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New issuances in the investment grade corporate credit market showed no signs of slowing during the second quarter of 2016.  With assistance from our colleague Drew Jamner, Credit Analyst of Informa Global Markets (IGM), we take a look back at the second quarter of 2016 within the investment grade corporate credit capital market space.

Continued low borrowing costs and heightened demand from investors have urged corporate borrowers to look to capital markets to raise cash.  Investors have turned to investment grade corporate debt while the amount of negative yielding sovereign debt continues to balloon. Until the last two weeks of the quarter, markets were friendly and volatility stabilized, which provided opportunities for corporations to issue new debt.

New investment grade corporate credit issuance during Q2 closed at $352.979 billion (ex-SSA), which finished just behind Q1 ($355.379 billion).  Q2 also comes in as the third largest quarter ever by volume, trailing the largest quarter by just under $7 billion (Q2 2015 $359.082 billion).  The total volume of $352.979 billion was comprised of 239 deals/413 tranches (ex-SSA).

Merger & Acquisition (M&A) activity continued to outpace 2015’s record setting year.  M&A deals came in at $82.01 billion during Q2, which came in just ahead of Q2 2015 by only $510 million.  The first half of 2016 is setting the foundation for a record year in M&A activity as it is 10.31% ahead of last year’s pace.  Technology and healthcare companies led the way during Q2.

One such trade over the period, was Dell Inc.’s biggie takeover of EMC Corp.  Dell Inc. benefited greatly due to the increased demand for corporate debt.  Dell Inc. increased the size of its original deal from $16 billion to $20 billion due to the deal being oversubscribed, with $89 billion worth of orders coming in.  Dell Inc. also benefited by being able to reduce the pricing on the deal from initial thoughts on pricing. 

A perfect storm might be brewing for 2016 to be a record year. With additional rate hikes by the U.S. Federal Reserve seemingly less likely for 2016, and the amount of negative sovereign debt yields growing, high demand for investment grade corporate credit debt might create the perfect environment for corporate borrowers.

To learn more about Drew Jamner, Credit Analyst (Drew.Jamner@informagm.com) and the services provided by Informa Global Markets visit http://www.informagm.com.

Ryan Nauman
Market Specialist
Informa Investment Solutions
Tel: (800) 789-5323
Ryan.Nauman@informais.com
www.informais.com

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