Historically low funding costs are set to encourage opportunistic high yield issuance in 2020, with investors hungry for paper after geopolitical disruption, recession fears and trade tensions weighed on dealmaking activity in 2019 and Fed policy drove fixed-rate spreads tighter.

As the turn of the decade approaches, Debtwire has compiled a list of companies that could tap the market in the coming months. The list includes performing credits with bonds maturing in 2020-2021 alongside deals to fund M&A and LBO activity.

Analysts are forecasting roughly USD 260bn-USD 275bn of high yield issuance in 2020. That would represent a big increase on last year, when issuance tracked by Debtwire was USD 249bn—far above researcher’s expectations of USD 180bn-USD 200bn for 2019.

Performing credits with 2020 maturities include Nielsen Holdings, Ball Corp and Springleaf Finance. APX Group, otherwise known as Vivint, also has notes due in 2020 which it may deal with as part of its recently rejiggered SPAC merger.

Meanwhile, M/I Homes, GameStop, Hecla Mining and Century Aluminum are among those that could look to deal with 2021 maturities in the coming year.

Among likely M&A financings, investors are waiting for HilCorp to come to market to raise roughly USD 1bn of bonds to fund its acquisition of BP’s midstream and upstream assets in Alaska.

Meanwhile, three large LBO financings are expected to hit the market early in 2020. Nestle’s ice cream division is being bought out by Froneri, Presidio is being acquired by BC Partners, and Zayo Group is set to hit the market to fund its LBO by Digital Colony and EQT.

Among the factors driving expectations of increased bond issuance in 2020 are cheap funding costs in fixed-rate bonds compared to floating rate loans. That could push issuers to skew LBO and M&A fundraising towards bonds, as well as driving opportunistic refinancing activity, sources said.

The scales have already tipped in favor of bonds in several large refinancing and LBO deals this year, with issuers like Kantar and Grifols downsizing the loan portion of large deals during the syndication process. Some, like Wesco Aircraft, scrapped the loan portion entirely.

The loan market, meanwhile, has displayed a flight to quality. The closing weeks of 2019 saw a surge in higher-rated borrowers repricing their loans to tight margins, while second lien issuance was lower overall and increasingly privately placed.

With fears of a recession fading, the average yield of bonds in the ICE BofAML HY Index is now 5.3%. That’s 260bps tighter compared to the start of the year and 140bps tighter than the start of June.

This is likely to propel opportunistic refinancing activity in 2020, even for issuers without imminent maturities. These expectations are being reflected in trading levels, with a large chunk of the performing-credit high yield universe trading around call price, sources noted.

“Already this year, we’ve seen issuers cram [refinancing] deals through for bonds that were due several years down the line,” said a buysider. “In 2020, issuers will continue to be opportunistic, even if they have to pay a little extra for call prices.”

Click here for a chart of selected performing credits with upcoming maturities, and upcoming M&A and LBO fundraising deals.

2019 Debtwire