Graphic: Soaring valuations, low borrowing costs fuel January fundraising bonanza

Going Public Media AG

01/02/2021 10:14

By Sujata Rao, Karin Strohecker and Abhinav Ramnarayan
    LONDON, Feb 1 (Reuters) - Exuberant share valuations and
rock-bottom borrowing costs made it a bumper January for
dealmakers in the equity as well as debt space, data shows, with
global bond sales topping $600 billion and IPOs more than
doubling on the year. 
    World stocks had stepped back off record highs on the last
trading day of the month, unnerved by the tussling between
hordes of small-time traders and big hedge funds but the equity
raising juggernaut continued, with bootmaker Dr Martens seeing
bumper demand for its IPO and surging 16% on debut.  urn:newsml:reuters.com:*:nL8N2K41V7
    Dealmaking too shows no sign of flagging; Reuters reported
on Friday a potential 3-billion-euro sale of Bertelsmann's stake
in a French TV company to Vivendi and Altice Europa.
 urn:newsml:reuters.com:*:nL1N2K42BL
    Here is some data on capital market milestones for January
from financial information provider Dealogic:
      
    1/GOING PUBLIC
    Equity raising surged last year as pandemic-hit companies
sought to raise capital and others took advantage of soaring
stock markets to list shares. Dealogic data showed $49.2 billion
worth of initial public offerings (IPO) in January, compared to
$11.6 billion a year ago.
    IPO volumes had dwindled for years prior to 2020 as more
companies tapped private equity funding. But the recovery will
likely continue, not least because huge demand for equities
offers private equity managers a lucrative opportunity to exit
their investments.
    It was a record January for emerging market IPOs too,
comprising $16.8 billion of the total and doubling from January
2020.
    "Stock market valuations have held up strongly and we have
had a raft of strong businesses and unicorns reaching the right
stage of maturation at the right time," said one European banker
who manages IPOs.
         
    2/BUMPER FOR BONDS
    Global borrowers issued $619 billion worth of bonds in
January, though this fell short of last January's $662 billion
high. Issuers paid little attention to a mid-month rise in U.S.
10-year yields, using record low global borrowing costs to lock
in funding.
    There was a noticeable move towards debt maturing 30, 50 or
100 years in future. Slovenia was the latest, selling a 60-year
bond on Thursday.  urn:newsml:reuters.com:*:nL8N2K22TZ
    Marc Baigneres, Head of Western Europe, Japan & Australia
investment-grade finance at J.P. Morgan said issuance was 
"defensive and offensive."  
    "Hybrid debt, for example, can be used to shore up
corporates if ratings are under pressure, but can also be used
to make acquisitions," Baigneres said.
    Emerging market borrowers meanwhile sold $120 billion,
flirting with the record set in Jan. 2020, driven by investment
grade issuers. Prominent deals included Saudi Arabia raising $5
billion and Airport Authority Hong Kong's $1.5 billion deal. 
 urn:newsml:reuters.com:*:nL1N2K20SW  urn:newsml:reuters.com:*:nIfp2hfSwt
    Cristian Maggio, a strategist at TD Securities attributed
the hefty issuance to big redemptions which he expects will
lighten in February, with "some moderation in new paper hitting
the primary market going forward."
    

    3/ MERGER MANIA
    Monthly M&A activity totalled $314 billion, the fifth best
January on record. That comes after a stop-start 2020 that saw
dealmaking slump at the height of the pandemic, only to surge in
the second half to $1.1 trillion.
    Prominent deals included French luxury group LVMH  LVMH.PA 
closing on its $15.8 billion acquisition of Tiffany  TIF.N  and
Global Infrastructure Partners' $4.63 billion purchase of
Signature Aviation. 
    The dealmaking world remains abuzz; Aside from the
Bertelsman/Vivendi/Altice reports while UK retailer BooHoo is
swooping on Debenhams and several other fashion chains.
 urn:newsml:reuters.com:*:nL1N2K50FX  urn:newsml:reuters.com:*:nL8N2K41UG
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Best January for global IPOs on record    https://tmsnrt.rs/39t77fb
Global debt sales scale lofty heights    https://tmsnrt.rs/2MyPba7
Merger Mania    https://tmsnrt.rs/2Mzq6fp
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 (Reporting by Karin Strohecker, Sujata Rao and Abhinav
Ramnarayan; Editing by Toby Chopra)
 ((sujata.rao@thomsonreuters.com; +44 207 542 6176;))