Debt Offerings Surged in 2020

Following the uncertainty of COVID-19, many companies took to the debt markets to ensure they could cover short-term obligations and operating expenses. The explosion of debt offerings culminated in the total amount of notes and bonds eclipsing $2 trillion based on FINRA TRACE securities; over $500 billion more than any year since at least 2010.

US Debt Issuance by Number and Amount of Offerings (Annual)

However, the number of notes and bonds offered in 2020 was lower than in the mid-2010s. This resulted in much larger average offerings. The average debt offering between 2010 and 2016 was between $290 million and $340 million. Since then, the average offering size has escalated rapidly, coming in at nearly $600 million in 2020.

Average Debt Offerings and Interest Rate

The increasing size of the average debt offering, coupled with the shrinking number of offerings (prior to 2020), is a sign that smaller companies are choosing alternative methods for raising capital. Large companies, meanwhile, continue to tap the debt market, likely due to low interest rates.

Deviation from Average Debt Offering by Industry

When reviewing debt offerings in three main industries affected by COVID-19, we see Entertainment companies offered the most abnormal amount of debt securities. Abnormal offerings were measured as the difference between the amount offered in a single year and the average amount offered between 2010 and 2020. The Entertainment industry was largely affected by Disney’s acquisition of Fox Entertainment in 2019. Disney raised more than $11 billion in connection with the acquisition and subsequently raised another $17 billion in connection with COVID-19. Disney represented nearly 70% of debt raised by Entertainment companies in 2020.

Surprisingly, Retail companies offered less debt relative to their peers. In fact, Retail companies raised more debt in 2018 than they did in 2020, and only marginally more than the average of all other industries.

US Debt Issuance by Number and Amount of Offerings

Debt offerings returned to normal during the fourth quarter of 2020 in terms of number and amount of offerings, as businesses have acclimated to new operational structures. We are likely to see debt markets return to their pre-pandemic trends of fewer offerings, but higher average offerings.

This analysis uses data from the Debt Securities database, powered by Audit Analytics.

For more information about Audit Analytics or this analysis, please contact us.

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