NEW YORK -- U.S. investment-grade corporate bond sales soared to a weekly record Friday as financial firms scrambled for capital to bolster their balance sheets.
U.S. companies issued $38.4 billion of high-grade debt, while high-yield companies sold $326 million in debt this week, according to Thomson Reuters data.
High-grade issuance climbed to the biggest weekly total ever, according to data going back to 1980. The surge in sales shows access to capital may be easing as market sentiment improves after debt markets were shut earlier this year.
Banks are facing more pressure to raise cash after recognizing losses and reporting some $300 billion in writedowns since the U.S. housing and credit crisis took hold last year. The International Monetary Fund has said the final write-down figure may approach $1 trillion.
"We're seeing a race for capital," said Rizwan Hussain, director of credit research at Morgan Stanley in New York.
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Dr Pepper Snapple Group, the American beverage business being spun off by Cadbury Schweppes Plc, also plans to sell $1.7 billion in debt on Friday, according to a source familiar with the sale, which will put the weekly total over $40 billion.
Moody's Investors Service assigned a "Baa3" rating, the lowest investment grade rating, to the new debt.
Merrill Lynchon Tuesday sold $7 billion in debt, the second-largest investment-grade sale this year, according to Dealogic. General Electric Capital Corp, a unit of General Electric Co, last week sold $8.5 billion of debt in the year's biggest sale to date.
Investment banks including UBSand Wachovia Corp also sold debt this week.
Corporate bond spreads have been narrowing in recent weeks on bets the worst of the credit crisis may have passed.
High-grade spreads, or the yield premium investors demand to hold riskier bonds over U.S. Treasuries, have narrowed to 268 basis points, from a peak of 305 basis points in March, according to Merrill Lynch & Co data.
Junk bond spreads have narrowed to 692 basis points from a peak of 862 in March, as bargain hunters returned to the market, pushing prices higher and yield spreads lower.
Michael Fineman, a distressed bond investor for Third Avenue Management, said he has bought debt of some homebuilders and wood product companies in the past six months, and he anticipates more buying opportunities ahead.
Despite the recent improvement in the credit environment, Fineman said he expects corporate bond defaults will rise in 2008 and into 2009, and company bankruptcies will follow.
Fineman oversees $110 million in Third Avenue's Special Situations Fund, and is involved in distressed investments for veteran investor Marty Whitman.
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