Midday Commentary: Expect $20-$40 billion September issuance, trader says; Sprint megadeal likely

By Paul A. Harris

Portland, Ore., Aug. 30 - The pre-Labor Day Friday morning passed quietly in the high-yield primary market, according to a trader.

There were no deal announcements, nor are any announcements expected before the close ahead of the three-day Labor Day weekend.

Thursday's news of a $55 million inflow to the high-yield funds was a slight positive, said the trader, citing information contained in a weekly report from Lipper-AMG.

A $1.2 billion inflow into bank loan funds was a big positive, the trader added.

Sprint deal ahead

September new issuance is shaping up to be moderate to heavy, said the trader who expects the month ahead to generate $20 billion to $40 billion of new junk, with $7 billion to $10 billion of it coming from Europe.

The market will likely enter the Labor Day weekend without an announced post-holiday calendar, the trader said. However by mid-September watch for a vigorous buildup of the active deal calendar, the source added.

There is a pipeline of merger & acquisition-related business which will unfold during the remainder of 2013, on into early 2014, but just how much of that pipeline will come in September remains to be seen, the source said.

One M&A megadeal that the market is expecting in September is bond financing related to Sprint's acquisition of Clearwire, which was announced in early July. The deal, in which Sprint acquired Clearwire for $5 per share in a transaction which valued Clearwire at approximately $14 billion, could generate well north of $2 billion of issuance, the trader said.

However September is unlikely to get off to a fast start, owing to holidays in the week ahead, the trader said.

"We could see a couple of drive-by deals from serial issuers, because those are easy," the source said.

"But I don't look for things to truly ramp up until the Sept. 9 week."

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