M&A revival only hope for another record high-yield year
* High-yield supply could dip 10% without M&A pick-up
* Refinancings to slow as rates rise, maturities pushed out
* Booming IPO market could also cap bond supply
By Natalie Harrison
NEW YORK, Dec 6 (IFR) - Leveraged finance bankers are heading into 2014 with the same old nagging doubts about whether M&A will finally pick up, but this time round there is an even greater desire for a resurgence as refinancing opportunities fade.
US high-yield volume is running at USD331bn so far this year, close to last year's record high of USD336bn, according to Thomson Reuters data, with more than half of that driven by companies issuing new bonds at historically low yields to pay down more expensive debt.
But with interest rates on the rise, the incentive for companies to refinance is becoming less obvious, while the urgency to do so has also diminished as a vast swathe of debt maturities have been pushed out to 2017, according to Moody's.
To maintain the same kind of momentum in the market and to keep fees flying in, M&A and leveraged buyout activity has to make a comeback.
"M&A is always the most interesting thing to talk about. It shows how companies and investors are looking at the world, and it's how banks make money," said one senior leveraged finance banker. Continued...