Private Market Plays All-Too-Familiar 'Waiting Game'

October 10, 2008

It was another quiet week in the U.S. private placement market, as price uncertainty kept issuer's on the sidelines. As of Thursday afternoon, not a single deal had priced, and not a single new one had launched.

Of course, there are a lot of good reasons for this, most notably the $700 billion U.S. government bail-out package which has been bouncing back and forth between the U.S. House of Representatives and the Senate for more than a week. Uncertainty over the fate of that measure, and the fresh spate of meltdowns in the financial services sector this month, has caused new issuance in the public debt market to slow down, and at times come to a complete halt. And when that happens-as it did when the market first cracked in the summer of 2007-the private debt market is always soon to follow. Without the public pricings as a guide, it is hard to get a good read on where a private placement will price.

Without a clear idea where their deals will price, issuers generally tend to hold-off on tapping the market. Thus, many of the issuers who launched deals early last month are still circulating, hoping the market will settle. Others who may have been considering the private market have held-off altogether.

"From an issuer's perspective, no one wants to launch a deal in uncertain times, or until they can see more of a pattern in where [deals] are printing," said one private placement agent. At the same time, he voiced confidence in private market investors. "Investors are ready to buy, and always are," he said. The uncertainty about price has focused more attention on covenants and relative value, he said, but investors are still buying.

Indeed, the news is not all bad. Some sources took heart in the fact that two deals, Yankee Gas and Compass Group, even managed to price last week, and expect that the market will open up next week, allowing a lot of "pending" deals to price and allowing new ones to come into the market. That is, of course, as soon as the government settles on a bail-out package.

(c) 2008 Private Placement Letter and SourceMedia, Inc. All Rights Reserved.

http://www.privateplacementletter.com http://www.sourcemedia.com/

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