Big Deals (Sep 10)

HP, GMAC launch jumbo deals, high yield continues to soar.

By Marine Cole

The volume of global high-yield corporate debt is already surpassing 2009 levels and is just shy of breaking an all-time record.

High-yield debt issuance was at $177 billion as of September 6, a 96 percent increase over the year-to-date period in 2009 and less than $10 billion from breaking the all-time annual record for high-yield new issues set in 2006, according to data from Thomson Reuters.

Five industries--industrials, materials, financials, energy and power, and media--account for more than two-thirds of global high-yield activity this year. In addition, US companies made up 72.6 percent of issuance this year while European firms only accounted for 20.1 percent.

The recent $1.73 billion bond issuance by Ally Financial, the lender previously known as GMAC, was one of the top ten top global high-yield deals so far in 2010, according to Bloomberg.

The company has sold $5.65 billion of bonds this year through offerings in February, March and September, citing debt repayment as a possible use of proceeds.

US investment-grade corporate debt issuance also fared relatively well this week.

Including this week's largest deal--a $3 billion combined offering of global notes and global floating-rate notes from Hewlett-Packard--US investment-grade issuance for the week totaled $33.7 billion, the highest week for new issuance since May 11, 2008, according to Thomson Reuters.

There were 35 investment-grade offerings this week, the highest number of issues since September 23, 2007. Overall, investment-grade issuance in the US market totals $478.8 billion for the year, down 5 percent in value from the same period last year and the lowest year-to-date period since 2005.

JP Morgan, which was a bookrunner for the Hewlett-Packard deal along with Citigroup and Barclays Capital, currently ranks as the top underwriter this year for US investment-grade corporate bond issuance.

In the mergers and acquisitions space, Europe has seen little action. With just 103 European-target M&A deals announced this week with a total value of $2.6 billion, this is the lowest weekly number of deals since the week of December 22, 2002, and the lowest weekly value since April 12, 2009 in Europe, according to Thomson Reuters.

Overall, year-to-date M&A activity in Europe totals $393.8 billion, down 4 percent and the lowest value since the same period in 2004.

“This low activity is a sharp contrast to worldwide M&A, which is up 21 percent and Europe is the only major region with a year-over-year decline in M&A activity,” Thomson Reuters added.

In the equities market, Asia is still going strong.

After this week's $6.6 billion follow-on offering from CML in Hong Kong, secondary offerings in China have reached a record year-to-date level of $25.6 billion, up 54 percent from $16.6 billion from the same period last year.

Shanghai has been the most active exchange this year for follow-on activity--with 25 offerings and a total value of $12.2 billion, followed by Hong Kong and Shenzhen with $8.5 billion and $3.5 billion respectively. Follow-on activity has been focused in the financial sector, with 10 issues so far this year and total value of just under $14 billion.

Comments (1)Add Comment
Robert Burns
...
written by Robert Burns, September 13, 2010
I agree that lots of paper is being moved but it's my opinion that it equates to the huge amounts of synthetic paper that Wall Street foisted on the unsuspecting investor and the only cash you'll see out of it will be the fees charged. I do hope I'm wrong about this.

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