Aug 23, 2019

Global economic concerns are impacting the leveraged loans market

Illustration: Sarah Grillo/Axios

Global economic concerns eating into the leveraged loans market, thus making it more difficult for private equity to close deals.

Why it matters: Five U.S. leveraged loan offerings have been pulled so far this month. Summer vacations could be to blame, but this summer is the exception. Instead, the last such slowdown came at year-end 2018, mirroring broader economic worries.

  • Some offerings are still moving forward, but often with more lender-friendly terms or reduced offering sizes. Ancestry.com just did both, for a dividend recap that would benefit owner Silver Lake Partners.
  • Better credits are always, well, better credits. But those on the wrong side of the tracks are being treated worse than is usual.

Policy matters: If you're an issuer with significant exposure to the U.S.-China trade war — which significantly escalated this morning — then you've got to give on pricing. And it's become hard to sell with a floating-rate, given Fed uncertainty that is unlikely to be resolved today in Jackson Hole.

The big picture: The leveraged loan market's real test will come after Labor Day, when the spigot turns significantly to the left.

Go deeper: China announces retaliatory tariffs on $75 billion of U.S. goods

Go deeper

Trump tells American businesses to leave China

President Trump significantly escalated his trade war rhetoric on Friday with a series of tweets — just two days after tweeting that things were "great with China."

"Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA."

The bottom line: It should go without saying that Trump doesn't have the authority to order U.S. companies to look for alternatives to China.

Go deeper: China announces retaliatory tariffs on $75 billion of U.S. goods

Keep ReadingArrowAug 23, 2019

The biggest week for bond sales on record had perfect timing

Illustration: Rebecca Zisser/Axios

U.S. companies issued $74 billion of investment-grade bonds this week, between Tuesday and Thursday, the most for any comparable period since records began in 1972, Bloomberg reported on Thursday. That nearly doubled the previous record of $40 billion set in 2013.

What happened: Issuers were able to sell into a historically thirsty market, with 30-year bonds from companies like Disney, Deere and Apple carrying record low coupons, and investment-grade bond yields dropping to a 3-year low of 2.77%.

Go deeperArrowSep 6, 2019

Trump trade war: 15% tariffs on Chinese imports take effect

Illustration: Rebecca Zisser/Axios

The Trump administration's trade war with China entered a new phase on Sunday morning as new 15% tariffs on about $110 billion of Chinese imports took effect, Bloomberg reports.

Why it matters: Per the New York Times, the move changes the rules of trade in ways that have no recent historic precedent. "This is the first time U.S. consumers will see the costs quite directly, right as we head into the busiest shopping time of the year," Western Washington University economics professor Edward Alden told the Washington Post. China has introduced retaliatory taxes, the first phase of which came into effect Sunday.

Go deeperArrowUpdated Sep 1, 2019