IFR SNAPSHOT - IG primary stirs with offerings
The US investment-grade corporate primary expects at least five offerings to price on Monday as it begins the second week of December, the last month of the year.
At least one high-yield bond is expected to price today with more issuance slated for later in the week.
The economic calendar this week has some key inflation data with the Consumer and Producer Price Index readings on Wednesday and Thursday, respectively. For today, the November Employment Trends Index and the Wholesale trade report are among the releases expected.
"For US CPI on Wednesday, our US economists expect headline CPI growth to pick up to +0.30% (+0.24% in October)," Deutsche Bank Research said in a report today. "The PPI report will follow on Thursday and our economics team forecast the headline to grow by +0.3% MoM (+0.2%)."
No Fed speakers are scheduled for today, as the pre-FOMC blackout period begins ahead of the meeting next week. The CME FedWatch Tool forecasts an 87.1% probability that the FOMC will cut the fed funds rate by 25bp on December 18.
For the week ahead, market participants are expecting approximately US$13bn of new IG supply this week, which is a strong estimate for this point in the year, BMO said in a report today.
"Since 2016, this corresponding week has seen an average of just $3.5bn in IG supply with a maximum of $7.7bn that came in 2017," BMO said.
"Expectations for the month of December as a whole for upward of US$40bn compares to average December IG supply of US$26.5bn since 2016," BMO said.
While no IG issues were priced on Friday, last week the IG primary kicked off the month of December with 38 tranches sold in 27 deals totaling US$23.3bn, according to IFR data. The average new issue concession for last week's offerings was 0.48bp and the average order book was 4.79x subscribed, according to the data. The average progression from initial price thoughts to pricing was 26.31bp tighter.
Demand in the IG market remains very healthy, BMO said.
"For example, last week’s mutual fund flow data from Lipper showed a $2bn inflow into IG funds for the week ending December 4," BMO said. "Thus far, Q4 has seen a total inflow into IG funds of $24.3bn according to Lipper, which trails only Q1 2024 as the largest quarter of inflows into IG funds since the extraordinary 2021."
In the HY primary on Friday one issue was priced totaling US$350m, pushing weekly and December HY issuance to US$5.125bn.
The average IG bond spread remained unchanged at 81bp on Friday and the HY bond spread edged out 1bp to 267bp, according to ICE BofA data. US yields across asset classes were lower on Friday.
"High grade spreads were little changed in response to Friday’s mostly in-line jobs report and closed last week as a whole within a basis point of unchanged. IG index spreads open this morning 4bp off YTD lows alongside neutral risk tone," BMO said.
HIGH GRADE
The US investment-grade bond market is expected to draw five bond deals on Monday.
Casino REIT VICI Properties announced a seven-year senior unsecured note offering. HA Sustainable Infrastructure Capital is marketing a US$150m tap of its 6.375% senior notes.
Canadian Toronto-Dominion Bank is selling a four-part deal targeting shorter-dated tenors. The senior unsecured offering includes two and five-year tranches in both fixed and floating rate formats. ANZ Group is also marketing a four-part offering for the Yankee bond market today.
Insurer CNO Financial is issuing three-year funding agreement-backed note.
LEVERAGE/HIGH YIELD
High-yield bond investors are set to see a menu of new money options this week as junk-rated borrowers prepare pricings on acquisition-driven trades and a dividend recap.
Headlining issuance this week is a US$2bn five-year non-call two bond, which will go toward financing luxury retailer Saks' acquisition of Neiman Marcus and Bergdorf Goodman for US$2.7bn. Pricing is expected tomorrow.
Meanwhile, Goat Holdco has set initial price thoughts of 7.00%-7.25% on a US$750m seven-year non-call three offering ahead of expected pricing on Tuesday.
Proceeds from the bond and borrowings from credit facilities will help fund Apollo’s acquisition of Barnes Group, a provider of engineered products for the industrial and aerospace sectors.
Elsewhere, aviation company OneSky Flight is out with a US$500m five-year non-call two bond as it seeks to refinance debt and fund a dividend to it shareholders. Pricing is expected later this week.
