The prospect of an interest-rate rise is getting pushed out further and further due to global woes, but this hasn’t stopped the corporate bond issuance frenzy. Companies continue to issue debt in record numbers and not only are rushing to issue, they’re extending duration, according to the Securities Industry and Financial Markets Association (SIFMA).
Average corporate debt maturity reportedly surged to 21.3 years in September, according SIFMA, which is the longest duration since association started keeping track in 1996. The jump in issuance – up 39 percent over August and up 45 percent over all of last year – began amid talk of a Fed rate hike in September. That hike has been pushed out as the Fed acknowledges that the rest of the global economy hasn’t kept up with the US recovery.
And companies are getting busy with the cash, boosting M&A deals to a record numbers. Worldwide investment-grade nonfinancial corporate issuance has surged to a record $1.38 trillion in the first nine months of 2015, according to data from Dealogic. And US investment-grade MNCs issuance hit $570.4bn, also a record for the period. Companies issuing for acquisition purposes also recorded a new high of $277bn. Dealogic reports that 45 $10bn-plus M&A deals were announced in the first nine months of 2015, with a combined total of $1.15tn, up 89 percent from the same period last year ($610.5bn via 27 deals) and the highest first nine months volume and activity on record $10bn-plus deals accounted for 34 percent of global M&A volume, up from 23 percent year-on-year, and was the highest market share on record.
Investment banks driving the most deals were Goldman Sachs with $623.2bn, followed Morgan Stanley and Bank of America Merrill Lynch with $549.7bn and $468.8bn, respectively, Dealogic said.
In The NeuGroup universe, the Engineering &Construction industry seems to be the hot area. After M&A activity peaked in 2006 at over $41 billion, it dramatically dropped off during the recession. However, according to BNP Paribas, a sponsor of the group’s spring meeting, 2015 is currently on pace to exceed the 2006 peak. M&A activity is being driven by a lot of smaller transactions in Europe and fewer, but much larger, transactions in North America.