Bond markets have rallied in recent weeks off the back of improving inflation data and low unemployment. Investors are prioritizing large, liquid deals from known companies, which partly enabled tech giants Apple and Meta to raise more than $15 billion in debt this month.
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1. The US corporate bond market is basking in the August sunshine with big transactions. It's a rare sight because Wall Streeters are more likely to be found on a beach in the Hamptons or floating in the turquoise waters of the Mediterranean at this time of year.
"The last couple of weeks have been the best window I've seen in months for companies looking to do a deal," one capital-markets banker told me. "There's less volatility and the inflation levels were lower than the consensus."
This month, Facebook parent Meta completed a whopping $10 billion bond sale, and Apple raised $5.5 billion in bonds.
The draw with both these deals were its big, billion-dollar sizes, something investors are currently craving so they can trade in or out of debt in secondary markets. There's also an appetite for recognizable companies as bond buyers chase the old saying of a "flight to quality."
"Apple and Meta are important trades because they're huge, liquid deals and known names," the capital-markets banker said.
Leveraged finance, one of the riskier corners of the capital markets, has also shown signs of life. The price of high-yield bonds — also known as "junk bonds'' — have improved as investors bet the US Federal Reserve's focus on reducing inflation will bear fruit. The percentage of high-yield bonds trading at distressed levels dipped to 6.2% last week, from 11.6% in early July, the Financial Times reported.
One investor said things in the leveraged-finance market were almost "back to normalcy," and played down talks of a heavy recession so long as unemployment levels stay low.
"The underlying consumer is still very healthy and I'm not really worried about the economy," Michael Marzouk, a managing director and portfolio manager at Pacific Asset Management, told me. "There may be concern about a bunch of new supply bringing markets down again, but overall, prices have rallied back quite hard."
One of the most talked-about transactions in leveraged finance is the roughly $15 billion in debt financing that is supporting the buyout of Citrix Systems by private-equity firms Vista Equity Partners and Elliott Investment Management.
Last week, Bloomberg reported that the banks marketing this debt revamped the structure to include roughly $500 million-equivalent in loans denominated in euros. Market volatility earlier in the year had prevented the banks — Credit Suisse, Goldman Sachs, and Bank of America — from syndicating the Citrix debt to investors, but they're marketing the revised structure in a bid to get the debt off their own books.
"The Citrix deal won't be for everyone, but I'm confident they're going to figure out how to get it done," Marzouk said of banks' efforts to sell the bonds and loans to investors after the Labor Day Holiday.
To help with this, the underwriters are expected to offer the Citrix debt at a steep discount in the low 90-cent range, Marzouk added.
In other news:
2. Wall Street banks are nearing agreements to pay as much as $200 million each and admit that their employees' use of personal-messaging apps violated regulatory requirements, the Wall Street Journal reported. The development comes as many on Wall Street grow concerned by regulators' efforts to monitor their messages via Whatsapp.
3. US mortgage lenders are starting to go broke, according to Bloomberg. The industry is seeing its first lenders go out of business after a spike in rates, and the upcoming failures could be the worst since the housing bubble burst about 15 years ago. To be sure, there's no systemic meltdown coming as big banks account for less of the overall business.
4. Credit Suisse's largest shareholder has urged the firm to fix its investment bank or seek other options to sort out its losses. David Herro, the chief investment officer of Harris Associates, told Bloomberg that if the unit can find a way to earn sustainable returns, that would keep shareholders on board. Bloomberg also reported that Credit Suisse investment bankers are anticipating brutal cutbacks from the latest emergency restructuring.
5. Madison Square Garden Entertainment is exploring a spinoff of its live entertainment business. A new company would control the iconic New York arena and would also control the Garden's licensing agreements with the New York Knicks and New York Rangers.
6. A 20-year-old college student raked in a profit of about $110 million by selling Bed Bath & Beyond shares last week. Jake Freeman, the head of Freeman Capital Management, capitalized on the retailer becoming the latest meme stock to multiply value in a matter of days.
7. The founder of crypto firm Animoca Brands described big tech companies like Meta and Microsoft as "digital dictatorships." Yat Siu said his goal — alongside the broader Web3 universe — was to strip power from big tech and return power of ownership to the user.
8. Elon Musk's tweet about buying Manchester United was not so funny for the English football club's fed-up fans, according to this account from Reuters. On Musk-Twitter news, meanwhile, the billionaire has said Twitter is hounding him over every chat he has had about the potential $44 billion buyout of the social-media platform, Bloomberg reported. Twitter also wants to see Musk's text messages as both sides prepare for a trial on October 17.
9. Wire, an encrypted-messaging startup, just raised $24 million. Take a look at the pitch deck the Berlin-based firm used to raise capital from the likes of Cipio Partners and Iconical. Wire deploys end-to-end encryption so users can host video conferences, share files, and send messages safely. The fundraise comes at a time when many on Wall Street grow concerned by regulators' efforts to monitor their messages via unauthorized apps.
10. Reilly Meehan is a 31-year-old private chef in the Hamptons. He is on call constantly, but the pay and lifestyle is beyond worth it. Meehan said he was glad he left the traditional culinary path — here is what his job is like.
Done deals:
- GI Alliance, a gastroenterology practice, has been bought out by its physician owners. The physicians, who own about 70% of the company, have purchased the minority stake from Waud Capital Partners. The transaction values GI Alliance at $2.2 billion and is being led by Apollo's Hybrid Value fund.
- KKR-backed software company Level Access has merged with eSSENTIAL Accessibility, a Accessibility-as-a-Service platform that provides digital access and compliance for companies. JMI Equity is another third-party investor in the merger.
Curated by Aaron Weinman in New York. Tips? Email [email protected] or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.