‘Crazy’ August Debt Binge Brings 48 Corporate Deals in 48 Hours

(Bloomberg) -- A breakneck corporate borrowing binge, in the middle of August no less, is surprising everyone involved.

Companies across America are taking advantage of an unexpected dip in benchmark Treasury yields last week to tap the debt markets, not wanting to miss out on borrowing costs near historic lows.

Some are simply pulling forward bond sales that had been scheduled for September to finance acquisitions or capital spending. Others are looking to refinance more expensive debt and bolster their cash on hand.

“It’s been a crazy new issue week so far for mid-August,” said Travis King, head of investment-grade corporates at Voya Investment Management.

Thirty investment-grade rated borrowers priced new deals on Monday and Tuesday, the most for any two-day period since last September, according to data compiled by Bloomberg. In junk bond land, 11 issuers marketed bonds, while at least six launched leveraged loan sales, according to the Bloomberg-compiled data. Taken together, the market absorbed almost 48 transactions in the first two days of the week.

Read more: IG ANALYSIS: Intel Joins 48-Hour, $36 Billion Bond Sale Frenzy

“There are so many pitches coming at you that if you miss one you are going to have something else to swing at momentarily,” said Matt Freund, co-chief investment officer at Calamos Investments, capturing the mood shared by many money managers still awash with cash.

The yield on 10-year U.S. Treasuries dipped below 1.2% last week amid concerns that the economic recovery may lose steam, though they’ve since climbed. Borrowing costs for junk-rated U.S. companies have been rising since early July, according to Bloomberg Barclays index data.

For companies, it’s hard not to see this as an opportunity given risks ranging from the economic impact of the rapidly spreading delta variant to the possibility that the Federal Reserve may taper its support for financial markets more quickly than anticipated.

“The slight increase that we’ve seen in longer term rates suggests to a lot of market participants that we may be bottomed out and that now is a good time to hit the markets,” said Ivan Hrazdira, head of debt capital markets for the Americas at Credit Agricole SA.

The flurry of activity is keeping bankers, traders and investors, who may have hoped for a slow summer, glued to their desks -- at least for now.

One banker who helps arrange financing for acquisitions and buyouts lamented not being able to visit his Hamptons retreat more than twice since the pandemic started. But others say work-from-home arrangements are actually making it easier to handle the work flow in the summer.

“It’s also a function of people being able to work from anywhere now,” said Matt Brill, head of U.S. investment grade credit at Invesco. “People are putting in orders from places they probably wouldn’t have in the past.”

U.S.

More and more, private equity firms looking to finance big leveraged buyouts are cutting out the Wall Street banks, and borrowing money from each other or from direct lenders.

• Royal Caribbean Cruises Ltd. is back in the junk market, looking to raise $1 billion from a bond sale that will refinance debt it sold earlier in the pandemic at elevated rates
• Money-market traders are starting to get nervous that the debt-ceiling battle will go down to the wire, even though the U.S. government has created some breathing room for now
• For deal updates, click here for the New Issue Monitor
• For more, click here for the Credit Daybook Americas

Europe

Inter-American Development Bank (IADB) is the only deal in Europe’s primary markets Wednesday, and the issuer has opened books on a 100 million-pound ($138.1 million) tap of its existing 0.5% 9/2026 notes in the area of gilts plus 27 basis points.

• Elsewhere, Heathrow Airport won creditor backing for a second change in bond terms that would allow it to avoid default
• A positive crop of seasonal earnings is boosting sentiment:
  • ABN Amro swung to a second quarter profit and pledged to pay a dividend later this year after freeing up funds it had set aside for doubtful loans
  • German energy giant EON raised its full-year outlook after cooler weather boosted gas demand, while Thyssenkrupp’s adjusted earnings before interest and taxes swung to 266 million euros for the quarter ended in June from a 693 million-euro loss a year ago amid rising prices for steel and other metals
• Meanwhile, companies have returned in force to global loan markets to line up funding for acquisitions after the pandemic forced them to delay their expansion plans last year

Asia

Spreads on investment-grade Asian dollar bonds are on track to tighten for a seventh consecutive session on Wednesday, the longest such stretch since June. The yield premiums fell 2-5 basis points in the morning, according to traders.

• At least three issuers from the region were looking to price dollar notes on Wednesday, including a green offering from India’s Azure Power Energy Ltd.
• Chinese high-yield dollar notes climbed as much as 1 cent on the dollar Wednesday morning, according to credit traders, amid some improved sentiment on China Evergrande Group
• Southeast Asian dollar junk credit market has outperformed investment grade bonds recently on renewed risk appetite as investors bet the worst of the virus resurgence in the region may be over

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