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By Marine Cole
Despite some large debt transactions in recent weeks, including a $3 billion offering from Time Warner on Wednesday, US investment-grade corporate debt issuance is at the lowest year-to-date level since 1997.
So far this year, there were 266 offerings worth $199.1 billion, down 35 percent from 2009 and the lowest level since 1997 when issuance totaled $190.2 billion, according to data provided by Thomson Reuters.
Financials continue to be the main driver of issuance of investment-grade corporate debt, but deals from media and entertainment companies are gaining ground.
The latest offering from Time Warner, a US-based media company, helps bolster investment-grade corporate debt issuance in the media and entertainment industry to the highest year-to-date level on record for US companies. Offerings from the media industry in 2010 total $18.8 billion, accounting for 10 percent of all US-based corporate debt issuance. Time Warner said it will use proceeds from the deal to refinance existing debt.
The Time Warner deal, coupled with stronger consumer confidence fuelled by a drop in jobless claims and higher-than-forecast retail sales, helped boost debt issuance for the week to $12.8 billion.
Overall investment-grade corporate issuance more than doubled this week over last week, according to Bloomberg. But even with the increase, investment-grade corporate debt issuance fell short of the $14.8 billion weekly average for 2010, it added. Earlier this week, Bank of America Merrill Lynch cut its forecast for investment-grade corporate debt issuance in 2010 to $700 billion from $800 billion.
Spain also made headlines this week, and not only because of its win against Germany in the World Cup semi-final soccer game. The Kingdom of Spain issued $7.6 billion in fixed-rate bonds--bringing year-to-date issuance for Spain to $41.6 billion, the largest amount it ever issued in the first half of a year.
Spain, which has been facing debt and fiscal problems similar to those in Greece, is the third largest issuer of agency, supranational and sovereign debt in Europe so far in 2010, accounting for 10 percent of all offerings, behind Germany with $124 billion and Luxembourg with $66.5 billion.
In the merger and acquisition world, after identifying Europe as a ripe market for acquisitions, Standard and Poor's released a report this week looking at US companies that may be potential acquirers of European targets. Some of the companies included Northrop Grumman, Motorola, Yahoo, Intel, Pfizer, News Corp., Walt Disney Co. and Time Warner.
The criteria S&P looked for in potential acquirers included a somewhat weak return on equity that may motivate them to boost their market value, as well as at least $1 billion in cash and a total debt-to-equity ratio of less than 100 percent.
But one of the largest M&A deals this week actually occurred in Asia. The $2.7 billion acquisition of Singapore-based healthcare company Parkway Holdings by RHC Healthcare PTE is the largest acquisition in 2010 in Singapore and the sixth largest on record in Singapore.
With seven deals worth $4.3 billion, M&A activity in the healthcare sector accounts for 52 percent of all transactions in Singapore, followed by financials and media with 13 percent and 10 percent respectively. Morgan Stanley was the advisor to Parkway Holdings and currently top the advisory league tables for Singapore target M&A.
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