Deals and flows analysis in high-yield bond markets
High-yield bond issuance activity increased significantly last week on a strong market condition. Issuers were in a rush to close deals ahead of Memorial Day weekend. According to data from S&P Capital IQ/LCD, dollar-denominated high-yield debt amounting to $11.2 billion was issued in the week ended May 27, 2016, the largest year-to-date (or YTD). In the previous week, high-yield issuance was $8.2 billion.
The number of transactions increased to 17 last week, from nine the previous week.
Last week brought the total US dollar-denominated issuance of high-yield debt to $63.4 billion in 2016 YTD. That’s 39.0% lower than the corresponding period in 2015.
Mutual funds such as the PIMCO High Yield Fund – Class A (PHDAX) and the Fidelity High Income Fund (SPHIX) invest in junk bonds. High-yield debt is tracked by ETFs such as the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG).
Majority of the deals were for refinancing
Of the 17 deals that were priced last week, 11 were for refinancing, two were for acquisition, one was for corporate, one was for dividend recapitalization, one was for spin-off, and one was for a leveraged buyout.
The following issued junk bonds for refinancing purposes:
- Teck Resources (TCK)
- Albertsons Companies
- Realogy Holdings (RLGY)
- CalAtlantic Group (CAA)
- Calpine (CPN)
- Dana Holding (DAN)
- Match Group (MTCH)
- Iron Mountain (IRM)
- US Concrete (USCR)
- TRI Pointe Homes (TPH)
Below are the companies that issued junk bonds for acquisition purposes:
OpenText (OTEX) issued junk bonds for a general corporate purpose. Cengage Learning issued junk bonds for a dividend recapitalization purpose. Hertz Equipment Rental, a wholly owned subsidiary of Hertz Global Holdings (HTZ) issued junk bonds for a spin-off. MPH Acquisition Holdings issued junk bonds for a leveraged buyout.
In the next part of the series, we’ll look in detail at some deals priced last week and some pricing trends.