OSLO, May 21 — In Scandinavia, issuance of junk bonds is approaching a pace not seen since a record was set in 2014. The difference now is that debt sales are no longer dominated by the oil industry.
Until crude prices collapsed in 2014, Norway’s offshore industry used to be the main source of high-yielding bonds in the region. But now, more Swedish companies are tapping the market. Issuers just this week include Swedish online retailer Qliro Group AB and game developer Stillfront Group AB. Swedish real estate companies have nearly doubled their debt sales from a year earlier.
With issuance spread across more industries, “we have more companies to invest in,” said Maria Granlund, a portfolio manager at Alfred Berg in Oslo. “The market has become more diversified, which is very positive.”
Deals worth about 40 billion kroner (RM26 billion) have been priced so far this year in Scandinavia, including 7 billion kroner in the past two weeks, according to DNB ASA, Norway’s biggest bank. The share of oil and gas related new issues is now only about 11 per cent. Back in 2013, it reached a high of 53 per cent.
There are still “several other deals rumored in the market,” said Magnus Vie Sundal, a credit analyst at DNB.
Junk-bond issuance is rising across the globe amid signs economic growth is picking up in both the U.S. and Europe. Tighter credit spreads and better liquidity for Nordic high-yield funds help explain the surge in the primary market. Bank loans have also become relatively more expensive, adding to the allure of the bond market, according to Vie Sundal.
“In recent weeks we have seen a broad range of smaller and lesser known first-time issuers, proving that the market is much more than offshore and shipping niche market these days,” Vie Sundal said.
While the development is positive, it also comes with its own challenges, according to Alfred Berg’s Granlund. There is also “a lot of cash” in the market, she said.
“Credit margins have tightened a lot over the past six months, the whole market has seen credit margins tighten, especially in the more risky end,” she said. “We’re also seeing some companies that we’re not as interested in, some very high risk companies trying to finance themselves at very low margins. Then we have to be more careful.” — Bloomberg
