The convertible bond market recovered strongly. The issuance scale of convertible bonds of PCG.US was the highest in two years.

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Zhitong Finance APP was informed that PCG.US on Thursday raised the issuance scale of its convertible bonds from the initial $1.5 billion to $1.9 billion,hotly discussed information setting the largest convertible bond issuance in the United States since December 2021. This shows that the recovery of this asset class is going smoothly, because companies seeking to reduce the cost of debt are eager to issue convertible bonds before the holidays when the market is about to freeze.

The data shows that there will be $104 billion and $89 billion in convertible bond financing in 2020 and 2021 respectively. Although this scale of convertible bond financing is unlikely to appear again, the scale of convertible bond financing so far this year has reached 51.3 billion US dollars, nearly 73% higher than the total amount in 2022. As investors show interest in this asset class again, the financing scale of convertible bonds will further increase this year.

Barry Gewolb, CEO of consulting firm HudsonWest LLC, said that the expansion of convertible bonds issued by Pacific Coal and Electricity "shows that investors in this asset class still have strong demand for new bonds".

Due to the expectation that the Federal Reserve will cut interest rates next year, the US stock market rebounded and the yield of US bonds fell. Some issuers are starting to issue new convertible bonds because their prices are still cheaper than direct debt. Just a week before Pacific Coal and Electricity issued convertible bonds, UBER.US raised $1.73 billion through the convertible bond market before Thanksgiving.

Steve Studnicky, head of strategic equity solutions for Americas at UBS, said: "If interest rates fall again, the convertible bond market will have more opportunities to lower coupon rates." "In the next 12 months, this will be a window market."

At present, the issuer is grasping the window period before the holiday. Syed Raj Imteaz, head of the consulting department of convertible bonds and stock derivatives of ICR Capital LLC, said that under normal circumstances, the issuance schedule will last until mid-December, but the November CPI data of the United States and the Federal Reserve's interest rate resolution will be released in the week of December 11, and issuers and investors may seek to end the issuance activities before this week to avoid potential market fluctuations.

Financing through convertible bonds can save a lot of money. Pacific Coal and Electricity said that the proceeds from coupon rate's 4.25% senior notes will be used together with its own cash to prepay about 70% of the outstanding loans under the $2.75 billion secured term loan credit agreement from June 2020, with an annual interest rate of 8.44%. According to industry insiders, this difference is equivalent to saving about $75 million a year. In addition, Uber also said that it intends to use part of the proceeds from convertible bonds to redeem existing senior notes with interest of 7.5%.

Pacific Coal & Power has been refinancing term loans with newly raised funds, but the company has reduced the proposed issuance scale from $750 million to $500 million. The utility giant recently announced that it will pay dividends for the first time in about six years as part of its efforts to restore financial health after getting rid of bankruptcy. Syed Raj Imteaz said: "Getting a lot of money at attractive interest rates in the convertible bond market can provide chips when negotiating with bond investors."

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