A New Year Promises Deals In Smaller Packages
December 17, 2007
We here at High Yield Report coined a phrase in the headline of our last year-end issue to sum up 2006. “Megadealicious” we called it. And that seemed to suit a year that saw record-breaking deal volume and the advent of the megadeal, with venti-sized issues from the likes of HCA and Ford Motor Co.
And with the private equity M&A boom showing no signs of fizzling out at that point, the corporate debt markets awaited another year of such deals, and, unsurprisingly, they kept coming. In the first half of 2007, megadeals such as Freeport McMoRan, Univision and Tribune pretty much sailed through the syndication process, with pricing topping out at Libor plus 300 for Tribune, a company in a troubled sector that came late in the first half.
We all know what’s happened since. And this time around, as we say goodbye to another year (and for many, good riddance) predictions on deal size are quite different.
While 2006 and the first half of 2007 were the epoch of the megadeal, 2008 seems primed to be the age of the middle market. We’re already seeing loan issues top out at around $1 billion, and market participants don’t expect that to change much, at least not for the first six months of 2008. Though some do believe it will inch up in the latter part of the year.
While this means less fun at the private equity party and could mean a decrease in fees at some of the bigger banks, a steady flow of smaller deals could bode well for the market in general. Without megadeals eating up the cash and the spotlight, smaller deals will see increased demand, some deservedly so. Moreover, since large deals often set the tone for pricing, without them, the market seems more inclined to look at issues on a deal-by-deal basis.
So as we head off for a two-week holiday publishing break, let me leave you wishes for a joyous holiday season and happy New Year and the hope that, when we all return to work, the market will see a lot of good deals in small packages. Happy holidays.
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