Blackstone Says Slowdown in High-Yield Debt Market Will Turn

A slowdown in the high-yield debt market likely will end as investors put idle cash to work, said Timothy Coleman, head of restructuring and reorganization at Blackstone Group LP. (BX)

“There is a lot of money out there,” Coleman, 57, said today at the Bloomberg Dealmakers Summit in New York.

Companies facing a high-yield debt-sales market that has plummeted 89 percent are finding it more difficult to refinance and may be forced to restructure their obligations. Since July, $6.13 billion of high-yield debt has been sold in the U.S., compared with $55 billion in the same period last year, according to data compiled by Bloomberg. The lull in activity isn’t the “new normal,” Coleman said.

“It’s just a moment,” said Coleman, a senior managing director at New York-based Blackstone, the world’s biggest private-equity firm and this year’s busiest buyout dealmaker. “The market will come back.”

Investors demanded 8.01 percentage points more than government debt to own high-yield bonds on Sept. 23, up from 4.52 percentage points on Feb. 21, according to Bank of America Merrill Lynch index data. That’s the most since October 2009. Speculative-grade companies have slowed their debt sales to $5.1 billion in September compared with an average monthly issuance of $25.1 billion this year, Bloomberg data show.

While debt markets remain slow, private-equity firms are seeing new areas for distressed investing, said Jeffrey Aronson, co-founder of Centerbridge Partners LP.

‘Marked Change’

“We’ve seen a marked change in the opportunity set over the last two months,” Aronson said at the conference. “There are lots of things for us to look at from an investment standpoint in the U.S.”

Europe’s debt crisis also has created opportunities for restructuring groups, said William Derrough, co-head of New York-based Moelis & Co.’s recapitalization and restructuring unit.

“There’s a huge need for equity capital to go into the banking system over there,” Derrough said.

To contact the reporters on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Jonathan Keehner in New York at jkeehner@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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