This Ain’t 2006…Fortunately it Ain’t 2008, Either…
September 25, 2009
This week I asked a private placement agent whether he thought the market had opened up as expected after Labor Day. He replied with a pithy remark:
“This ain’t 2006,” he said.
Right now there are deals coming to market, and deals getting priced, and the market does seem to have opened up since mid-August. We have a nice mix of foreign issuers, like Grifols, Vitol, and Murray Goulburn, as well as the kinds of issuers that have been the backbone of the market this year; domestic repeat issuers such as Union Pacific and Vermont Public Power, and others.
Still, the agent’s words ring true for anyone who has been following this market over the past few years. What he really meant was, “The market has opened up a bit, but not as much as would in the best of days.”
Indeed. The years from 2003 through 2006 seem to have been the Golden Age of the U.S. private placement market, when $35 to $40 billion in new deals were hitting the market every year; a pace of more than $3 billion per month.
In those days you could expect the market to be a little slow at the beginning of the year, then build to May and June, then taper off through the rest of the summer, and then to open up in a big way after Labor Day as investors rushed to put money out and companies scrambled to get deals done before the end of the year.
Because I started covering private placements in 2007, I’ve never really gotten to see a “normal” year. Most people will remember how 2007 was kind of a Bi-Polar year in the private market, and everywhere else for that matter. Our market priced $20 billion in the first half of that year and then---like all markets---was rocked by the dislocation in the sub-prime mortgage market. It took a while to hit the private market, but by late August and mid-September, deal flow was down to a trickle. The Autumn wore on, and many people felt like the market never really recovered its stride.
People thought 2007 was rough and were glad to move on into 2008. Ha, ha, ha…
2008 was a strange year, to say the very least. When Bear Stearns collapsed we thought the worst was over. The private market had a fairly strong Springtime, and even stayed active through the summer despite the looming “crisis” that was affecting everything.
Last year, the Labor Day effect seemed to be in full force, as deals began popping up on a daily basis. Most of them, however, never got to price. Lehman Brothers declared bankruptcy in mid-September and knocked the entire Financial Market out of wack. Most of the deals in the market then never even came back to market. Things slowed to the point where two (2) deals priced in October, and the market never got into gear again for the rest of the year. That was one short year ago...
So no…this is not 2006. We are not printing $750 million to $1 billion per week. But hey…it’s not 2008, either.
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