Daily Management Review

Highest Funds For August In A Decade Raised By Global Companies


The highest amount of funds in global equity and debt markets in the month of August in a decade was raised by companies as homebound bankers etched deals fueled by support of trillions of dollars of novel coronavirus pandemic stimulus worldwide.
According to data from Refinitiv, as much as $65.5 billion was raised in Aufust so far by companies from initial public offerings (IPOs) and high-yield bond issuances globally which is the highest for the month in the past 10 years.  In June companies raised $126.5 billion and $98.6 billion in July which were the highest in the past 20 years for those months.
According to analysts, this was prompted by support and stimulus packages worth a total of  $15 trillion issued by governments and central banks all around the world to support the economic impact of the pandemic.
According to corporate advisors, it was easier for deals to be executed in August as people in the banking sector continued to work through the traditional August holiday month as travel restrictions because of the pandemic forced people to remain indoors.
"The liquidity in financial markets is the key point driving the number of deals we have seen in August," said Rishi Jalan, Citigroup's co-head of Asia debt syndicate. In a way, the corporate deal process has been sped up by the pandemic.
"People have adapted to the current environment very spontaneously. Roadshows have been turned into calls and investors are making themselves available very quickly, people are engaging with deals at short notice."
The Refinitiv data showed that so far this month, there was $25.3 billion worth of equity deals in Asia which is the highest in August in four years. The data also showed that over the past three weeks in Asia, some $13 billion worth of US-dollar denominated debt was issued.
"There has been a lot of liquidity in the system and that has kept activity going, that has helped convince investors there is enough support in the system that they can regain confidence to deploy their cash again," said UBS APAC head of global banking, Gaetano Bassolino.
The corporate advisors said that in the month of August in any other year, it would most likely have not been possible to get through deals such as grain trader Archer Daniels Midland's recent deal to raise $850 million by selling a $550 million stake in Singapore's Wilmar as well as a $300 million exchangeable bond in the company.
"Typically in the summer months the risk is some key individuals are out on annual leave and that may impact some transactions," said Alan Roch, head of Asia bond syndicate at Standard Chartered in Hong Kong. "But that is not the case in 2020, pretty much everyone is working."
So far this year, the top issuers of equity and debt offerings globally were the technology and healthcare firms, Refinitiv data showed, while those lagging behind were the travel services, hotels, and brick-and-mortar retailing sectors.
In the coming months, it is expected that there will be a fair amount of M&A activity because companies are aggressively seeking to raise money, said David Spreng, chief executive officer at venture capital firm Runway Growth Capital.
"Those who want to be the buyers rather than being eaten, want to make sure they have a strong balance sheet," he said. "And even if you are likely to be a seller, you want to make sure you enter into that negotiation with a strong position as much as you can."