European junk investors forced one issuer to pull a deal and another to raise the coupon on a new issue last week as General Motors' midweek profit warning rippled through the credit markets. Auto parts supplier Hayes Lemmerz International pulled its €120 million seven-year offering on Thursday, two days after its planned pricing. And German women's fashion company Escada priced its €200 million at least 50 basis points higher than it would have a week earlier, coming at par with a coupon of 7 1/2%.
The issuers' pain came as investor risk appetite plummeted on the back of the GM earnings warning Wednesday. "The buy side has more leverage now. Investors are looking for a reason not to buy rather than just piling into deals," said an official at Deutsche Bank in London, which was joint bookrunner on the Escada sale with HVB.
As for Hayes Lemmerz, the auto parts maker was seen as too correlated to GM, despite less than 10% of its business being linked to the big Detroit automaker. "There was a deal before GM and no deal after GM," said an official at Merrill Lynch, joint underwriter with Citigroup on the deal. An official at Citi said the issuer refused to offer more than 11 1/4% on the bond and opted to go to the bank market instead. One London-based investor said, "We would have needed a whole lot more reward to get involved in a small, illiquid deal like Hayes," given the GM news.
James Yost, cfo of Hayes Lemmerz in Northville, Mich., did not return calls.
