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9 Nov, 2021
By John Atkins
A spate of early November deal announcements has propelled U.S. high-yield bond issuance volume to new annual record, marking a second consecutive record total for the asset class as swarms of debut borrowers and acquisition-driven financings add significant volume to an ongoing refinancing wave.
A heavy slate of deals Monday boosted high-yield issuance volume to $436 billion this year, topping 2020's $435 billion full-year total to establish a new all-time annual high, according to LCD. The totals tower over 2012's roughly $345 billion full-year amount, which remains a distant third place on that list.
This year's new record was not always considered a matter of course. Looking back at the sell-side projections for 2021 that analysts rolled out a year ago, most estimates ranged from $300 billion to $375 billion.
While bond volumes often ebb and flow in relation to the strength of the leveraged loan market, this year's bond boom came alongside a new annual record for loans as well. The loan market established that annual record nearly a month ago.
Notably, the 2021 bond volumes reflect a new record for unsecured issuance, at $301 billion as of Nov. 8, and secured volume already roughly in line with last year's full-year record amount.
As for issuance drivers, refinancing-driven volume accounts for just shy of 64% of total issuance so far this year, down from last year's record-high share near 68%. Issuers continue to take the opportunity to materially push out their debt-maturity profiles — new deals dated seven years or longer accounted for 77% of new pricings this year, up from 61% last year — and they winnowed their debt-service costs against bone-thin funding costs this year.
The historic refinancing opportunities included a record-low 4.83% average yield at issuance for the deals priced in June. But yields have ticked higher since then as inflation concerns put the Federal Open Market Committee on hawkish footing, with the yield average at a 12-month high at 5.90% in October.
As well, deals inked for general liquidity slipped to 8.5% of this year's volume through Nov. 8, from a record-high 19% in 2020, when issuers erected liquidity bridges over the cash flow disruptions wrought by the global pandemic. The 2021 proportion is more in line with the 7% handles for the annual shares backing general corporate purposes from 2016-2019.
Filling those year-on-year gaps are deals from first-time issuers backing mergers and acquisitions and leveraged buyouts. Debut issuers priced 153 tranches of new bonds this year through Nov. 8, well ahead of the 111 in 2020 and the annual totals of 52-72 from 2015-2019. The prior peak was 127 in 2013.
By volume, the $98 billion total for debut prints this year supplants last year's then-record $72 billion.
As for the M&A/LBO boom, high-yield bond deals backing those efforts account for more than 23% of year-to-date issuance volume, or more than double the 11% share last year.