More Signs of Credit Thawing

From Bloomberg:

High-yield, high-risk bond sales almost tripled to $2.38 billion this week, the most in seven months, as borrowers took advantage of a rally in corporate debt to increase cash reserves and pay down credit lines.

Forest Oil Corp. of Denver raised $600 million in the largest junk bond offering this week, while Nashville, Tennessee- based hospital chain HCA Inc. sold $310 million of notes, according to data compiled by Bloomberg. Both came to the bond market to repay bank debt.

Borrowers concerned that a weakening economy and deteriorating earnings may shut off their access to the debt markets are taking advantage of the lowest yields since October relative to Treasuries to issue debt. Companies see an opportunity to raise cash and repay credit lines, said Pete Brady, managing director of high-yield bond trading at Broadpoint Capital Inc.

“You have companies that recognize that it’s becoming harder and harder to refinance,” Brady said in a telephone interview yesterday from his office in Roseland, New Jersey. “You better do it when you can, because the market can dry up, as we saw back in 2008.”

This week’s high-yield bond sales compare with $796 million the previous week and were the highest since the period ended June 26. That week’s $2.8 billion of sales excluding conversions of bridge loans to bonds was led by Ottawa-based Telesat Canada, a provider of fixed satellite services, and BE Aerospace Inc., the world’s largest maker of aircraft-cabin interiors, Bloomberg data show. Junk-rated borrowers raised $8.5 billion in June. BE Aerospace is based in Wellington, Florida.