IFR SNAPSHOT-IG quiet, HY sees action on Monday

7 min read
John J. Doran

The investment grade primary is idle this Monday, but the high yield sector is active with three deals expected to price.

Easter Monday is rolling out slowly in the US.

HIGH GRADE

No issuers are in the investment grade primary Monday with markets closed in much of Europe for the continued Easter holiday.

Still, volume is expected to pick up with some US$20bn expected this week, with a number of financial issuers and some corporates coming out of earnings blackout.

Parent company FirstEnergy Corp is in the midst of splitting form its subsidiary FirstEnergy Solutions and its US$3bn in outstanding debt. However, markets are starting to worry about FirstEnergy Solution’s ability to maintain investment grade ratings of Baa3/BBB/BBB-.

Earlier this month, a bankruptcy judge refused to release the company from future environmental liabilities and last week the company updated its disclosure in compliance with that ruling.

The charges in question could be as low as US$267m, but could also jump to several billion as its did with Duke Energy earlier this month, according to CreditSights.

Another embattled company Kraft Heinz announced that CEO Bernardo Hees is stepping down on June 30 to be replaced by Anheuser Busch InBev’s chief marketing officer Migeul Patricio.

Kraft Heinz bonds are moving wider on the news in early trading while AB InBev bonds move materially tighter, according to MarketAxess data.

HIGH YIELD

Three new high yield deals emerged on Monday.

Brookfield Property REIT announced a US$750m 7NC3 senior secured note offering, with Morgan Stanley as left lead.

The issuer is holding an investor call on Monday at 11am with the roadshow continuing this week. Pricing is expected on Friday.

Oil and gas exploration firm Moss Creek Resources announced a US$500m senior unsecured note offering due 2027, to repay all outstanding borrowings under its revolving credit facility. The borrower is a wholly owned subsidiary of Surge Energy US Holdings.

Media and entertainment firm Entercom Media Group also announced a US$300m 8NC3 senior secured 2nd lien note, with Bank of America Merrill Lynch as left lead. The deal is on roadshow on Monday and Tuesday with pricing expected to follow.

The three deals join a US$750m seven year secured note from car seat maker Adient, which starts a roadshow this week. Bank of America Merrill Lynch is left lead on the bond.

Last week US$2.6bn of new high yield debt was sold, taking the month-to-date total to US$11.18bn, according to IFR data.

Last year, US$16.65bn was sold during April, a month that since 2010 has produced an average of US$29.5bn new bonds, according to JP Morgan figures.

STRUCTURED FINANCE

American Express has announced guidance on a US$521.49m credit card ABS, American Express Credit Account Master Trust (AMXCA) Series 2019-2, which is expected to be priced on Monday.

The US$500m senior A tranche has guidance of 28bp over interpolated swaps, 4bp tighter than where it priced its previous deal in February.

The only other deal in the ABS pipeline is a consumer loan deal from Marlette Funding, which has filed documents with the Securities Exchange Commission but is yet to launch the deal.

The SEC slapped online lender Prosper with a US$3m fine on Friday, reaching an agreement with the firm to settle charges that the lender was “miscalculating and materially overstating” annualized net returns to investors between July 2015 and May 2017.

In the student loan space, Democratic presidential candidate Senator Elizabeth Warren announced a plan Monday to wipe out student debt for millions of Americans.

The plan would forgive US$50,000 of debt for people earning under US$100,000, with a sliding scale of forgiveness for those earning more.

The plan would be funded with a 2% wealth tax on families with over US$50m of wealth.

LATAM

While the market is kicking off on a quiet note with no new deals priced today, activity is expected to pick up later this week.

Panama’s state-owned energy company Empresa de Transmision Electrica is expected to wrap investor meetings by Wednesday, which it began on April 12. Bank of America and Scotiabank are global coordinators on the deal.

Chile-based pulp and paper firm Celulosa Arauco y Constitucion is also expected to price a new senior unsecured 144/RegS dollar note toward the middle of the week. Proceeds are to be used to tender for the firm’s existing 7.25% 2019s and 5% 2021s.

Finally, Trinidad Petroleum Holdings is due to conduct a debt exchange of its 9.75% 2019 and 6% 2022 bond. The early tender offer is scheduled for this Friday.

EQUITIES

The May IPO calendar is taking shape with three deals launched this morning.

With Uber Technologies pacing toward a potential launch of its US$10bn IPO on April 29 for pricing the week of May 6, there is strong motivation for companies to go public in the week ahead.

Beyond Meat this morning launched marketing of its US$184m, all-primary IPO that the plant-based meat maker plans to use to fund expansion.

Goldman Sachs, JP Morgan and Credit Suisse are leading the sale of 8.75m shares being marketed at US$19-$21 apiece to target a valuation of US$1.3bn. They expect to price the deal the evening of May 1.

Transmedics Group, a medical device company focused on organ transplants, also launched its US$80m IPO this morning with pricing expected May 1.

Morgan Stanley and JP Morgan are marketing 4.7m shares at a US$15-$17 apiece.

Scientific Games went live this morning with the planned spin-off of its online gaming unit, SciPlay.

Bank of America Merrill Lynch, JP Morgan and Deutsche Bank are marketing 22m shares at US$14-$16 each for pricing next Thursday, May 2.

Bulge bracket investment banks are warming up to Canada’s growing legal cannabis industry.

Bank of America Merrill Lynch, Citigroup, Credit Suisse and RBC Capital Markets this morning launched a US$200m follow-on offering on behalf of Canadian grower CannTrust Holdings.

The offering is being marketed off a recent price of US$7.11 for pricing on May 1.