The train of FIGs into the investment-grade primary continues to roll with three offerings slated for Wednesday.
Four FIG offerings hit the market on Tuesday, while three FIG deals were sold on Monday.
A total of five deals hit the market on Tuesday, totaling US$6.400bn, pushing weekly issuance to US$14.250bn and monthly volume to US$80.825bn. And 2019 year-to-date issuance now stands at US$292.293bn.
Healthy demand is contributing to the overall tone of the IG market.
Barclays said in a report today that a decline in cross-currency hedging costs, combined with a steeper yield curve, especially in the long end, has made USD fixed income more attractive for international investors and resulted in strong flows into investment grade credit from foreign buyers.
HIGH GRADE
Barclays is marketing a perpetual Additional Tier 1 bond today, the third such Yankee issuance in as many days.
The structure has received strong demand this week, with order books oversubscribed.
Barclays is offering initial price thoughts of 8.25% area.
That is wider than where BNP Paribas and Nordea started on their Additional Tier 1 bonds earlier this week. Both started at initial price thoughts of 7% area, and then priced at 6.625%. nL8N2172JL
Two other FIG issuers in the market today are Webster Financial and Marsh & McLennan.
Marsh & McLennan is tapping its US$250m 4.375% 2029 in part to fund the US$5.7bn acquisition of British insurance company Jardine Lloyd Thompson Group.
Marsh & McLennan earlier this week tapped the euro market and in January issued a US$5bn bond, also in part to fund the JLT acquisition.
In the secondary market, Bayer is moving notably wider after a court ruled against the company in a case to determine if its Roundup weed killer causes cancer.
Bayer’s 4.875% 2048 tranche was among the most traded Wednesday morning, moving as wide as 236bp over Treasuries up from T+210bp the day prior.
HIGH YIELD
Satellite company Viasat Inc, rated B1/BB+, announced price talk of 5.75% area this morning on a US$500m eight-year non-call three senior secured note offering that is expected to price today.
The refinancing deal - proceeds will repay borrowings under its revolver - will be the first deal to price since the delayed Power Solutions buyout trade cleared Monday in what has been a relatively quiet week for issuance so far.
A few other deals could also price today, one broker said, including trades from E&P company Kosmos Energy and gaming company Churchill Downs.
Away from primary, printer Xerox, which became a fallen angel last year, is under the radar of the rating agencies after it said it was exploring the possibility of a strategic transaction for its customer financing business. nL1N2161AI
But it didn’t say what it would do with the proceeds.
“It is possible that Xerox could choose to use most, if not all, proceeds for shareholder returns rather than debt reduction, resulting in higher core debt,” CreditSights said.
S&P warned it may cut its ratings by as much as two notches if proceeds from a sale were not used to pay down debt. Moody’s also warned of downward pressure on its Ba1 rating.
STRUCTURED FINANCE
A flurry of activity is expected in structured finance on Wednesday with at least four deals expected to be priced.
Strong conditions have allowed several issuers to increase the size of their deals during marketing.
Dunkin’ Brands is due to price its US$1.85bn whole business securitization, upsized from an initial US$1.15bn size, while online car dealer Carvana is expected to wrap up its US$338.8m auto loan deal, its debut in the securitization market.
Element Financial meanwhile was able to upsize and launch a US$1bn fleet lease transaction, which was boosted from an original US$400m size.
Foundation Finance is also due to wrap up its US$300m home improvement consumer loan deal.
This follows the pricing of four deals on Tuesday. Ford Motor Credit priced a US$1.63bn prime auto loan deal, its first retail offering of the year, which was upsized from an initial US$1.32bn.
Massachusetts Mutual Life Insurance priced its US$922m equipment loan deal while Freddie Mac closed two agency CMBS transactions totaling almost US$1.2bn.
Commercial real-estate lender Latitude Management Real Estate Capital is looking to sell US$282.5m of CMBS debt backed by floating rate CRE loans this week. The lender, which specialises in bridge loans, was acquired by LaSalle Investment Management in a US$1.2bn deal that closed in January.
LATAM
LatAm primaries remain on hold ahead of the Federal Reserve announcement at the end of the two-day FOMC meeting on Wednesday.
Next week, though, is expected to be busier, including at least one high-yield name after a strong reception to AES Gener’s hybrid issuance on Monday.
That bonds had given back some gains to trade at 100.97 this morning after hitting a high of 101.00, according to MarketAxess data.
“The Fed could hold off some people but we potentially have something for next week,” said one banker. “AES Gener went well even though it was a funky structure.”
The backdrop for issuance remains solid enough, with spreads on most sovereigns tighter over the past 10 days, according to ICE BAML data.
Elsewhere bonds issued by Petrobras were putting in a mixed performance early in the session despite news that Brazilian government is likely to pay the oil firm some US$10bn to settle a ‘transfer-of-rights’ dispute.
EQUITIES
Market attention is squarely focused on the IPO of Levi Strauss & Co, which at nearly US$600m is the first large, liquid deal of the year.
The American apparel company is headed toward a strong outcome, with the leads indicating they are multiple-times oversubscribed ahead of pricing this evening.
Goldman Sachs, JP Morgan, Bank of America Merrill Lynch, Morgan Stanley and Evercore have told investors that pricing of 36.7m shares is likely to come toward the high-end or slightly above the US$14-$16 marketing range.
The banks closed bookbuilding yesterday at 4:00pm, providing them time to sort through orders ahead of pricing later this evening.
Levi Strauss is scheduled to debut on the NYSE under the ticker “LEVI”.
Alight, the Blackstone-backed HR consultant, is facing investor pushback on its IPO.
Bank of America Merrill Lynch, JP Morgan and Morgan Stanley, the joint bookrunners on the Alight IPO, are oversubscribed on the 32m shares being marketed, though there is price within the US$22–$25 indicative range.
Alight benefits from high recurring cash flow, though revenue is expected to grow slowly and it is relatively highly levered.
Invitation Homes, the single-family home rental company, surfaced last night with a US$1bn all-secondary block, the first selldown by longtime sponsor Blackstone Group.
Morgan Stanley reoffered 43m shares, 40m by Blackstone and 3m by Starwood Capital, at US$23.30, no discount to last sale on more than 70 days’ trading volume.