Fitch: Friendly Market Spurs PIK Volume After Slow January
NEW YORK--(BUSINESS WIRE)--The volume of US pay-in-kind (PIK) debt showed increasing signs of life this month, according to Fitch Ratings, reflecting a more receptive market for PIK and other high yield issuances.
PIK volumes tend to ebb and flow with the credit market cycle. The resurgence of the PIK market over the past few years is consistent with the overall high yield market, which is trending in a creditor-friendly direction. Last year set a record with 36 total U.S. PIK issues: 2013 volume of $14.8 billion was third highest behind 2007 and 2008.
PIK issuance started to flow in earnest again in the past few weeks in tandem with the jump in overall US high yield issuance volumes. The first 2014 PIK issue launched in late January, when Ancestry.com added $100 million of notes to its existing PIK debt. The issue priced at 9.625% (cash)/10.375% (in-kind) and matures in October 2018. This was followed in early February by a $285 million 9.75% issue by American Greetings Corp. Proceeds were earmarked for refinancing preferred stock, paying a dividend and funding construction of a new headquarters. This year's third PIK issue was announced today: a $250 million five-year issue from BlueLine Rental. Proceeds from that sale will fund a dividend payment.
So far, this year's issuance of PIK instruments is slower than the comparable 2013 time period. Five US PIK issues totaling $1.35 billion had been sold by Feb. 15, 2013 compared to $625 million YTD, which includes today's BlueLine transaction. That said, the continuance of favorable conditions in the high yield market (low defaults, growing GDP, loose credit) should support another year of strong PIK volumes.
For more information on the PIK market, see Fitch's special report, "Pay-In-Kind Debt," dated Jan. 21, 2014.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Applicable Criteria and Related Research:
Pay-in-Kind (PIK) Debt (U.S. Market, Credit and Payment Trends)