American Equity Investment Life Holding Co., the seller of fixed annuities, withdrew a $250 million bond offering as investors demand higher rates.
“Conditions in the debt capital markets led us to the conclusion that we should not proceed,” Chairman D.J. Noble said today in a statement from the West Des Moines, Iowa-based insurer. “We will continue to monitor developments and may return to the market when conditions are more favorable.”
Yields on speculative-grade debt in the U.S. jumped 26 basis points yesterday to 6.86 percent, the highest level since December, according to Bank of America Merrill Lynch Index data. Borrowing costs for junk-rated companies had reached a record-low 5.98 percent on May 9.
The rise in the cost of borrowing accelerated after Federal Reserve Chairman Ben S. Bernanke said on June 19 that growth could be strong enough to allow policy makers to stop buying bonds. He said the central bank may begin dialing down quantitative easing this year and end it in mid-2014.
American Equity declined 0.9 percent to $16.01 at the close in New York and has surged 31 percent this year.
American Equity announced its $250 million bond offering on June 18. JPMorgan Chase & Co. had been selected to manage the offering of senior unsecured notes due in 2021. The insurer said it had planned to use the proceeds to repay debt and for other expenses. American Equity is rated BB+ (AEL:US) at Standard & Poor’s, one level below investment grade.
Odebrecht SA and Yankee Candle Co. also halted debt offerings this month. Odebrecht, a Salvador, Brazil-based construction and engineering firm, postponed a $1.9 billion sale while Yankee Candle, based in South Deerfield, Massachusetts, terminated a $450 million offering.
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