Bristol-Myers Squibb is making a big splash in the investment-grade primary on Tuesday, with an M&A offering expected to come at US$19bn, which would be the largest IG offering so far this year.
And seven high-yield bond offerings were also announced today, making it one of the busiest days in the sector so far this year. Most are drive-by issues.
The deals arrive as markets are still working through and digesting a variety of macro events, including more US tariff threats against China.
Three deals did make into the IG primary on Monday, totaling US$2.55bn, pushing monthly issuance to US$9.25bn, according to IFR data.
And corporate credit spreads were mixed on Monday, with IG flat to wider, and HY wider, according to ICE/BAML data.
HIGH GRADE
Bristol-Myers is the Big Kahuna in the IG primary today, with two smaller offerings swimming around it.
Volatility over President Donald Trump’s threats to raise tariffs on Chinese goods pushed the Bristol-Myers deal back a day, and those threats are likely to have an impact on high-grade volumes this week as issuers look to navigate the uncertainty.
Bristol-Myers is looking to cut through that volatility with an up to nine-part bond that would fund the purchase of competitor Celgene in the largest pharmaceutical acquisition ever. nL2N22J0B0
Other issuers in the market today include retail center leasing company Brixmor Operating Partnership and investment management and insurance company Principal Financial Group.
HIGH YIELD
Issuers have swarmed the high-yield primary market with seven deals announced on Tuesday morning, the majority of which are expected to be priced today.
Among the offerings are power generation company Talen Energy Supply with a US$500m unsecured note; diversified holding company Icahn Enterprises with a US$500m 7-year NC3 senior unsecured note; and healthcare services firm IQVIA with a US$1.1bn 8-year NC3 senior unsecured note.
Clinical trial and lab company Eagle Holding Company II also announced a Caa1/CCC+ rated US$900m senior PIK toggle note that will fund a dividend to sponsors Carlyle and Hellman & Friedman.
In addition, casino operator MGM China closes a roadshow for a US$1.25bn bond package on Tuesday while global business aviation company Vistajet Malta is out on the road until Friday marketing a US$525m 5NC2 offering.
Average high yield spreads have tightened 161bp in the year-to-date, according to ICE BAML data, but new issue volumes have remained modest.
JP Morgan analysts said on Tuesday that gross and net (which excludes refinancing) high-yield volumes totaling $87.8bn and $28.8bn in 2019 are now down -10% and -9% year-on-year, respectively.
STRUCTURED FINANCE
A handful of ABS deals reached guidance stage on Monday and the market should see some pricing activity on Tuesday.
Navient’s US$609.67m student loan deal is expected to be priced today and is understood to be multiple times subscribed across the capital stack, according to a person familiar with the deal.
Bank of America Merrill Lynch, Barclays and RBC are joint leads on the deal. The 1.5 year tranche has guidance of EDSF+37bp-40bp.
Guidance was also announced for a container lease ABS from Seacube Container Leasing, and subprime and prime auto ABS from DriveTime and World Omni Financial, respectively.
The CMBS pipeline is filling up, meanwhile, with as many as eight deals expected to be announced soon, across conduit, single asset and CRE CLO transactions.
“Next week is shaping up to be fairly busy,” said a syndicate banker. “Issuance is strong and steady, but not overwhelming. It’s steady as she goes.”
LATAM
LatAm remains mostly quiet as political volatility in the US and abroad continues.
Markets are in “wait and see mode,” according to one LatAm syndicate banker.
Pressures from the political election in Turkey and Trump’s tariff threats escalation on China have issuers less confident about coming to the market.
Only one deal is expected to price this week in LatAm: the Paraguay-backed infrastructure notes from Bioceanico Sovereign Certificate Limited.
The 144/RegS senior secured note has expected ratings of Ba1/BB. It will have a weighted average life of nine years, with a final maturity in June 2034.
No additional issuance is expected until the political situation settles a bit. However, there is positive sentiment in the market.
“We have to see what is going to happen next, but some Chinese officials are coming to Washington. That’s a good sign,” said the syndicate banker.
EQUITIES
The first two of 14 IPOs that are being readied to price this week successfully completed their offerings last night.
Biotech Trevi Therapeutics, a carryover from last week, secured a downsized US$55m at a lower valuation than it had targeted.
SVB Leerink, Stifel and BMO Capital Markets placed 5.5m shares last night at US$10.00 apiece, after extending marketing from last Wednesday. They revised price talk earlier in the day to 5.5m shares at US$10.00, from the US$14-$16 original marketing range on a deal sized at 4.7m shares.
Existing shareholders invested US$30m on the IPO and New Enterprise Associates an additional US$15m in a concurrent private placement alongside the IPO.
“This is an old-school, club-like biotech IPO,” one banker involved in the underwriting told IFR.
Trevi will debut on Nasdaq today under the ticker “TRVI”.
Axcella Therapeutics, another biotech, similarly has closed ranks on its up to US$78.5m, scheduled to price after the market close Wednesday.
In an amended filing this morning, the company revealed that insiders have committed to invest US$43m on the offering.
Axcella, however, maintained the size at 3.57m shares and price talk at US$20-$22.
Goldman Sachs, JP Morgan and SVB Leerink are joint bookrunners on the Axcella IPO.
Landcadia II, a new special purpose acquisition company affiliated with casino operator Fertitta Entertainment, last night secured US$275m on its IPO.
Jefferies, sole bookrunner, placed 27.5m units at US$10.00 apiece, a slight increase from the 25m units marketed.
Landcadia II is targeting acquisitions in the hospitality and gaming industries.
The vehicle is headed by Tilman Fertitta, the CEO of Fertitta Entertainment, and Jefferies’ CEO Richard Handler.
Landcadia is scheduled to debut on Nasdaq at 10:45am under the symbol “LCAHU”.