Though you’d seen the worst of the credit crunch?
Well, November marked the first dry month ever for total U.S. high yield issuance with exactly zero dollars in new speculative grade bonds hitting the market over the 30-day period, according to a recent report by ratings agency Standard & Poor’s. The report also noted a continued rise in the speculative-grade default rate.
A frothy high-yield bond market helped fuel a boom in large-scale leveraged buyouts that began in 2005 and ended with the start of the credit crunch in the summer of 2007.
November represents the first month to have seen a complete stall in new issuance since S&P began tracking such information in January 1993, underscoring the severity of this credit crunch and economic downturn. Indeed, four of the 10 lowest monthly issuances on record have occurred in 2008, including October and August, which each saw only $700 million in new bonds priced.
Compared to last month, the previous low in U.S. high yield issuance came on the heels of the 9/11 terror attacks when fear and uncertainty shocked the financial markets and stunted high-yield issuance that September to only $400 million.
Year-to-date high-yield issuance as of Nov. 30 lagged levels over the same period in 2007 by 65 percent, with only 102 new issues ($37.7 billion) this year compared to 291 issues ($134.2 billion) in the same period last year.
The 15-year median monthly high yield issuance is $6.2 billion, while the highest monthly issuance on record is November 2006’s $27.1 billion.
Meanwhile, S&P recorded an an uptick in the default rate for speculative grade debt. The eight companies that defaulted on debt payments in November kicked the preliminary estimate for 12-month trailing default rate for speculative debt up to 3.16 percent, up from October’s 2.9 percent.
Two of the eight companies that defaulted on high-yield bond payments are sponsor-backed companies: Hawaiian Telcom Communications Inc., a phone and internet services provider owned by The
S&P said it expects the default rate for speculative issuances to reach 7.6 percent by October 2009, but warns that it could reach as high as 9.6 percent if economic conditions are worse than expected.