There was “a lot of education process that went on last year,” said Roxane Reardon, global co-head of Simpson Thacher & Bartlett’s capital markets practice.
“It certainly is not unreasonable to think there could be an uptick, as people have been considering using these types of offerings and now have a better understanding of the process,” Reardon said.
Some rated companies still have lingering concerns over potentially issuing new shares, especially at a time when many executives still consider their stock cheap, said William Hunter, a Neuberger Bermam Group portfolio manager in equity income strategy.
“Certain companies have spent a lot of money buying back shares over the last couple years, so I would think that those companies would be a little hesitant to issue shares if they didn’t have to,” Hunter said.
S&P 500 companies spent nearly $800 billion on buybacks in the past year, according to data compiled by Bloomberg.
Still, with the potential to manage potential dilution via hedging strategies using options, issuance is likely to remain robust, analysts at Barclays Plc wrote in a Dec. 8 note. High-yield issuers face annual interest cost that would jump over 200 basis points from an average 6% coupon they are currently paying, were they to refinance today with straight debt.
“Across the capital market spectrum, companies are waiting for rates to be lower, but people can only wait so long,” said Joel Carter, Americas head of equity-linked capital markets at Morgan Stanley.
This article was provided by Bloomberg News.