Market volatility dominated the week and put a damper on the new issue market with only $2.9 billion in new deals being priced. With investors focused on the volatility in Tyco, WorldCom, Household Finance and other benchmark corporate bond borrowers there was little appetite for BBB names or risky names. In fact, Computer associates (Baa1/BBB+) pulled a plan deal from the market when Moody's put the companies rating on watchlist for a downgrade. That said, there appears to be money to put to work for very high quality borrowers as shown by the $400 million 10-year deal for AA rated Kimberly-Clark, which was sold in less than an hour. Emerging markets had a rare debut borrower as Peru (Ba3/BB-) came to market with $1.43 billion 10-years priced at +455 basis points over Treasuries. About $500 million of the new deal was for cash and the rest was used for liability management to retire Brady bonds. The cash portion was significantly oversubscribed with a reported $1.7 billion in demand.
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