More debt financing was cancelled or postponed globally in 2022 than even during the tumultuous pandemic period.
Roughly 140 fund-raising transactions including bonds, loans, and asset-backed securities worth at least $75 billion were pulled in 2022, only slightly below the combined tally of 2021 and 2020, according to data compiled by Bloomberg.
While that’s as far back as the data goes, it’s likely been several years since so many companies withdrew from the market, given the recent era of cheap and plentiful money.
The war in Ukraine, high inflation, soaring interest rates and recession concerns combined to scare investors off this year. The first quarter alone saw 50 deals shelved and pessimism continued throughout the year as lenders remained wary.
“People are naturally more cautious in a recession,” said Carlo Fontana, global head of syndicate with UniCredit SpA. “It’s taking a bit longer and becoming more complicated to do deals as even relationship lenders are evaluating their exposure.”
Almost 70 per cent of the pulled transactions were bond offerings, including those for highly-rated names including Central American Bank for Economic Integration, Eesti Energia AS, and Johnson Electric Holdings Ltd. Leveraged loans were the next most impacted market with 21 deals dropped, affecting the likes of Mallinckrodt Plc and Topgolf Callaway Brands Corp.
Still, some borrowers managed to take advantage of small windows of relative calm to revive deals. Private equity sponsor Bain brought back a loan backing the buyout of Inetum in September after putting it on hold for a month, while Ceske Drahy AS returned for a bond offering in October after about a three-month delay. In total, 10 bond deals and eight loan transactions were revived.
A November sales surge in Europe’s main funding market illustrated how volatile the business of selling bonds has become, with issuers relying on positive headlines that grant a few days of stability to launch new deals. The region’s primary bond market has seen 48 days without any issuance so far this year, the most ever.
Elsewhere in credit markets:
EMEA: Banks have returned to syndicate a bond to fund Bain Capital’s acquisition of House of HR, two months after pulling the deal due to challenging market conditions.
Asia: Asia’s primary bond market saw several domestic transactions from China, India, Japan and Malaysia while only one issuer sold a US dollar transaction.
Americas: The Federal Reserve has pushed borrowing costs for blue-chip companies to the highest levels since the financial crisis, to help tame the worst inflation in four decades.