The IG primary has gone quiet on Thursday, just a day away from the start of Memorial Day weekend.
This week 19 offerings were sold, totaling US$16.600bn, but falling short of the US$20bn of supply that had been forecast.
On Wednesday, five of those deals came to market, totaling US$2.150bn, according to IFR data. Monthly issuance stands at US$98.500bn, bringing year-to-date issuance to US$517.893bn, according to IFR.
The bond market closes early on Friday at 2:00pm New York time. The stock market will close at its regular time.
No deals are expected in the HY, IG and Latam primary markets.
HIGH GRADE
With no IG deals today, the focus on is the secondary.
Credit spreads continue to move wider amid US-China trade talks, but have largely held up compared to equities.
Tech companies in particular are taking a hit after the US government banned Chinese tech giant Huawei from doing business in the US.
The action could prompt retaliation from China to ban Apple from doing business in the country, which sent the company’s bond spreads wider by as much as 15bp this week, according to MarketAxess data.
That widening even took place during a week in which a judge ruled that chip maker Qualcomm broke antitrust laws, in a move that could lower costs for Apple.
Qualcomm may be forced to reduce pricing for its patent licensing business, which would lower costs for smartphone makers such as Apple, but also delivers a blow to the chip makers’ core business.
Qualcomm’s secondary bonds have moved as much as 24bp wider this week on the news, according to MarketAxess data.
Additionally, IBM bonds are some of the most traded in the secondary due to their liquidity from the US$20bn bond deal that priced earlier this month.
HIGH YIELD
With much of the pipeline cleared for the week, it remains unclear how much more activity the primaries will see as concerns over a prolonged US China trade war weigh on sentiment.
The US junk market has seen close to US$4bn in new supply this week from nine issuers, with a fair few of those credits in the Triple C category.
Two more issuers further down the credit spectrum remain in the pipeline, namely luxury retailer Neiman Marcus (CCC-) and oil field services company Q’Max Solutions (Caa2/B-).
Neiman Marcus is expected to price its second lien US$500m five-year non-call two as soon as today as it looks to prepay a portion of its outstanding loans.
Initial price talk on the bonds is being heard at 8% cash and 6% PIK, according to a buyside source.
The deal is part of a liability management transaction designed to extend maturities and give the distressed credit some breathing space.
“They are buying time,” said an investor. “[But] it is a lot of leverage in an industry that has typically faced a lot of challenges.”
While the transaction will extend maturities, Moody’s expects free cash flow to remain negative given the unsustainable levels of leverage.
STRUCTURED FINANCE
Dine Brands has set priced guidance on its US$1.3bn whole business securitization, with the five-year tranche indicated at IS+215-225bp, and a seven-year tranche guided in the 260bp area.
The deal is expected to be priced next Tuesday, according to joint leads Barclays and Credit Suisse.
Guidance is out on a new conduit CMBS deal sponsored by JP Morgan, Citi and Deutsche Bank, BMARK 2019-B11.
The super senior Triple A notes have guidance of 86bp area over swaps, in line with BANK 2019-BNK18 which was priced on Tuesday. The tranche in the BANK deal had earlier been talked in the 82bp-83bp area.
In the ABS market Prosper is marketing its first consumer loan ABS since being hit with a US$3m fine by the SEC for overstating investor returns.
Kubota Credit Corp is also marketing a new equipment ABS deal via JP Morgan and MUFG.
Hertz priced its US$750m rental car ABS on Wednesday at the wide end of guidance, with the five year tranche sold at IS+125bp. The deal was upsized from US$426m.
LATAM
Latin American primary markets are set to take a break after seeing US$2.3bn in new supply from three issuers this week as activity slows down ahead of the US holiday weekend.
One LatAm issuer joined the pipeline this week. Brazilian gas distributor Ultrapar is due to market a new 144A/Reg S dollar deal to investors between May 28-29.
Elsewhere, America Movil is re-joining the handful of blue-chip Mexican names that have come to market in the past few weeks. The company is due to wrap investor meetings in Europe on Friday.
The Mexican telecom, which sold US$2.25bn in a two-part deal in April, has mandated Barclays ahead of a potential euro-denominated transaction.
America Movil’s recently-issued 4.375% 2049 notes were among the most traded this morning, yielding 4.249%, coming in tighter than the 4.409% yield at time of issuance, according to MarketAxess data.
EQUITIES
The last three IPOs in the pre-Memorial Day pricing window priced last night.
Diamondback Energy found no lack of takers for the carve out of its midstream assets, Rattler Midstream, as part of a new initiative to return capital to shareholders.
Credit Suisse, Bank of America Merrill Lynch and JP Morgan responded to strong investor demand by placing 38m shares at US$17.50 each, the midpoint of the US$16–$19 range and an increase from the 33.3m shares marketed.
Rattler is expected to open trading this morning at around 10:20am this morning on Nasdaq under the ticker “RTLR”.
Bicycle Therapeutics, a UK-based biotech founded by Sir Greg Winter, winner of the Nobel Prize for chemistry in 2018, secured US$60m on its IPO last night to fund development of a new mode of cancer treatment.
Goldman Sachs, Jefferies and Piper Jaffray priced 4.33m shares at US$14.00 each, the low end of a US$14–$16 marketing and including insiders had committed to invest up to US$25m on the deal.
Bicycle is slotted to open trading this morning at around 11:35am under the symbol “BCYC”.
Ideaya Biosciences, last night’s other biotech IPO, faced stronger investor push back, settling for US$10.00 pricing on its 5m-share offering that had been marketed at US$13–$15. Existing shareholders had committed to invest up to US$35m of the US$50m raised..
Ideaya is expected to debut on Nasdaq this morning at approximately 10:45am under the symbol “IDYA”.