Junk-Bond Boom Takes a Timeout
Junk-bond issuers may have found the limit of investors' goodwill.</br></br>After easily finding buyers for a flood of new debt sales to fund leveraged buyouts or dividend payments, private-equity firms and other junk issuers found the going tougher this past week.</br></br>Golf-course operator ClubCorp. on Friday delayed its expected $415 million offering until this coming week. Manufacturer Nortek Inc. on Thursday shrank its offering to $250 million from $300 million and agreed to a higher interest rate. Burlington Coat Factory postponed a sale that would have handed Bain Capital a $325 million dividend. And in the stock market, TPG and Apollo Management canceled an initial public offering by Harrah's Entertainment on Thursday after investors balked at the terms, a sign that stock investors are also being picky.</br></br>While this past week may well be a blip, the struggles of some deals do show how investors are becoming more demanding. It is likely to slow the flood of issuance into the "junk"-bond market and force private-equity firms to sweeten the terms of some deals.</br></br>"It's all more about pricing than anything else," John Cokinos, head of high-yield capital markets at Bank of America Merrill Lynch. "Issuers are adjusting to the repricing that we've seen earlier this week for fear that it could get worse or that the market will stay volatile."