Record amount of junk bond issues to refinance-BofA
NEW YORK, Nov 11 (Reuters) - A record proportion of junk-rated companies are using debt markets to refinance rather than expand operations, even as corporate bond issuance rebounds strongly after the credit crisis, according to a report released on Wednesday.
U.S. companies selling high-yield bonds have used 75 percent of their proceeds so far this year to refinance existing debt, the highest proportion since Bank of America Merrill Lynch started tracking the data in 1996, it said in a research report.
Global central banks' ultra low interest rates and huge liquidity injections into the financial system have revived investor appetite for risk and slashed the costs for companies to issue debt, the report noted.
U.S. junk bond yield spreads over Treasuries had narrowed to 752 basis points as of Tuesday, from a record 2,182 basis points in mid-December, when investors panicked about a potential rerun of the Great Depression.
"However, our data shows that the fact that credit-worthy borrowers can once again tap the debt market on reasonable terms doesn't mean that many of them are eager to do so for any reason other than refinancing their existing debt," stated the report, authored by Jeffrey Rosenberg, the bank's head of global credit strategy research.
The report said that as recent Federal Reserve data showed, "bank lending is now declining to a large extent due to a lack of demand from borrowers as opposed to simply lack of supply from lenders."
Fed data of U.S. commercial and industrial loans outstanding showed the fastest contraction of this measure of lending in a quarter century, the report said.
(Reporting by John Parry; editing by Jeffrey Benkoe)
