US companies raise billions in debt markets after rate cut
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Ten high-grade issuers raised a total of US$12.2 billion (S$15.8 billion), with the market bouncing back after sales fell short of issuance forecasts last week.
PHOTO: REUTERS
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US companies stormed debt markets on Sept 23 following the US Federal Reserve’s decision last week to begin lowering its benchmark interest rate, pushing borrowing costs down.
Ten high-grade issuers – including T-Mobile – raised a total of US$12.2 billion (S$15.8 billion), with the market bouncing back after sales fell short of issuance forecasts last week.
There could be US$20 billion to US$25 billion worth of deals this week, according to syndicate desks.
There are 10 companies borrowing in the junk bond market, marking its busiest day in 2024 in terms of the number of issuers. Also in the US, 18 leveraged loan deals launched.
Last week, the Fed decided to cut interest rates by half a percentage point,
That is giving borrowers another chance to refinance and raise fresh capital before earnings blackouts, and potential volatility around US elections or upcoming economic data.
“With the uncertainty of the Fed’s decision out of the way and investors still having liquidity to be deployed, it appears issuers are eager to get their deals done,” said Mr David Schiffman, lead portfolio manager at Aquila Investment Management. “Companies do not want to be shut out of the market as liquidity becomes more difficult as we approach the election.”
The average yield in the US investment-grade and high-yield bond markets fell following the Fed’s move, making it more attractive for issuers. Spreads have also narrowed. Leveraged loan prices have held steady over the past week.
Companies in the junk bond market on Sept 23 include online furniture retailer Wayfair, which is looking to borrow US$700 million to refinance existing maturities.
Goldman Sachs Group is the lead bookrunner on the transaction.
Cigarette filter manufacturer Cerdia launched a US$800 million offering to refinance its notes due 2027 and to fund a shareholder distribution. Coal producer Coronado, meanwhile, is issuing US$400 million of debt to redeem its 2026 notes.
Telecommunications provider Windstream Holdings is tapping both the loan and bond markets.
It launched a US$1.3 billion debt package on Sept 23 to refinance existing loans, with JPMorgan Chase & Co. leading the transactions.
While a majority of the deals in the loan market in 2024 are to reprice or refinance existing debt, transactions funding leveraged buyouts are also on the upswing.
On Sept 23, Agco Grain & Protein is marketing a US$400 million offering to help finance an acquisition by American Industrial Partners. That deal is being led by Santander. BLOOMBERG
