Private Market Grows to Nearly $2.5 Billion in May
Busiest month so far in 2009...
June 12, 2009
The U.S. private placement market priced $2.42 billion in traditional private paper last month, according to data compiled by Private Placement Letter. Although the total is far from the $4.85 billion priced in May of last year, or the $3.9 billion of May 2007, last month did fulfill expectations that issuance volume would expand after a tepid pace in March and April.
Market players were generally encouraged by the continued tightening of new issue spreads in the public market—as private placements are often priced to comparable public bonds—and an increase in cross-border activity.
Investor appetite for risk remained an issue, however, and most of the month’s issuance was from high-quality issuers, NAIC-1 and high NAIC-2s, and in defensive sectors like Energy & Utilities. Several of the deals were also from Government or Government-related credits. As a result, many sellsiders continued to express doubt about whether the investor base was ready to go lower into the credit spectrum.
Some were optimistic, however, saying that the strengthening of the High Yield market over the second quarter, and recent increased inflows into High Yield funds signaled the overall market was ready to start embracing risk again. And as the overall markets go, so usually goes the private placement market.
Government Related
From an industry perspective, the picture was still dominated by deals from the Energy & Utilities sector. While deals from the Food & Beverage, Real Estate, Retail, and Business Services sectors also priced, several of the credits to hit the market this month had some kind of government link.
Ireland’s Electricity Supply Board, for example, tapped the market for $508 million in a multi-currency deal led by Barclays Capital and RBS Greenwich Capital. The NAIC-1 issuer is 95% owned by the Government of Ireland, which made it attractive enough to get upsized from an original size of $150 million.
Also with a government tie-in, the Army & Air Force Exchange Service tapped the market in a big way via JPMorgan Securities. The $650 million deal reportedly received $2 billion worth of interest. The NAIC-1 credit is a joint venture of the U.S. Army & Air Force, and is sometimes referred to as the “military Wal-Mart.”
From the real estate sector, U.K.-based housing authority Places for People Homes Ltd. got $165 million in private funds via National Australia Bank. While not affiliated with the U.K. government, the NAIC-1 issuer provides housing to people who are on government assistance, and receives some of its income through “government paid rental streams.”
As the month’s only sovereign deal, the Government of Bermuda tapped the market via JPMorgan, getting $160 million. The territory is a multiple repeat issuer in the U.S. private market.
Other Notable Deals
Making a splash this month was Italy-based beverage maker Campari Group, with its $250 million private placement via Banc of America Securities Merrill Lynch. The deal was done to help finance the group’s acquisition of the Wild Turkey spirits brand.
Canadian energy income fund Enerplus Resources Fund also got $265 million in private funds via Citigroup. The dual-currency, NAIC-2 deal priced in a six-year bullet, a 12-year final, 10-year average life amortizer, and a Canadian dollar six-year bullet, each at 485 basis points over Treasurys.
From Australia, repeat issuer APA Group (formerly Australian Pipeline Trust) tapped the market for $140 million via RBS. The company operates a natural gas transmission and distribution network.
Chicago-based electric and gas utility Integrys Energy Group Inc. tapped the market for $155 million in five- and seven-year private funds via BASML, Citi, and JPM.
Rounding out the months issuance were deals from Depository Trust Company, which tapped the market in U.S. dollars and Japanese Yen for a total of $91 million via Calyon Securities, and Cayman Islands-based Caribbean Utilities Company Ltd., which got $40 million via JPM.—GC
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