Standard Building Solutions is readying pricing for today on a US$250m add-on to its 6.5% 2032 as the roofing company looks to refinance debt.
STRUCTURED FINANCE
Dealmakers are preparing to complete over US$2bn of asset-backed offerings this week in a likely final push of supply before year-end.
Jersey Mike's Subs is seeking to wrap up a US$850m whole business securitization whose proceeds will help finance Blackstone's acquisition of the sandwich chain.
Two electric utilities are in the market with recovery bonds. Ameren is on track to price a US$476.1m green issue to cover the costs for a closure of coal-fired power plant, while Southwestern Electric Power is looking to sell a US$336.7m security to recoup the costs for storm damages.
Also in the ABS primary is a US$644.5m prime auto loan deal from online used car retailer Carvana.
Last week two asset-backed issuers came to market, raising over US$1.4bn, bringing the sector's year-to-date issuance to US$316.5bn.
LATAM
Argentina's Pampa Energia is expected to price today a benchmark offering of 10-year non-call five senior unsecured notes. Initial price thoughts are in the low 8% area. Citigroup, Deutsche Bank, JP Morgan and Santander are the bookrunners.
Tomorrow the City of Buenos Aires is scheduled price an up to US$600m senior unsecured amortizer that will have an average life of seven to 10 years.
Also on Tuesday, Ecuador is slated to price a US$1bn bond offering to fund a debt-for-nature swap to support conservation efforts in the Amazon Basin.
EQUITIES
Arthur J Gallagher is seeking to raise US$8.5bn of equity from a follow-on stock sale to fund its hefty US$13.45bn purchase of sponsor-backed rival AssuredPartners.
Morgan Stanley and Bank of America expect to price the insurance broker's fixed-size offering post-close Monday after a day of marketing.
The offering would rank as the year’s second biggest secondary ECM offering after Boeing’s US$18.5bn common stock offering in late October (part of an overall US$24.3bn equity/equity-linked financing).
Gallagher’s shares closed Friday's session at US$296.71 and are now up by about a third this year.
Gallagher also revealed early Monday it would buy AssuredPartners from private equity firms GTCR and Apax Partners for 14.3x its own non-GAAP earnings metric (earnings before interest, tax, depreciation, amortization and the change in estimated acquisition earnout payables or Ebitdac).
Assuming US$160m of synergies, the acquisition would have added 10%-12% to Gallagher’s adjusted GAAP earnings per share in the 12 months ended September 30 2024, the company said.
Gallagher expects to fund the balance of the cost with short and long-term debt as well as available cash, enabling it to maintain its investment-grade credit rating and continue to pursue tuck-in M&A opportunities.
Loar, one of this year’s best-performing IPOs, is making an inevitable return to ECM by launching a US$437m first-time follow-on.
Jefferies and Morgan Stanley launched two days of marketing to sell 4.8m shares for pricing post-close Tuesday.
Moelis, Citigroup and RBC are also joint bookrunners.
Shares of the aerospace supplier closed Friday’s session at US$92, more than triple the US$28 mark at which it priced a US$308m NYSE IPO in April this year.
Loar, which is selling 3.2m shares, is using the primary proceeds to repay debt and for other general corporate purposes. Private equity backers Abrams Capital and Blackstone are selling 1.6m shares.
Robust activity in the structured equity market is showing no let-up in the twilight of 2024.
Datadog launched a US$775m five-year CB to refinance an existing security due next year.
Morgan Stanley, Goldman Sachs and JP Morgan are marketing the data software firm’s new CB at a coupon of 0%-0.5% and conversion at 27.5%-32.5% through Monday for pricing post-close today.
Datadog is using the money to repurchase some of the US$747.5m of outstanding principal on its existing 0.125% CB due in 2025.
Marking the latest in a string of CBs from bitcoin-related companies, Riot Blockchain is also raising US$500m from the sale of a five-year CB marketed at a 0.75%-1.25% coupon and 30%-35% conversion premium for pricing late Monday.
Elsewhere, Australia’s Anteris Technologies Global, a maker of replacement heart valves, launched a US$100m Nasdaq IPO for pricing on December 12, joining software firm ServiceTitan (pricing later this week) as the only other IPO on the road.