar-denominated junk bonds worth $2.0 billion in July. Olin (OLN), a manufacturer of chlor alkali products, issued junk bonds worth $1.2 billion in September.

First Data Corporation and Pharmaceutical Product Development were among the largest junk bond issuers in August. WPX Energy (WPX) and Iron Mountain (IRM) were also among notable issuers.

We’ll revisit these deals and pricing trends in detail in the next article.

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