NEW YORK: Outflows reached a record high this week in the high-yield market as conditions have deteriorated. Lipper reported USD4.634bn outflow for the week ending Wednesday, which far surpassed the USD3.432bn previous outflow record from the week ending June 22, 2011.
This week's redemptions may affect an already weak primary market. One investor said he is not playing the new issue market due to a lack of cash.
Still, primary market activity is starting to pick up, with one deal priced this afternoon from Approach Resources and InterGen on deck with its USD1bn dual-currency offering.
Tomorrow, at least three issuers are on deck to price, having launched deals earlier in the week or last week with extended roadshows.
The lowest price guidance among these is 8.25%-8.5% on the Caa1/CCC+ rated USD200m offering from Warren Resources, while the highest is 9% area for Hot Topic's USD350m B2/B rated offering. Jack Cooper's USD225m B2/B- deal is talked at 8.75% area.
Meanwhile, InterGen is still expected to price today its USD1bn dual currency offering through Deutsche Bank left lead.
One investor said this week's deals appear to be backing up a bit in price in order to get done.
"Any issuer in the market now is going to have to rethink pricing and rethink structure," he said.
Approach Resources offering priced this afternoon on the wide end of its 6.75%-7% talk.
That said, market participants are calling this correction healthy, especially after the yield-to-worst dropped to an all time low of 4.95% on the Barclays index earlier in May.
"I don't think this sell-off should be too concerning," said the investor. "Things were tight and issuers got aggressive. It's not unhealthy to have a little pause. I don't see this as the beginning of a long-term correction."
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