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Thursday, 27 June 2019

IFR SNAPSHOT-Three deals set for IG primary; secondary steady

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Three IG offerings are expected in the IG primary on Thursday, including issuers from Latin America.

On Wednesday only one issuer was in the market with an offering upsized to US$500m, bringing weekly issuance to US$20.65bn and monthly issuance to US$44.2bn.

The IG supply surge this week - which included a US$12bn offering from Saudi Aramco - has pushed year-to-date issuance to US$371.943bn, just behind the level of US$373.822bn for the same period last year.

In a report BAML said, “This week’s new issues are trading 1.9bps tighter on average from their pricing spreads. High grade credit continued its strong outperformance over stocks and rates (on Wednesday).”

“This strong performance is a testament to exceptional demand levels,” BAML said.

 

HIGH GRADE

Aircraft leasing company Avolon Holdings Funding and two Latin American issuers are in the high grade market today.

JP Morgan and Wells Fargo kick off first-quarter earnings season on Friday and creditors will be watching closely to see if companies stick to their deleveraging plans to bring down net debt.

Microsoft bonds are among the most traded in the secondary Thursday morning but performance is mixed.

On the positive side, Microsoft is one of two finalists alongside Amazon for a contested US$10bn government contract to bring cloud computing to the Defense Department.

Competitors IBM and Oracle have been knocked out of the running for the contract, which will be awarded as early as mid-July.

More pressing however is new criticism over Microsoft’s partnerships with the Chinese government in which its working on AI and facial recognition technology that could be used for surveillance and censorship across the communist state.

Microsoft’s 2024’s have moved 7bp wide on the news but remains at tight spreads of 37bp over Treasuries.

 

HIGH YIELD

Just one new deal is expected to be priced in the high yield market on Thursday.

Crestwood Midstream, which manages oil and natural gas assets, is expected to price a US$500m 8NC3 senior note to repay borrowings on its revolving facility. Wells Fargo is left lead. Initial price talk is high 5s to 6%.

The firm drew on the facility to partially finance the US$485m acquisition of the remaining 50% stake in Jackalope Gas Gathering Services, a joint venture that Crestwood had invested in alongside energy infrastructure firm Williams.

Crestwood bought out Williams’ stake and will take over operation of the gas processing facilities, which are based in Wyoming.

One new deal was added to the pipeline. Houston-based Natural Resource Partners is lining up a US$275m 6NC2.5 senior note which is expected to be priced next Wednesday. Citi is the sole bookrunner on the deal.

The firm owns interests in coal, aggregates and industrial minerals across the United States.

JP Morgan analysts forecasted on Thursday that Lipper fund flow data will show inflows of US$625m to high yield bond funds in the reporting week, which would represent the 12th weekly inflow out of the past 14.

 

STRUCTURED FINANCE

Almost US$9.5bn of ABS bonds have been priced this week in what has been the busiest week of the year in the sector so far, according to IFR data.

The auto loan and equipment finance sectors have been most active, with auto deals from Consumer Portfolio Services and Santander priced on Wednesday, along with an equipment deal from Ascentium Capital.

Deals across the board have been able to tighten pricing from initial thoughts to price at the tight end, if not through, guidance levels.

That is despite the heavy number of deals this week which may have thinned order books a little.

“It’s not quite the food fight category I would have characterized the earlier part of the year,” said one syndicate banker. “There was just so much competing supply from deals in similar categories.”

But the market has had no trouble mopping up supply.

“The street was pretty light on their inventories going into the quarter, so (dealers) have room to absorb risk,” said Dave Goodson, head of securitized credit at Voya Investment Management. “What we’ve seen so far this quarter tells us there’s a lot of money everywhere – secondary markets are almost as lively as primary.”

 

LATAM

Issuers from Panama and Peru enter the markers today with dollar-denominated deals, following yesterday’s trio of launches from the same nations and an additional Brazilian bond.

Energy corporation Consorcio Transmantaro (CTM), operated by Colombian energy firm Isa, and Panamanian bank Global Bank Corporation (GLBA) are expected to launch with an estimated $400m issue and a benchmark transaction, respectively.

The CTM deal, rated Baa3 by Moody’s and BBB- by Fitch, is a 15-year green bond deal with IPTs set at around 5% area.

The Panamanian bank’s 10NC9 benchmark is drawing IPTs of around 5.375-5.50%.

Proceeds from the offerings are expected to be used to pay down debt.

 

EQUITIES

Uber’s highly anticipated IPO filing has yet to materialize but the rideshare company is expected to publicly file this week, allowing it to launch later this month and price the IPO in early May, sources involved in the underwriting told IFR.

The offering, which is to be led by Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch, Barclays and Citigroup, is expected to be sized at US$10bn, making it one of the largest-ever stock listings globally.

Expectations on valuation have been tempered by the poor performance of rival Lyft, which fell 9.2% in yesterday’s session to US$61.23, some 15% below the US$72 offer price on its IPO last month.

Regardless, IPOs are garnering strong receptivity.

PagerDuty, a fast-growing software collaboration firm, secured a premium valuation on its IPO.

Morgan Stanley, JP Morgan, RBC Capital Markets and Allen & Co placed 9.07m shares at US$24, above the US$21-$23 range that was upwardly revised from US$19-$21.

PagerDuty will debut this morning on NYSE under the symbol “PD”.

Tufin Software Technologies, an Israeli cybersecurity software company, raised $108m in an IPO that priced at the top of the range.

JP Morgan, Barclays and Jefferies placed 7.7m shares at US$14, versus the US$12-$14 marketing range.

Tufin will trade on NYSE under the symbol “TUFN”.

Jumia, an African e-commerce play, held up pricing of its IPO last night to provide investors time to absorb interim first-quarter results.

Jumia expects that the number of active users as of March 31 grew to 4.3m, from 4m at December 31, the company said in securities filing yesterday afternoon.

Morgan Stanley and Citigroup, the joint bookrunners on the Jumia’s offering, elected to push pricing to this evening to allow that information to “season”.

They now expect to price 13.5m ADSs being talked at US$13–$16 after the market close today.

 

 

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