IFR SNAPSHOT-Healthy, busy buzz stays with IG primary

6 min read
John J. Doran

Three deals are expected to price in the IG primary on Wednesday, keeping the offering train on track and still rolling.

On Tuesday, after a long holiday weekend, four IG deals were priced totaling US$3.75bn, bringing monthly issuance to US$83.45bn.

BAML noted that despite the equity sell-off on Tuesday, “conditions in high grade credit were more favorable … potentially reflecting the more bullish credit investor sentiment.”


Regional banks are starting to announce deals in the investment grade space as earnings trickle out.

Fifth Third Bancorp is marketing a five-year bond with initial price thoughts in the T+low 130s, while Regions Financial announced a US$400m tap of its 3.8% 2023s with initial price thoughts in the T+low 140s.

There’s also an overnight US-dollar two-tranche trade from Seoul, South Korea-based KEB Hana Bank.

While banks have made up most of the supply - spurred by new issuance from Bank of America and JPMorgan Chase yesterday - there’s not a lot of corporates lined up in the pipeline despite good deal performance, one syndicate banker told IFR.

“Not a lot of people are lined up because a lot of guys are starting early blackout periods,” the banker said.

The lack of issuance could be a function of the earnings calendar because markets have been relatively stable and all the deals that priced last week have tightened in the secondary.


Four issuers stormed the high yield market on Tuesday and all of them were able to upsize their transactions, raising a total of US$4.15bn and pointing to strong levels of demand for new paper.

Two more were announced on Wednesday - offshore drilling company Transocean is looking to price a US$550m 8NC3 senior secured deal today, led by Morgan Stanley.

Lamar Advertising also announced a US$250m tap of its 5.75% senior unsecured notes due 2026 to repay borrowings under its revolving credit facility. Lamar may also price today, a broker said.

Short-term sentiment has clearly shifted in a more favorable direction in the last month, but many investors appear less confident on the bigger picture.

“The support for high yield issuance is welcome, but heavy issuance can create market indigestion and geopolitical risks remain, so we continue to favor short duration for our credit exposure and are not getting too carried away with this short term exuberance,” wrote Twenty Four Asset Management portfolio manager Pierre Beniguel in a client note on Wednesday.

China, trade war and geopolitical risks are now credit investors’ main worries, according to a survey from BAML. Interest rate concerns were top of the list in November, but have now dropped to fifth spot.


There is a good chance that Mercedes Benz and World Omni will price their auto ABS deals today, clearing the bulk of the week’s ABS supply, according to bankers.

Both auto deals saw good demand from investors in premarketing, as did sub-prime lender Exeter, which yesterday priced its US$550m trade mostly tighter than anticipated.

Exeter’s riskiest 4.12-year BB class priced at 260bp over interpolated swaps, or some 65bp tighter than BBs sold last week by rival lender Consumer Portfolio Services, according to IFR data.

CPS tightened two Triple A classes but widened three subordinate classes before pricing, signaling a slower recovery in riskier ABS after the Q4 sell-off. nL8N1ZI4SN

This week’s Mercedes deal has an initial size of US$1.06bn that could increase to about US$1.31bn. World Omni this morning will test a potential increase of its US$827m deal to around US$1.065bn.


LatAm primary markets are set for action today with another sovereign deal out, this time from the Republic of Colombia.

The sovereign is targeting a two-part trade. Initial price thoughts on the 30-year senior unsecured offering is T+240bp, and T+190p on the tap of its existing 4.5% 2029 issue.

BNP Paribas, Bank of America Merrill Lynch and Morgan Stanley are bookrunners on the trade, which is expected to price today.

“Everyone has been waiting to see if we get another decent size sovereign issue,” one syndicate banker told IFR.

Uruguay and Mexico both brought successful trades last week.

Colombian power company Termocandelaria, which ended roadshows on Friday, is also out with a US$410m 10-year with IPTs at low 8%. BAML and Scotiabank are bookrunners on that trade, which is also expected to price Wednesday.


Hopes the US government shutdown might be headed towards a near-term resolution lifted yesterday when Republican Senate leader Mitch McConnell indicated he would put competing proposals to reopen the government to a vote tomorrow.

Both proposals are expected to fail but the move was viewed as a sign Republicans and Democrats might be edging closer to ending the now month-long shutdown.

This comes as the first US IPO of 2019, LNG upstart New Fortress Energy, is scheduled to price tomorrow night, but only if the SEC is open for business and able to declare its registration statement effective. New Fortress is looking to raise about US$420m.

In a relatively active evening for follow-on stock sales last night, biotech PTC Therapeutics raised gross proceeds of US$202.9m from the overnight block sale of 6.7m shares at US$30.20, the bottom of the $30.20-$31.20 marketing range and an 8.5% discount to last sale. RBC Capital Markets acted as sole bookrunner.

PTC pre-announced Q4 results and 2019 guidance for its Duchenne muscular dystrophy drugs alongside the offering.

Waste management company Casella Waste Systems took advantage of its strong share price to raise US$91.5m from the sale of 3.1m shares at $29.50, a 4.8% discount to last sale. Raymond James acted as sole bookrunner.

UroGen Pharma (US$150m) and eHealth (US$90m) also launched marketed offerings, while Jefferies brought a US$565m unregistered block trade in Global Payments, enabling a major shareholder to sell.