Despite a stirring of activity in the first half of August as market yields tightened, the high-yield marketplace ran aground on rocky conditions over the final two weeks of the month, limiting issuance volume to the single digits for the sixth month so far this year, and for the seventh time in the last nine months, according to LCD.
The $8.1 billion of issuance for August was a low for the month since 2014, and it paled in comparison with August totals of $34.3 billion last year and $52.9 billion in 2020, the latter an all-time high for the month. Year-to-date volume, at $77.9 billion, was down 78% versus the 2021 pace through eight months this year.
All 11 tranches of new high-yield bonds priced in August were wrapped by Aug. 16. Still, that influx marked a revival of sorts for the primary market, which had turned out just five new-issue tranches from June 17 through July. As well, high-yield issuance ran ahead of monthly institutional loan issuance in August ($5.8 billion) for the first time since August 2021.
The month also produced the first deals backing refinancing efforts since a spate of such offerings that were completed June 7-9. Refinancing-driven deals accounted for roughly 47% of new-issue supply through eight months this year, marking a sharp drop-off from full-year shares for the carve-out at 63% in 2021, and more than 67% in 2020 and 2019. Including refinancing-oriented deals completed last month for Allegiant Travel, Royal Caribbean Cruises, Sensata Technologies, Darling Ingredients, EnLink Midstream, and Univision Communications, the dollar-weighted share in August was 45%, keeping 2022 on track for the lowest proportion of refinancing-driven deals since a 46% share in 2015.
Royal Caribbean paid the highest costs for refinancing with its 11.625% issue of five-year (non-call two) senior notes, the proceeds of which will be used to address the cruise operator's debt maturities in 2022 and 2023. Even with that double-digit input, the average yield at pricing for August's 11 new-issue tranches tumbled to 7.27%, from 9.69% across July's thin slate of deals. It was the lowest monthly average since March, if still well above the 5.04% average in August 2021. The sub-6% clearing yields for deals from Sensata and Darling Ingredients were the tightest for any new issues since April.
Notably, though, issuance skewed to higher-rated borrowers, with 65% of the issues carrying at least one BB rating. The CCC category produced no new supply for a second straight month. The previous triple-C entrant was Intertape Polymers, which on June 15 cleared a $400 million issue of 10% senior notes due 2028 at an OID of 82, to yield 14.36%.