Credit Chaos Causes Debt-Hungry Companies to Invest in Bond Sales

(Bloomberg) — Companies are set to raise the least new debt in more than a decade this year and there’s an unusual contributing factor: big swings in markets mean borrowing windows often shut before firms can begin to sell their bonds.

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The trend is set to continue into 2023 because credit committees at some firms aren’t used to the levels of volatility, meaning demand can evaporate by the time they sign off on issuing securities, according to people with knowledge of the matter.

It’s a major headache for companies that need to refinance, especially after central banks reaffirmed this week that they plan to keep raising interest rates. As economies slow, the risk of credit rating downgrades increases. This can also lead to lower consumer sales.

“Many will be sitting on their hands for a while and delaying spending until we have more clarity” on the economic outlook, said Sarah Boyce, an associate director at The Association of Corporate Treasurers. “The more expensive price of debt will be factored in to all decisions going forward.”

Select buyers

According to Bill Zox (portfolio manager at Brandywine Global Investment Management), companies have spent a lot of the past decade buying back stock and increasing dividends to reward shareholders. He said that corporations now pay more attention to bondholders.

“Stockholders and corporate managements had a big party for the last decade and never invited their lenders,” said Zox on Friday in an email. “Now they are rolling out the red carpet for the lenders. But you have to be careful not to go to every party because some of them will end badly.”

According to Bloomberg League Table data, global corporate sales have dropped to around $2 trillion because of higher borrowing costs, and the war in Ukraine, which has dampened demand. That’s the lowest since 2011 and the euro-zone debt crisis era.

Missing Windows

The turnaround in sentiment has been so dramatic that some European firms still haven’t come to the bond market after almost an entire year because they keep missing borrowing windows, according to an investment banker at a US lender, who asked not to be named as he wasn’t authorized to speak publicly.

Barclays Plc advises borrowers to be available to issue as soon as possible.

“You need to be as flexible as you can, including on pricing,” said Pete Mason, co-head of Capital Markets EMEA at the bank. “Overspend on refreshing documentation, be nimble and go and see people. Investors want to see you, especially if you’ve a tricky credit story to tell.”

That’s particularly true in the junk bond market, where the amount of bonds sold this year has fallen by about 75% in Europe and the US.

One company that did manage to get a deal away was Blackstone Group Inc.’s Cirsa Gaming Corp SA, which offered its bond when a risk gauge for high-yield debt was near the highest level on record.

“Markets have been really volatile over the last months and we have seen significant changes in prices in a few days,” a spokesman for the gaming firm said. Borrowers cannot take it for granted “that you will get the price that prevails when you start the process, even if the process lasts just for a few days.”

The Spanish gaming company raised €425 million ($452 million) in October — €75 million more than originally anticipated — to refinance most of its notes that come due late next year. The new bond pays four percentage point more than the bond that was sold in 2018.

Failure Deals

Others were not so fortunate. Bloomberg data shows that around 140 fund-raising transactions were made this year. These included bonds, loans and asset-backed securities totaling at least $75 billion.

Bank of America strategists said last week that both high-yield as well as investment-grade companies have the incentive to reduce their borrowings in coming years. Refinancing is becoming more difficult as funding costs are rising.

The US has had a rising debt level relative to gross domestic products for many years. The bank stated that if companies increased their debt to the same extent as they did in 1970, they would be able to reduce the level of debt by $1.2 trillion.

Commerzbank AG’s head of corporate credit research Marco Stoeckle expects European net issuance to fall next year as the continent and the US are facing recessions, which should dampen corporate investment and deal making.

Continue reading: The US Credit Recession Indicator Bodes Well for Europe’s Junk Debt

“Market conditions are returning to a similar situation as before 2008,” said Boyce. “CFOs and treasurers that have been around since then understand this and know the extra work they need to do.”

Other credit markets:


According to an informal survey of debt analysts, no companies plan to sell US investment grade bonds this Friday. As the market finishes a tough year, the market expects that supply will be down by 16% in 2021.

  • Although the primary market has been difficult this year, dealers remain optimistic and predict a busy January with approximately $130 billion in sales.

  • John Hancock’s Emily Roland says investors still have time to get an end-of-year bargain. “Favoring the bond store over the equity store during this holiday shopping season,” the co-chief investment strategist of John Hancock Investment Management told Bloomberg Television’s Surveillance on Friday

  • JPMorgan Asset Management’s chief investment officer Bob Michele said investors should use every backup in yields to add high-quality duration to portfolios. “Recession remains our base case scenario, at 60%, given rapidly rising policy rates, early-stage quantitative tightening and still-high inflation,” he said in a note late Thursday

  • Click here to read this week’s issue of the Credit Brief newsletter

  • For the latest deal information, click here for our New Issue Monitor

  • Click here to read more about the Credit Daybook Americas


Sales of new bonds have been subdued amid a flurry of economic data and as the holiday season approaches: Issuers across all sectors have sold only about €515 million this week — the lowest of the year by far — while December sales stand at €16.35 billion

  • After a year of extreme volatility on global markets, the pace of European corporate debt issuance has returned back to its historical norms.

  • German development bank KfW and UniCredit Bank Austria lead €240 billion-equivalent of investment grade non-government euro and pound bonds maturing next quarter, according to data compiled by Bloomberg

  • As the tide goes out on an easy money era that inflated Europe’s real estate market, some of the world’s most-feared short sellers have turned their attention to the region’s landlords

  • Moody’s Investors Service raised its forecast for speculative-grade corporate defaults in 2023, warning they could more than quadruple under its most pessimistic scenario

    • According to its baseline scenario, the agency expects that the default rate will rise to 4.9% in November next year. This is compared with a forecast of 2.9% at the end of 2022. Last month’s year-ahead projection was 4.5%


The Asia ex-Japan region saw its bond issuance drop to its lowest level in six weeks. This was due to borrowers remaining on the sidelines during monetary policy decisions made by the Federal Reserve and other European central banks. The market is also getting ready for year-end vacations.

  • According to Bloomberg-compiled data on bond sales, deals fell to $520 million over the five days to Friday. This is a significant drop from nearly $1.2 billion last Week.

  • China’s Panda bond market may start rebounding after authorities moved to make the market easier to access, including allowing repatriation of funds offshore, according to Alan Roch, head of credit for Asia Pacific at Crédit Agricole CIB

  • Wireless operator Veon Ltd. is close to selling its tower assets in Pakistan to a consortium comprised of Pakistan’s TPL Corp. and UAE-based TASC Towers Holding Ltd. in what could be the country’s largest deal in more than a decade, according to people familiar with the matter

  • China’s government hinted at further support for the real estate sector, with a top policy maker describing it as a “pillar” of the world’s second-largest economy

–With the help of Abhinav RAMnarayan & Tasos Vossos

(Updates on Brandywine comments in the fifth and sixth paragraphs. Regional section updates.

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