American companies in the first half of the year reduced bond issuance amid rising interest rates, increased inflation and economic uncertainty, writes The Wall Street Journal.
The total volume of placements of companies with an investment-grade rating amounted to $515.71 billion compared to $603.34 billion in January-June last year, that is, it decreased by about 15%, according to Refinitiv data.
The number of large ones included the placement of an online retailer Amazon.com Inc (NASDAQ:AMZN). for $12.7 billion, pharmaceutical Bristol Myers Squibb (SPB: BMY) for almost $6 billion and home goods store chain Lowe”s Cos. for about $5 billion.
At the same time, bankers expect a further decline in volumes in the second half of the year.
“With the increase in financing costs,” such fundraising becomes less attractive, says Dan Mead of Bank of America (NYSE:BAC). “Over the past two years, issuers have accumulated quite large cash positions, and some of them now intend to use some of the money to repay the debt instead of refinancing,” he believes.
Companies with “speculative” ratings raised $54.77 billion in the first half of the year by issuing bonds against $256.1 billion in the same period last year. Thus, the drop was almost 79%.
The number of issuers in this category included the automaker Ford Motor (NYSE:F), social network Twitter (NYSE:TWTR) and retailer Macy’s Inc.
In January-March, American companies placed convertible bonds in the amount of $8.5 billion, which is significantly lower than last year’s figure of $52.47 billion.
Meanwhile, the volume of raising funds with the help of “revolving” loans in January-June increased by almost 12% – to $840.67 billion from $752 billion a year earlier. In particular, they were used by retailer American Eagle Outfitters Inc. and packaging manufacturer Ball Corp (NYSE:BALL).