High-yield bond and loan investors have shunned new debt sales so far this month, extending a buyers’ strike for risky assets into the traditionally busy first week of September as concerns linger over the shaky state of the credit markets.
Just one $50m (€36m) bond issue was sold last week, marking the lowest new issue volume for the first week of September in more than a decade.
The week after the US Labor day holiday is usually one of the busiest of the year as bankers and investors return to their desks after the summer hiatus. In 2006, the same week saw more than $2.4bn of new debt hit the market.
However, sentiment among both US and European credit investors remains nervous after August sales of high-yield debt ground to a virtual standstill as subprime mortgage losses were felt in the broader debt markets.
Just under $2bn of high-yield debt was sold in the US in August, the lowest amount since 2002, according to Thomson Financial. European credit markets saw no new issues in August.
Investors and analysts say the coming weeks will be crucial for the credit markets, as banks attempt to sell $300bn of high-yield bonds and loans linked to this year’s record levels of leveraged buy-out activity.
Investors say that confidence could return if large deals for the buy-outs of companies such as First Data and TXU are successfully sold.
Underwriters of the $22bn in leveraged loans and high-yield bonds for the buy-out of First Data are expected to begin marketing the deal this week.
Meanwhile, in Europe, the high-yield market is looking to a €400m bond issue from Tiscali, the internet service provider, to fund the acquisition of rival Pipex.
Copyright The Financial Times Limited 2007
