Companies rush to raise cash as stocks steady and inflation eases

Companies rush to raise cash as stocks steady and inflation eases


Companies in the US are rushing to raise cash as a steadier stock market and softer inflation data open a rare window to sell bonds and shares.

Bond markets enjoyed their busiest week in months, with about $2bn of shares sold in secondary deals — the busiest since a brief boom following the US Labor Day holiday on September 5.

Bankers and investors predicted the burst of activity would continue as companies and shareholders took advantage of the better mood, with equity sales by listed companies and large secondary sales by shareholders also up this week.

Issuance of both high-grade and junk-rated bonds more than tripled from the previous week to $45bn and $6bn, respectively, making it the busiest week for riskier bond deals since June. Oracle and General Electric Healthcare led the charge among the more highly rated borrowers, raising $7bn and $8.3bn apiece in deals that drew strong demand.

“Everyone that wanted to come to market came to market this week,” said Andy Brenner, head of international fixed income at NatAlliance.

Senior bankers said many companies had been preparing so they could move quickly if conditions improved as there are unlikely to be many more opportunities before the end of the year with holidays looming.

“We’ve been advising issuers and sellers to remain nimble,” said David Ludwig, head of equity capital markets at Goldman Sachs. “We are currently in one of those receptive periods, and those that have been prepared to move quickly achieved their financing objectives at more efficient terms.”

Interest in the corporate market was so heavy that it dented appetite for Wednesday’s $35bn auction for benchmark 10-year Treasuries and left primary dealers, whose role is to buy up the debt not taken by other investors, with their largest holding in over a year.

Participants were encouraged by the market reaction on Thursday to softer inflation data. Stocks surged by the most in more than two years while volatility measures dropped to levels last seen in August on hopes the US Federal Reserve could slow the pace of future interest rate rises.

Traders are betting on an 81 per cent chance of a 0.5 percentage point increase at next month’s Fed meeting, compared to a 62 per cent chance a week ago, according to CME’s FedWatch tool.

“I think there has been a desire on the part of investors to not believe Powell, to think the Fed will pull back. Anytime there is a bit of good news — including CPI [Thursday] — investors think, ‘now he’ll relent’,” said Marty Fridson, chief investment officer at Lehmann, Livian, Fridson Advisors, referring to Fed chair Jay Powell.

However, despite the improvement in conditions, few are expecting it to fuel an uptick in the more risky market for initial public offerings. While follow-on share sales can be completed quickly, IPO roadshows tend to last at least a week, raising the risk the process is derailed by a sharp market reversal.

Craig McCracken, co-head of equity capital markets at Wells Fargo, said, “Certainly after that CPI release people will start evaluating their options but you need day-to-day analysis of the markets right now . . . follow-ons and converts can get done at the moment, but we need longer-term evidence before we see IPOs.”

Quoted from Various Sources

Published for: Ipodifier