Jump to content

Sign in to follow this  
News Feeds

Smells LIke 2007 - PIK Toggle New Issues Collapse 1 Day After Issuance

Recommended Posts

Last Friday we warned that the massive ramp in PIK Toggle new issues so far in 2016 was eerily similar to a spike witnessed in 2007 which, in hindsight, was a solid indicator of the "beginning of the end" for the high-yield market. In 2007, the massive ramp in PIK Toggle new issues was driven by private equity firms rushing to take money off the table via massive, debt-funded dividend recaps. And now, 9 years later we see a similar spike in PIK Toggle issuance driven by a voracious "search for yield" by the world's largest pension funds and insurance companies.

 

But while the underlying cause of the two high-yield bubbles are different we fear the ultimate outcome will be the same. In fact, we're seeing the first signs that the 2016 edition of the high-yield, PIK Toggle bubble might be bursting with two new issues collapsing just 1 day after breaking for trading.

 

Luxembourg-based packaging company, Ardagh Group, issued €845mm of 6 5/8 PIK Toggle Notes of 2023 last week that crashed to below 96 in early trading today...

 

20160912_ardagh_0.jpg

 

 

 

Meanwhile, German auto parts supplier, Schaeffler, issued €750mm of 3 3/4 PIK Toggle Notes of 2026 that dipped below 97 in early trading.

 

20160912_schaeffler_0.jpg

 

 

 

According to Bloomberg, both of these PIK Toggle issuances were oversubscribed last week prompting the companies to increase deal sizing. And now, 1 day after yelling at bond salesmen for their poor new issue allocations, angry portfolio managers around the globe are rushing for the exits. Sound familiar to anyone?

 

Bond%20Bubble_3.jpeg?1473693587

vOj55DH3aIw

 

Continue reading...

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×

Important Information

Your Privacy Is Important To Us Learn More: Privacy Policy