IFR SNAPSHOT - IG issuance paces slows after robust run
The US investment-grade corporate primary expects at least two offerings to price on Thursday as the strong issuance flows ebb.
In the high-yield primary, however, at least four offerings are slated for sale.
Meanwhile, in the ECM arena, US equity capital markets are on pace to raise more than US$10bn this week, one of the busiest of the year.
Two employment reports make up the bulk of the menu for today's economic data releases, with the international trade data, weekly jobless claims and the Challenger Job Cut report, and only one Fed speaker, Federal Reserve Bank of Richmond president Tom Barkin, is scheduled. Tomorrow morning brings the US jobs report for November.
"Overall, the six-week high for initial jobless claims is unlikely to shift anyone's forecast for tomorrow's payrolls print, even if it is consistent with further balance in the labor market," BMO said in a report following the data.
"From here, there isn't much on the calendar aside from Barkin's 12:15pm comments on the economic outlook," BMO said. "We're anticipating more of the same in terms of Fed messaging - a December cut is on the table but contingent on the inflation data."
In the IG primary on Wednesday, six issues were priced totaling US$5.1bn, lifting weekly and December IG issuance to US$21.95bn, according to IFR data. The average new issue concession for yesterday's deals was 0.13bp and the average order book was 4.99x subscribed. The progression from initial price thoughts to pricing was 29.44bp tighter.
In the HY primary, one offering was priced totaling US$400m, pushing weekly and December HY issuance to US$2.4bn.
The average IG bond spread remained unchanged at 80bp on Wednesday and the HY bond spread was unchanged at 266bp, according to ICE BofA data. US yields across asset classes ebbed on Wednesday.
Bank of America Research said in a report that IG bond trading volumes have reached record high levels in 2024.
"Trading volumes set records both in absolute terms, as well as relative to the size of the IG bond index," BofA said. "The stronger IG cash bond trading volumes are likely a result of recent innovations, including portfolio trading, the proliferation of corporate bond ETF trading and e-trading."
HIGH GRADE
The US investment-grade bond market is set to slow significantly from the recent pace of supply, with at least two deals expected to price today.
Atlas Warehouse Lending, the funding arm of Apollo's structured products business, is out with a two-part senior unsecured fixed note offering comprising three and five-year bonds.
Proceeds are for general corporate purposes, including the repayment of debt.
Multinational Johnson Controls is out with a US$250m will-not-grow tap of its 4.9% 2032s, with proceeds also slated for debt repayments among other purposes.
LEVERAGE/HIGH YIELD
The pace of issuance in the US high-yield primaries is picking up as at least four borrowers ready deal pricings on Thursday
Hertz is back in the market with a US$500m add-on to its 12.625% first lien notes due 2029 after releasing initial price thoughts of 10.25%-10.5%, or a dollar price of around 106.25-107.
The car rental company is expected to price the deal today and will use proceeds to repay borrowings under a revolver.
UWM Holdings has set initial price thoughts in the high 6% area on a US$500m five-year non-call two offering ahead of expected pricing today.
The residential mortgage lender is using proceeds to pay down debt and for general corporate purposes.
Also on the pricing roster today are a US$400m five-year non-call two bond from Planet Financial and a US$400m 8.5-year non-call 3.5 issue from Genesis Energy.
STRUCTURED FINANCE
The securitization primary will see more action after four deals across asset classes landed yesterday.
Pagaya is slated to price a US$590.4m consumer loan ABS deal today, which was enlarged from US$492m.
Meanwhile, Ameren and America Electric Power are in the market with recovery bonds for sale next week. Both Triple A rated securities carry an eight-year tenor.
As for the CMBS arena, Velocity Capital yesterday released price guidance on its US$297.97m issue backed by residential and commercial property loans. The US$200.86m Triple A rated three-year certificate has guidance of US Treasuries plus 175bp-180bp.
In the RMBS space, Lone Star yesterday released price guidance on its US$409.4m non-QM offering. The US$325.98m Triple A rated two-year tranche is assessed at a 130bp area over US Treasuries.
Yesterday, Porsche priced a US$891.87m prime auto loan securitization, marking the first ABS pricing of this week. In the mortgage sector, two five-year conduit issues combined raised more than US$1.6bn, while Rithm sold a US$251.33m non-QM issue.
LATAM
It is proving to be an active December for the Latin American crossborder primaries as borrowers rush to raise funding before year-end.
Wednesday saw Banco Santander Mexico, Gruma and Vista Energy raise a combined US$2.1bn in the bond markets, and more deals are expected this month.
Ecuador is marketing a US$1bn bond to fund its second major debt-for-nature swap to support conservation efforts in the Amazon Basin.
And the City of Buenos is meeting investors regarding what could be its first crossborder bond since 2016, according to IFR data.
Uruguay is also expected to raise funding this week in the Japanese market, where it is approaching investors with a multi-tranche Samurai deal.
EQUITIES
US equity capital markets are on pace to raise more than US$10bn this week, making it one of the busiest weeks of the year, in an auspicious sign for dealmaking in the year ahead if market conditions hold.
Marking Wednesday’s biggest calendar addition, high-flying Semtech sought to capitalize on its appeal as a derivative play on the AI infrastructure boom by launching a US$400m follow-on stock sale.
Morgan Stanley and UBS are marketing the offering across Thursday’s session ahead of pricing after the market closes.
A banker close to the deal said the book was already well oversubscribed with demand from high-quality investors.
Shares of the wireless equipment maker closed Wednesday’s session at US$69.10 and are now up 215% this year.
Investors remain willing to put money into new deals in the twilight of 2024, enabling the upsize of two offerings priced late Wednesday.
Amer Sports, one of the year’s best performing IPOs, raised an upsized sum of US$938.4m from its first follow-on since its January debut.
Shares of the Helsinki-based maker of Arc’teryx jackets, Salomon ski gear and Wilson sporting goods dipped just 2% while it pitched new investors during two days of marketing.
Bank of America and JP Morgan led the all-primary sale of 40.8m shares, up from 34m shares at launch, at US$23, a 12% file-to-offer discount versus Monday’s closing price of US$26.13.
After a slow start, Amer shares have more than doubled from the NYSE IPO price of US$13 set in late January, setting the stage for last night’s stock sale.
Janux Therapeutics captured an impressive file-to-offer premium to raise US$350m from an upsized follow-on stock sale that tapped into one of biotech’s hottest trends.
After a day of marketing, a syndicate of Bank of America, TD Cowen, Stifel, Cantor and William Blair priced 5.6m shares at US$63, a premium to Tuesday’s closing price of US$59.86 at launch.
The early-stage cancer specialist rose 11% while marketing what was initially a US$300m stock sale.
The shares skyrocketed 48% a day earlier following the release of positive updated early-stage clinical data for its prostate cancer drug.
The drug is a new type of immunotherapy like the ones that Bicara Therapeutics is developing.
Bicara raised US$362m in September in one of this year’s largest biotech IPOs.