Photographer: David Paul Morris/Bloomberg
Photographer: David Paul Morris/Bloomberg
The high-yield market issuance frenzy is expected to keep up next week as investors continue to gobble up risky assets to escape ultra-low interest rates in other products.
Over $14 billion of U.S. junk bonds priced this week, making it the second busiest of the year, according to data compiled by Bloomberg. And with yields below 4% for the first time in the market’s history, more borrowers are expected to come after the long weekend.
The tidal wave of demand has slashed borrowing costs and opened up financing avenues for even the least credit-worthy firms, handing them an unprecedented opportunity to raise cash.
Bankers for American Tire Distributors Inc. are testing investor appetite for a potential $1 billion bond offering to refinance payment-in-kind loans it issued more than two years ago as part of its emergence from bankruptcy.
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Sinclair Broadcast Group’s unit, Diamond Sports Group, faces a Feb. 15 interest payment on three sets of notes, which are trading at distressed levels on concerns of Covid-19’s impact on future sporting events. Mall real estate investment trust Washington Prime Group also has a coupon payment due on its 2024 unsecured notes.
After seeing its fifth straight week of inflows, the leveraged loan market has about 23 deals due for over $22 billion, including BMC’s repricing and RealPage’s term loan for its LBO by Thoma Bravo. There are at least three lender meetings scheduled.
U.S. bond markets are closed on Monday in observance of the President’s Day holiday.
Blue-Chip Pause
The U.S. investment-grade market is anticipating another light calendar in the holiday-shortened week, after volume of $16.1 billion fell short of consensus expectations. About $20 billion of sales may price in the next four trading days, according to an informal survey of high-grade bond dealers.
The green bond flurry is in full swing with Goldman Sachs becoming the latest Wall Street bank to sell ESG bonds and saying the debt will become a “core part” of the bank’s strategy. Goldman issued $800 million of 5-year sustainability bonds Wednesday while JPMorgan Chase & Co., the biggest U.S. bank by assets, priced a $1 billion social bond on Tuesday. BNP Paribas predicts a 40% rise in U.S. ESG bonds this year, boosted in part by expected policies of the Biden administration.
A few energy companies are set to report earnings next week, making them candidates to sell junk bonds thereafter. Just Energy Group Inc. will report Monday and Occidental Petroleum Corp will follow on Tuesday. Energy companies have already been active borrowers this year and accounted for over 20% of total volume this month amid rising crude prices, according to data compiled by Bloomberg.
— With assistance by Gowri Gurumurthy, Lara Wieczezynski, David Caleb Mutua, Michael Gambale, and Katherine Doherty
