Cometh the hour, cometh the PP
Bankers will not admit it, but the public euro bond markets are de facto shut. Barring a miracle in Greece, they are expected to remain so until after Labor Day in early September.
That’s a long time, especially for those borrowers that must raise capital — either to refinance or for liquidity purposes. Some corporate bankers have said that there are as many as 25 issuers now stuck in the euro pipeline, having been unable to launch deals in June. This number will grow over next two weeks before European markets decamp to the beach. Unless some of those deals in this swelling pipeline can be siphoned off, September — busy at the best of times — is going to be an unholy bunfight.
One option is the public dollar markets which tends to stay open beyond Bastille Day and will look at deals throughout July and August. But not every euro (or sterling) based borrower can issue in the US — and many of those that can do not want the cost and rigmarole involved.
As a result, US private placement teams in London (and their Schuldschein and EuroPP equivalents in Europe) are reporting a spike of enquiries from corporate treasurers wanting to know what their options are.
Like its public counterpart, the USPP market is open for summer and more than willing to entertain companies they know and move quickly. A company that mandates this week could see the money as soon as early August, without the grief that the US public market access demands.
These private debt markets have form in difficult times. In 2008, after the credit crunch that followed the demise of Lehman Brothers, Schuldschein had its best ever year by volume. Meanwhile, the USPP market was there for borrowers in sectors spurned by the syndicated loan and bond markets. These private markets are choosy and hard to break into. But once you are in and investors trust you, they tend to be loyal in good times and bad.
Private placement investors are handy friends to have in a tight spot. And this is certainly a tight spot.