IFR SNAPSHOT - IG primary revs up issuance machine with 12 deals today
The US investment-grade primary expects 12 issues to price today, adding to the 20 offerings already sold this week, as issuers continue to dive into steadier markets.
No offerings are expected in the high-yield arena.
On the economic calendar today, there is only one data release, the February preliminary durable goods report at 8:30am New York time, and two Fed speakers are scheduled. Durable goods orders easily exceeded expectations for February, up 0.9% overall, IFR reported.
"This is the largest monthly gain in a year, and consistent with solid business equipment spending estimates for Q1 GDP," BMO said.
The stronger-than-expected durable goods report spurred a mixed reaction from US stocks, while US Treasuries remain in a range, with the 10-year note hovering around 4.35%.
In the IG primary on Tuesday, three offerings were priced totaling US$2.9bn, lifting weekly supply to US$28.05bn and pushing March volume to US$171.737bn, according to IFR data.
IG supply yesterday pushed the weekly total to just above US$28bn, already in line with expectations for the week, BMO said in a report today.
The average IG new issue concession on Tuesday was 11bp and the average order book was 4.12x, according to IFR data. The average progression from initial price thoughts to pricing yesterday was 31.50bp tighter.
Average new issue concessions were above 10bp for the first time since March 4, BMO said, and only the second time this year, though order books were healthily oversubscribed with an average of more than 4x covered.
The increase in the average NIC was attributed to a four-tranche US$2bn offering from LG Energy, a South Korean battery company. Investor feedback indicated that 20bp of new issue premium would be needed to entice real money investors, while hedge funds looked for 10bp–15bp, IFR reported. IFR data showed NICs of 12bp to 15bp on the fixed tranches.
Looking at supply, if another US$4bn of IG offerings land by the end of the month on Monday, this will be the biggest first quarter in volume terms on record, BMO said. To date, first quarter IG volume is US$533.152bn, according to IFR data.
In the HY primary market on Tuesday, three offerings were priced totaling US$5.3bn, lifting weekly issuance to US$5.6bn and March volume to US$21.6bn.
The average IG bond spread was unchanged at 90bp on Tuesday and the HY spread widened by 4bp to 309bp, according to ICE BofA data. US yields across asset classes were mixed on Tuesday.
"IG index spreads were mostly unchanged during yesterday’s session though underlying metrics were relatively strong," BMO said. "While secondary volume was light running an estimated 12% below average Tuesday turnover over the past year, client activity was skewed toward better buying in the IG market."
Looking at the HY sector, BMO said high-yield flows were skewed toward better selling, with the broad high-yield index widening 4bp-5bp.
"Part of that is likely attributable to strong supply in the high yield market with more than $5bn in supply making yesterday the largest new issuance day in high yield in nearly two months," BMO said.
HIGH GRADE
At least 12 US investment-grade bond offerings are expected to price on Wednesday.
German carmaker Mercedes-Benz is issuing a multi-tranche senior unsecured bond, marking its first US dollar transaction of the year.
Utility Union Electric is issuing a US$500m first mortgage bond, while insurers Global Atlantic and Mutual of Omaha are selling funding agreement-backed note.
Bermudan reinsurer Fortitude Group and private-credit lender MSD Investment are both marketing five-year senior unsecured notes.
Two Southeast Asian borrowers are in the market today. Malaysian oil and gas company Petronas and Singapore-based United Overseas Bank are pricing deals.
Dell is issuing a four-part senior unsecured bond with tenors ranging from three to 10 years. Casino REIT Vici Properties is selling three and 10-year senior unsecured bonds. And broker-dealer BGC Group is issuing a five-year bond.
The 12th deal is a 30-year senior note from Anglo-Swiss miner Glencore.
LEVERAGE/HIGH YIELD
The pipeline for junk bond sales continues to grow as more borrowers prepare deals this week.
CEC Entertainment announced a US$660m five-year non-call two offering this morning that it plans to price on Friday.
The company, known for its Chuck E Cheese restaurant chain, is using proceeds to refinance its existing 6.75% 2026s.
Also on the pricing roster this week are deals from packaging firm Novolex and Xerox, the maker of printers and other office products. Both of those companies are hitting the market to fund acquisitions.
Elsewhere, French auto parts manufacturer Forvia is also looking to refinance debt this week through the sale of a US$500m 5.25-year non-call 2.25 offering.
STRUCTURED FINANCE
The securitization primary will move along today as dealmakers push to complete offerings ahead of quarter-end.
In the ABS market, TierPoint started marketing a US$510m green data center securitization, while Allo is readying to issue a US$210.8m green fiber deal.
Yesterday Verizon sold two group of securities backed by mobile payment plans: a US$1bn two-year deal and a US$500m five-year issue. They were enlarged from their original offered sizes of US$600m and US$300m, respectively. Joining the wireless carrier was Regional Management, which cleared a US$265m consumer loan trade.
In addition to the asset-backed sector, ESG activity emerged in the CMBS market. Hudson Pacific is seeking to raise US$475m with a green bond to refinance a group of office properties on the West Coast.
As for the RMBS arena, primary activity remains steady. On Tuesday, Rithm and Annaly priced their latest residential offerings, which raised over US$500m, bringing the week's issuance so far to US$1.3bn.
LATAM
IRSA, Argentina's largest real estate firm, raised US$300m yesterday with an 8% 10-year senior unsecured bond. The bond priced at a yield of 8.5%. BCP Securities, Citigroup, Latin Securities, Santander and Balanz Capital were the joint bookrunners.
EQUITIES
StandardAero led a big night for sponsor exits by pricing an upsized US$1bn first-time follow-on that returned profits to key backers Carlyle and Singaporean sovereign wealth fund GIC.
After two days of marketing, joint bookrunners JP Morgan and Morgan Stanley priced 36m shares in the aircraft maintenance services firm at US$28 or a 4.5% file-to-offer discount versus Friday’s close of US$29.32.
The syndicate found enough excess demand to justify a 20% upsize from 30m shares at launch.
The offering also priced comfortably above the US$24 mark at which StandardAero went public via a US$1.44bn NYSE IPO priced in October last year.
The selling shareholders have agreed not to sell more shares for 90 days, helping to smooth the transition to a wider free float.
GFL Environmental returned with an upsized US$900m secondary block sale to facilitate another sell-down by its sponsor backers.
RBC Capital Markets reoffered its purchase of 18.9m shares of the NYSE/TSX-listed Canadian waste management firm at US$47.65, the bottom of the US$47.65-$48.62 marketing range and a 2% discount to Tuesday’s NYSE closing price (also US$48.62).
The offering enabled GFL backers Ontario Teachers’ Pension Plan Board, Singapore’s GIC, Poole Private Capital and HPS Investment Partners to reduce their stake.
Flush with US$3.75bn of net proceeds from the recent partial sale of its environmental services business to Apollo Global Management and long-time backer BC Partners, GFL bought back 7.1m shares in the offering to ease digestion.
Separately, GFL directly bought back US$800m worth of stock from BC, which did not participate in the secondary offering.
Elsewhere, Hong Kong and Nasdaq-listed Qifu Technologies raised US$600m from the sale of a five-year convertible bond, using part of the proceeds to buy back US$230m of stock.
Medical device specialist Humacyte secured US$50m from an overnight stock sale to help fund the commercial launch of its newly approved surgical implant.