LONDON, Dec 21 (IFR) - Corporates led a stellar year for
credit in 2012 as investors sought safe-haven investment-grade
debt away from the turmoil in the sovereign and bank sectors,
while huge inflows drove global high-yield volumes to record
Global high-yield corporate debt totalled USD116bn during
the fourth quarter of 2012, bringing the year's supply to
USD397bn - up 38% from 2011 supply of USD288bn, Thomson Reuters
The US market was on fire for the majority of the year,
while Europe was prone to more volatility and periods of
closure. By the end of the year, however, risk appetite was
buoyant on both sides of the pond following a rally inspired by
ECB President Mario Draghi's commitment to stem the euro crisis.
That paved the way for multi-billion dollar high-yield
offerings in the final quarter from U.S.-based Cequel
Communications, Plains Exploration & Production and Clear
The majority of the year's top 10 high-yield corporate bond
offerings involved US borrowers, with CIT Group's USD3.25bn deal
in February the largest high-yield offering of the year.
The only European deal to reach the top ten table was German
auto parts supplier Schaeffler's EUR2bn-equivalent four-tranche
deal, which also won IFR's European High-Yield Bond Award in
The average coupon for fixed rate high-yield corporate bonds
issued during the fourth quarter of 2012 rose to 7.604% from
7.341% in the previous three months as lower-rated issuers
accessed the market and riskier deals, such as payment-in-kind
(PIK) toggles surfaced, especially in the United States.
Just this month, Taminco - a privately held specialty
chemical producer - priced a USD250m senior unsecured five-year
non-call PIK toggle via joint bookrunners Credit Suisse and
Citigroup which paid a 9.125% coupon
In Europe, investors have also proved willing to move lower
down the ratings scale, but coupons remain much higher. Recent
PIK deals from Swedish cable firm Com Hem and Annington Homes,
for example, each pay a 13% coupon.
The pace of investment-grade corporate primary activity
slipped by 10% in the fourth quarter to USD667bn from the third
quarter, but still ended the year 13% higher than 2011 as global
supply reached USD2960bn.
As investors continue to pour into the asset class, issuers
have been able to sharply lower their borrowing costs, shown by
a drop in the average coupon for fixed rate investment grade
corporate bonds to an all-time quarterly low of 3.632% in the
fourth quarter of 2012.
By geography, European corporate issuers raised USD1,226bn,
up 6% from 2011 levels, but the biggest increase was in the U.S.
where issuance was up 35% on a year ago to USD975bn, followed by
Asia Pacific which was up 22% at USD673.1bn, accounting for 20%
of all corporate debt.
The most notable deal in terms of size was the USD14.7bn
six-part issue from AbbVie, the pharmaceutical spin-off from
Abbott Laboratories, which attracted USD41bn of demand even
though syndicate and buyside desks were only half-staffed in the
aftermath of Hurricane Sandy.
The bond was the biggest ever on record and won IFR's Dollar
Bond Award for 2012.
Non-US issuers also took about USD311bn out of the US
investment-grade bond market year to-date, making it a record
year for Yankee deal volume.
One of the standout deals was brewer Anheuser-Busch InBev's
opportunistic USD7.5bn transaction in July, which had an average
new issue concession of negative 10bp and set with record low
coupons. The deal was awarded IFR's Yankee Bond of the Year.
Other sectors also set new issuance records.
Global asset-backed securities totalled USD317bn, up 41%
from last year, and marking the strongest year since 2007 when
volumes reached USD1,239bn.
Volumes from financials were less impressive as banks
continued to deleverage, but issuers still raised USD1,749bn, up
6% from 2011.
Year-to-date underwritten agency & sovereign debt totalled
USD1,173bn, up 2% over 2011 volumes of USD1,151bn.
JP MORGAN TOPS DCM FEE TABLE
Global debt issuance across all sectors totalled USD5,951bn,
up 5% compared to 2011. Subsequently, debt capital markets fees
rose 28% versus 2011 to USD20.9bn - a sharp contrast to
respective 14% and 16% falls in loan underwriting and M&A
JP Morgan and Bank of America Merrill Lynch retained first
and second places respectively in the league table rankings for
global debt capital markets fees, but there was some shuffling
in the top ten leader board below them.
Citigroup, Morgan Stanley, Barclays and Goldman Sachs all
jumped up one spot to third, fifth, sixth and seventh
respectively, while Deutsche slipped to fourth from third place
and Credit Suisse slid to eighth from fifth.
The top 10 also saw a couple of newcomers, with Wells Fargo
jumping to ninth from fourteenth, and HSBC to tenth from
In European DCM rankings, Deutsche held steadfast at the top
of the table while JP Morgan held the second spot for a
consecutive year, but last year's third spot - held by BNP
Paribas - was captured by Barclays, while the French bank
slipped to fifth place.