Conditions in the corporate debt markets have improved in 2013, continuing last year’s strong performance. An important new trend is that banks are once again liquid and open for business.
This has resulted in loan volume growth outpacing the bond market, in spite of continued strong appetite from bond investors. Despite the availability of funding, acquisition activity has remained low.
This video explores recent trends in the debt markets in a bit more detail and advises companies on what they should do to take advantage of the current conditions (June 2013).
Get further detail on the latest in the debt markets here (URL to outgoing link)
The first quarter of 2013 in the deals environment has seen hugely increased liquidity, both for smaller corporates and larger corporates.
Right thought the credit spectrum in the investment grade space and non-investment grade space; whether you’re a public company or private company it hasn’t really seemed to matter to the market which has remained liquid.
Through all markets and right through the credit curve, there has been substantial yield compression and the yield compression has been accompanied by flexibility in both terms, tenure and in some of the product that has been available to lenders.
Some of the product has been reminiscent of the credit bubble in 2007: payment in kind instruments, derivatives thereon have been freely available and they haven’t been seen in the market for something approaching 7 or 8 years.
Not just in the financial sponsor space but also in the corporate space, debt is freely available on terms and conditions that haven’t been seen since 2007 and what we hear from our client base, the investors, is that there is a lack of M&A and a lack of deployment available for them and no choice.
So the message in the deals environment is that there is great liquidity, drive the M&A and take advantage of it now and we say that because we see change coming. In the first two weeks of June there have been approaching $5 billion of high yield capital leaving the market. That will drive down availability of credit, will tighten the current flexible terms and will drive reduced liquidity.
So our message to borrowers in the deals environment is ‘get it when you can, whilst you can’.