Four offerings, including the jumbo Saudi Aramco deal, are hitting the IG primary on Tuesday.
The Aramco offering is hogging the spotlight this morning, with over US$100bn of orders placed for a deal expected to come in around US$10bn to US$15bn.nL8N21R1DE
These offerings follow a robust Monday where seven deals were priced totaling US$4.9bn, bringing year-to-date issuance to US$356.193bn, according to IFR data.
Helping to absorb some of this debt this year were Japanese investors, according to Bank of America Merrill Lynch.
“The Japanese bid is so strong this year because JPY/USD hedging cost expectations have declined as a result of the Fed’s dovish capitulation,” BAML said in a report.
“Japanese investors can now expect to roll into 25bps lower hedging costs when buying US corporate bonds, as opposed to 5-6 months ago when they expected to roll into 75bps more expensive hedging costs.”
HIGH GRADE
Aramco’s order book is starting to rival some of the biggest ever seen, including CVS Health’s US$120bn order book backing the purchase of Aetna last year.
Aramco’s new debt issuance will finance the US$69bn acquisition of 70% of Saudi Basic Industries Corp (SABIC), a petrochemical company from the kingdom’s wealth fund.
Spreads have already tightened 15bp across all six tranches as it moved through Europe over night.
Toyota Motor Credit, Singaporean bank DBS Group and disposal and recycling company Waste Connections are also in the market today.
More M&A is added to the pipeline with the announcement that Principal Financial Group is buying Wells Fargo’s institutional retirement & trust business for US$1.2bn, doubling Principal’s retirement business.
The transaction is to be financed with cash and senior debt financing, the company announced in a press release.
HIGH YIELD
The Staples dividend recapitalization bond deal is expected to price Tuesday, a day after the secured portion was increased almost threefold and the unsecured bond and loan were downsized. nL1N21Q09S
But once that is done, the pipeline is quite thin.
Australia-based miner Mineral Resources is currently marketing a US$750m eight-year non-call three deal that is expected to price Friday, and one other deal could surface from aircraft leasing company Avolon Holdings.
It is due to start two days of investor calls today, with a potential senior unsecured issue expected to follow.
The company expects one or more rating agencies to upgrade it to investment grade if it prices a new issue, and Moody’s on Monday said it may lift its Ba1 corporate credit rating and Ba2 senior unsecured rating.
“The company’s contemplated senior notes issuance could be of sufficient size to further transform its funding structure, reducing its secured debt and increasing its unencumbered assets,” said Moody’s.
STRUCTURED FINANCE
A raft of new deals were announced on Monday including JP Morgan Chase’s first securitization backed by non-qualifying mortgages, Chase 2019-ATR1.
The US$440m deal is the first from the shelf, and is backed by prime-quality mortgages that do not meet the guidelines for qualified mortgage status because of documentation exceptions, according to Fitch.
Most of the exceptions were because the loans were underwritten using tax transcripts instead of signed tax returns, according to the rating agency.
Bank of America Merrill Lynch boosted its issuance forecast for non-QM private label RMBS at the end of last week from US$14bn to US$21bn, on the back of robust deal volumes in the first quarter.
The origination of “expanded-credit” non-QM loans has increased, despite a broader slowdown in the mortgage market, boosting the potential for RMBS issuance, the BAML researchers noted.
A handful of deals in the ABS sector were out with guidance levels on Monday, although no new deals were priced.
General Motors has set price guidance for its US$1.23bn prime auto loan deal at IS+25bp-27bp, while CarMax’s US$1.15bn prime auto loan deal is guided 10bp wider at IS+35bp-37bp.
LATAM
With some roadshows ending today, bankers are expecting the first pricings of the week to start as soon as Wednesday.
Peruvian consumer goods company Alicorp will wrap up marketing for a rare local currency trade today, as will Panama, which is marketing a Euroclearable Treasury note to foreigners.
Brazilian steel name CSN will also finish investor meetings today in New York as it prepares a new benchmark bond to fund a tender for its 2019 and 2020s.
Other issuers on the roster for US dollar bond issuance this week include Panama’s Global Bank and Peru’s Consorcio Transmantaro.
Other corporates could emerge between now and mid May when blackout periods kick in.
“There has been a lot of supply so investors are getting picky, which is normal,” said one banker. “But the interest rate backdrop remains positive despite the 10-year widening from its lows.”
EQUITIES
With seasoned companies going into blackouts ahead of quarterly earnings, the US IPO market is in bloom with seven companies launching deals so far this week.
Overall, there are now 11 companies on the road looking to raise US$3.3bn, compared with US$3.2bn across 11 deals last April.
Brigham Minerals, a royalty trust that was founded by oil tycoon Bud Brigham, is tapping into recovering commodity prices with an up to US$234m offering.
Credit Suisse, Goldman Sachs, Barclays, RBC Capital Markets, UBS and Wells Fargo are marketing 13.5m shares at US$15-$18 apiece for pricing next Wednesday.
Greenlane Holdings, a maker and distributor of vaping and other smoke-related products, is looking to its US$85m IPO to continue recent expansion.
Cowen and CIBC World Markets are joint books on the proposed sale of 5.3m shares being marketed at US$14-$16 each, also expected to price next Wednesday.
Pinterest, Zoom Video Communications, Hookipa Therapeutics and Turning Point Therapeutics all launched their IPOs Monday.
The secondary market is not entirely closed.
Clinical stage biotechs Homology Medicines and Autolus Therapeutics each launched US$125m follow-on offerings last night.
Both are being marketed for one day and expected to price after tonight’s close.