(Bloomberg) — Companies are delaying their bond and loan sales at the fastest pace in a year after a week of financial system turbulence left investors reluctant to buy debt.
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On a quarterly basis, the number of US deals in limbo — spanning bonds, loans and asset-backed securities — has climbed to eight, according to data compiled by Bloomberg.
Much of that activity happened in the latest week, with at least five companies either postponing or pulling plans to sell structured bonds and leveraged loans, as markets digest regional bank failures and turmoil engulfing Credit Suisse Group AG.
The number of debt deals pulled in the first quarter so far is the highest since the same period last year, when the war in Ukraine erupted.
Among the companies withdrawing deals this week were auto lender Santander Consumer USA, which halted the sale of $942 million of bonds backed by subprime auto loans; car leasing firm Automotive Rentals Inc., which paused an almost $900 million sale backed by auto fleet leases; and government-backed home loan company Fannie Mae, which delayed selling over $500 million of mortgage-linked bonds.
On the term loan side, medical equipment company Agiliti Health pulled a $1.08 billion deal while asset manager Russell Investments withdrew a proposed $1.16 billion amend-and-extend, bringing the total to the highest weekly figure seen in 2023.
That makes this the week with the most pulled deals so far this year, totaling about $4.6 billion of debt financings yanked out of the market as of Friday, Bloomberg data show.
The withdrawn deals came in the wake of multiple bank failures, most notably California’s Silicon Valley Bank, which collapsed last Friday, making it the biggest US lender to fail since Washington Mutual’s 2008 demise during the financial crisis.
First Republic Bank, widely seen by investors as wobbly after the collapse of other similar regional lenders, said on Thursday it was receiving $30 billion of deposits from banks including JPMorgan Chase & Co. and Bank of America Corp. The move amounts to a private sector rescue of the bank, brokered by the US government.
And Credit Suisse’s shares plunged on Wednesday, forcing the lender to secure a lifeline from the Swiss National Bank, after the company said it found material weaknesses in its reporting and controls, and its biggest shareholder said it wouldn’t put more money into the firm.
The tumult in the bank sector sent ripples across financial markets, making it much harder for borrowers and underwriters to determine how to price bonds and loans.
“Spreads have been difficult to pin down, and some issuers have preferred to pause their offering process until there’s better clarity,” said Brian Wiele, head of securitized product syndication at Barclays Plc.
While some borrowers are stopping offerings they’ve already launched, others are avoiding new sales. As many as 15 potential issuers stood down from selling US high-grade bonds as of Thursday, making it the fifth straight session without any sales and the first blank week since June 2022. No issuers are expected to come to market Friday, according to a survey of debt underwriters.
In secondary markets, leveraged loans traded at around 92.8 cents on the dollar on Thursday, down more than 1 cent from last Friday. The safest tranches of CLOs, which repackage those loans, have also fallen in price, to around 98 cents on Thursday from almost 99 cents on Wednesday, March 8.
–With assistance from Charles Williams, Jeannine Amodeo and Michael Gambale.
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