US CORP BOND WRAP-Geopolitical tensions, Vodafone halt issuance

By Paul Kilby

NEW YORK, Nov 24 (IFR) - Bankers are already calling an end to the week for bond issuance after Vodafone's postponement and geopolitical tensions left US corporate borrowers preferring to wait until after Thanksgiving holidays.

Potential issuers were heard standing down as equity markets initially slipped following news that Turkey had downed a Russian warplane.

"There were enough reasons to wait. Vodafone was pulled, and you walk in to hear about the Russian jet," said one syndicate manager. "It (Other OTC: ITGL - news) wasn't a great day."

Indeed, not one US high-grade, or high-yield, borrower stepped forth on Tuesday, making for what is likely to be one of the quietest weeks in a while.

"This is essentially a two-day week," said a high-grade DCM banker.

The week is likely to see just US$2.65bn in volumes - even smaller-than-expected after telco Vodafone threw in the towel Monday on a 30-year US dollar bond after investors sought greater covenant protections.

"People are pushing back on transactions with loose covenants and that is something that the market needs to be aware of," said a second syndicate official.

Next (Other OTC: NXGPF - news) week will be a different story, however, as any leftover issuance is pushed over into late November and early December.

That said, both high-grade and high-yield borrowers will have to navigate a series of potentially market moving events.

These include a European Central Bank meeting on December 3, when monetary authorities are expected to announce more easing, as well as the OPEC annual meeting and the release of US payroll numbers on December 4.

The culminating event will be the FOMC on December 16, when the Federal Reserve is largely expected to lift rates for the first time in nearly a decade.

"There is a lot to keep people on their toes," said the second syndicate banker.

Barring any unexpected surprises, such as a flare up in the Middle East, bankers are predicting anywhere between US$35bn-US$50bn for December. "I think the market can digest that," said the syndicate official.

Yet while few days are left for issuance, borrowers may want to get in before 2016 - which could be another record year for US high-grade corporate issuance amid expectations of more M&A driven fundings and a spike in refinancings.

US high-grade and high-yield companies face a total of US$750bn in maturing debt next year, not to mention US$2.1trn of announced M&A transactions, said Wells Fargo (Hanover: NWT.HA - news) in a recent report.

"Credit markets typically slow down after the US Thanksgiving holidays...," the bank said. "However this year could be a sprint to the finish."

"As a result, 2015 is likely to finish the way it started - with an uptick in market volatility and heavy bond issuance." (Reporting by Paul Kilby; Editing by Natalie Harrison)