Sep.06, 2012 | 5:27 AM–New debt issues nearly vanished in August, hitting a low for the year to date in both size and volume.
There were just two public offerings, both by financial institutions: Union Bank of Israel and Dexia Israel Bank raised a combined NIS 842 million, according to figures are from credit rating agency S&P Maalot’s monthly report on debt issuance. Six private issues, restricted to financial institutions, raised just NIS 215 million combined, Maalot said.
“The dramatic drop in issues during the month, especially in the latter half, was due to general market weakness and the release of financial statements toward the end of the month,”Ranen Cohen-Orgad, CEO at Leader Underwriters, said.
He noted that companies cannot raise funds prior to publishing their quarterly financial reports.
“Trading volumes on stocks and bonds during the period were also terribly thin, also making it difficult to raise money in the primary market,” Cohen-Orgad added.
S&P Maalot CEO Ronit Harel Ben-Zeev looked to a broader context to explain the situation.
“Uncertainty in Israel and around the world, high bond yields, a deterioration in the business condition of many companies as indicated in their second-quarter financials as well as concerns over additional debt settlements have exacerbated the negative mood among institutional investors and continue to depress activity in the corporate bond market,” she said.
She also cited a “stagnant” primary market during August, which she said indicates “further hardship for the capital market.
Wave of redemptions
“The lack of activity in August also stood out in comparison to previous years. The situation is even more worrying considering the redemptions expected in 2013 and 2014, along with companies’ limited ability to refinance their debt in light of credit reductions in the banking system and mounting difficulty in issuing public bonds,” said Harel Ben-Zeev.
High yields in the secondary market also contributed to the dip in issues.
No fewer than 120 companies, mainly in the financial, real estate and communication sectors – which comprise 46% of all companies with bonds trading on the market – have at least one series trading at a yield of over 10%. One third of these companies have completed or are seeking a debt settlement…Read More>>