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Debt Funding Slips 25% as Market Rout Intensifies

Debt Funding Slips 25% as Market Rout Intensifies

(1 July 2022 – Global) Corporates raised US$4.9 trillion in new bonds, credit and equity in 1H 2022, representing a contraction of 25 percent from the US$6.6 trillion raised in 1H 2021 according to Refinitiv.

Corporate fundraisings slipped in the first half of 2022 as financial markets turmoil saw bankers and CFOs become more cautious towards issuing new equity and debt. Investors have becoming increasingly reluctant to wade in while Bankers report that corporate treasurers largely halted all but absolutely necessary fundraisings. The junk bond market, where enterprises with low debt ratings borrow from risk-tolerant investors, recorded its biggest quarter-on-quarter loss since the pandemic-induced volatility of 1Q 2020.

The slide in debt capital markets (DCM) and equity capital markets (ECM) was concentrated among lower-rated companies globally, while high quality investment-grade issuance remained in line with historical trends. Financial market uncertainty in 1H 2022 have negatively impacted equity sales the most, with many corporates delaying planned initial public offerings (IPOs) including several that cut their valuations privately.

“We had begun to anticipate the storm in the first quarter. Now we are really in it” stated JPMorgan Head of Global Corporate Debt Issuance, Kevin Foley.

“There are just too many question marks at this time for deals to get done. The slowdown is unlikely to abate until inflation begins to cool. Nobody knows where the bottom is” commented KKR ECM Managing Director, Lauren Hahn.

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