Three IG offerings are set to hit the primary market this Thursday.
Over in stock land, rideshare company Lyft is rolling into the stock market later today with its IPO. The pricing is likely to come at US$70–$72 a share or higher, above the above the US$62–$68 marketed range.
Back in bonds, two deals were priced on Wednesday, totaling US$1.400bn and pushing weekly issuance to US$12.050bn and monthly issuance to US$100.175bn, according to IFR data. Year-to-date volume stands at US$311.643bn.
And we look forward to seeing the fund flows data from Lipper later today. Earlier this week BAML said in a note that looking at daily fund and ETF inflows, March is on track to set a new monthly record.
“Moreover, flows could accelerate even further into April,” it said. “The previous record inflow was US$38.4bn during January of 2018. So far in March inflows to US high-grade funds and ETFs have averaged US$846m per day, exceeding US$800m daily average during the record month last year.”
HIGH GRADE
Three issuers are in the investment-grade market Thursday led by British telecom company Vodafone with an uncommon hybrid bond.
Vodafone is selling the debt because it failed to receive equity credit from the rating agencies on an earlier mandatory convertible.
The 60 non-call 10-year issuance is being marketed with initial price thoughts of 7.5% area, which would be a 322bp pickup over the telecom’s senior bonds.
Vodafone is not expected to raise more than US$2bn as it looks to finish the funding for its US$21.8bn acquisition of Liberty Global.
NextEra Energy Capital and RenaissanceRe Holdings are also in the market.
Meanwhile, Healthcare and pharma mergers continue to attract the spotlight as more details come out about Centene’s proposed US$17.3bn acquisition of WellCare.
Centene has received a US$8.35bn financing commitment from Barclays while the deal seeks closure in the first half of 2020.
The company may look to tap the bond market for the full amount or a portion of the US$6bn in cash it needs to raise plus US$2bn to pay down WellCare’s senior unsecured notes.
HIGH YIELD
The US high-yield market saw its first pulled deal since November on Wednesday - a US$400m issue from contract-compression gas company Kodiak Gas Services. nL1N21E1LJ
Investor risk appetite has weakened a bit in the past couple of weeks with investors demanding higher yields and tighter covenants on some deals - especially smaller trades that tend to be less liquid and riskier, lower rated credits.
But higher quality deals are still going well.
Three deals in all priced Wednesday from Cable & Wireless, Realogy and MGM Resorts. The latter’s eight-year was doubled in size to US$1bn, and priced at a yield of 5.5%. This morning it was trading up a point in secondary, according to MarketAxess.
At least two deals are due to price Thursday.
Surgery Center, which owns and operates ambulatory surgery centers, announced price talk of 9.5-9.75% this morning on a US$430m eight-year non-call three unsecured bond after marketing the deal for the past couple of days.
Proceeds will refinance its outstanding 8.875% 2021 bonds which are callable at 104.438 next month.
Darling Ingredients, which makes sustainable food, feed and fuel ingredients, also set price talk on a US$500m eight-year non-call three unsecured note at 5.25-5.375%. That’s also a refinancing deal.
STRUCTURED FINANCE
Goldman Sachs priced a US$230.6m mortgage bond on Wednesday that securitized a combination of prime jumbo mortgages and mortgages that were eligible to be bought by the government-sponsored agencies.
The deal, GSMS 2019-PJ1, was Goldman’s first jumbo transaction since 2014, although it issued nearly US$11bn in rated and unrated re-performing mortgage bonds in 2017 and 2018 according to Moody’s.
The Triple-A rated A6 tranche, which has a 2.74 year weighted average life, was priced to yield 3.396%.
Though the jumbo RMBS market has slowed down recently, last year saw a stream of new entrants to the market such as Wells Fargo, as tightening spreads made securitization a more attractive financing method compared with selling whole loans.
Lone Star also priced its latest non-qualifying mortgage RMBS deal on Wednesday, COLT 2019-2, pricing the senior notes at IS+95bp.
Finch Investment Group priced a US$209.7m property tax lien securitization. The senior notes were tightened from EDSF+140bp-145bp area to price at 135bp.
Several new deals emerged on Wednesday, including a US$1bn prime auto loan deal from Hyundai Capital America. The auto manufacturer has mandated Societe Generale, Credit Agricole, MUFG, RBC Capital Markets and SMBC Nikko to arrange the deal.
Otherwise, activity remains relatively light, though several sources have suggested deal flow will pick up after quarter-end.
LATAM
Activity in the LatAm primary markets continues today as Telefonica Celular del Paraguay (TeleCel) moves forward with a US$300m eight non-call three bond.
Initial price thoughts on the deal, whose proceeds are going to fund a tender for the existing 6.75% 2022s, have been set in the low 6% area.
The deal is coming on a mixed day for EM corporate credit as investors fret about possible contagion effects from a sell-off in the Turkish lira and amid worries about global growth.
Even so, with rates in the US and Europe still low, investors are on the hunt for yield and willing to put money to work in higher quality EM names, say bankers.
“We continue to see people chasing yield and low beta names are doing well,” said a banker. “Growth concerns continue but central bank messaging is dominating the mindset overall.”
Brazilian pulp and paper company Klabin managed to generate an order book of over US$3bn yesterday for a US$1bn two-part deal comprising 10 and 30-year tranches.
The 7% 2049 was trading at 98.80 this morning after pricing at 98.46, while the 5.75% 2029 was being quoted a touch over reoffer at 99.75, according to MarketAxess data.
EQUITIES
Rideshare unicorn Lyft is heading for a strong outcome for its historic IPO.
JP Morgan, Credit Suisse and Jefferies closed the books on the Lyft’s IPO at noon yesterday, but not before informing investors that pricing was likely to come at US$70–$72 a share or higher, above the above the $62–$68 marketed range.
Lyft crystallized the new US$70–$72 price range in an amended prospectus yesterday afternoon.
At the top of that revised range, Lyft is raising as much US$2.55bn and would be valued at US$24.3bn, assuming there is no upsize.
Precision Biosciences secured mid-point pricing on its IPO last night, giving the gene editing specialist US$126m of cash to fund development.
JP Morgan, Goldman Sachs, Jefferies and Barclays led the placement of 7.9m shares at US$16, versus the US$15-$17 range marketed, to value the company at US$1bn.
Precision Biosciences is slotted to debut on Nasdaq at around 10:20am under the symbol “DTIL”.
BluePrint Medicines will be marketing a US$300m fixed-size follow-on offering today that will allow it to update investors on the status of two promising cancer drugs.
Goldman Sachs and Cowen expect to price the deal after the market close today.