Corporate bonds stage comeback
Israeli companies raised NIS 15.4 billion in new offerings, 2.5x their take in the last quarter of 2011.
A total of NIS 15.4 billion in freshly-minted corporate bonds was issued since the beginning of the year, two and a half times the amount raised in the last three months of 2011, according to a report prepared by the S&P Maalot credit rating agency.
The financial sector accounted for 39% of the debt issued, or 43% excluding the NIS 1.5 billion raised privately by Israel Electric Corp. just before the Passover holiday.
"In the next few months bond issues can be expected to continue in the primary market now that the annual financial statements have been published," Maalot said Sunday, adding that there are a lot of issues in the pipeline. "Investor selectivity dictates that most offerings will continue to be done by highly-rated companies, while risk margins for some of the companies could be relatively larger than seen in the last few months," the firm, managed by Ronit Harel, added.
Maalot's review also shows that 32% of corporate bond series are trading at yields of over 8%, and 19% show yields exceeding 15%. The high yields indicate that issuing additional debt in the capital market isn't a relevant option for many companies.
Maalot said such yields are a great challenge for some of the companies needing to rollover substantial amounts of debt. "Although some improvement can be seen in the level of market yields compared with the beginning of the quarter, we are still talking about huge volumes," it noted. "Most of the bond series being traded at the highest yields are from companies now in the process of a settlement."
Another item of interest from Maalot's report is the continuing trend that started at the beginning of the year of institutionals extending private loans to large business concerns. Such loans totaled NIS 1.7 billion, according to updated figures for February. "At an annual rate, this indicates a continued increase in the trend of private loans extended directly by the institutionals," said Maalot.