IFR SNAPSHOT-End of active week for IG and HY markets

8 min read
John J. Doran

It was a busy week for the investment-grade and high-yield primary markets.

Issuers and investors seemed to ignore or bypass concerns in volatile markets, even with a US government shutdown weighing on everything and setting a record for days closed.

Thursday saw five IG deals priced totaling US$4.100bn. For the week, 12 deals were priced totaling US$10.450bn, pushing monthly issuance to US$90.150bn, according to IFR data.

The high-yield market was very active, with 8 deals totaling US$7bn priced this week, according to IFR.

Commenting in a research report this week on the high-yield sector, BAML said, “The big story of late last week and the last couple of sessions in our world was undoubtedly the return of supply.”

“A more important takeaway from the re-opening of the HY and loan primary markets is that the refinancing channel is operating again, reducing the risk of further material tightening in financial conditions,” BAML said.

And while there were outflows from IG and HY funds, related to the volatility in markets, the moves were considered minimal.

For the week ended January 23, Lipper US Fund Flows reported that the investment-grade funds net outflow was US$157.730m, and the high yield funds net outflow was US$263.516m.

For high yield, this was a change of course from the more than US$3bn of inflows last week.


No issuers in the investment grade market today as investors digest a week of issuance from financial institutions.

US domestic financial institutions so far have issued US$37.2bn this year, down from US$54.85bn for the same period last year, according to IFR data.

“It’s really just been a monumentally underwhelming FIG month so far,” one banker told IFR.

“We would have liked to see something like a dual tranche US$4bn, US$5bn, US$6bn-type transaction.”

Although markets have a long way to go to reach the US$125bn to US$150bn volume projections bankers expected for the month, investors are optimistic that more industrial names will start to issue as they come out of blackouts and could produce some US$15bn to US$20bn next week.

Investor demand is high for more supply and bond markets are starting to post inflows again after 10 straight weeks of outflows, according to Bank of America Merrill Lynch Global Research. Net buying of high grade rose to US$1.32bn from US $0.57bn.


CSC Holdings, a subsidiary of cable firm Altice, raised US$1.5bn after upsizing an initial US$1bn deal on Thursday, while Lions Gate upsized its US$400m to raise US$550m.

And after rallying hard in the first two weeks of the year, average spreads have moved within a 20bp range this week according to ICE BAML data.

“Between materially slower coupons, normalization of fund flows, and the return of the primary calendar, the unusual set of circumstances that underpinned the market pop in early January is no longer here,” wrote Bank of America Merrill Lynch high yield analysts on Friday.

Grant Moyer, head of leveraged finance at MUFG, told IFR that both the high yield and loan markets appear to have plateaued. “There’s not a lot of movement in pricing but there’s definitely stability for borrowers.”

The bulk of issuance so far this year has come from higher quality and less cyclical names. Dun & Bradstreet’s triple C rated US$850m senior unsecured bond, which is due to finish a roadshow next Thursday, is seen as the first real test for the health of the market.


Mosaic Solar looks to price its US$259.7m residential solar securitization on Friday, adding a new price point for the sector in the new year.

The California-based lender launched its top 4.91-year Single A class at IS+175bp this morning from talk earlier this week of 185bp-195bp.

It sold similar bonds in June at 135bp over swaps, according to IFR data.

Fallout from tariffs imposed by the Trump administration led to a 15% drop in US solar installations in Q3 2018 from Q3 2017, according to a SEIA/Wood Mackenzie report.

The new deal bundles up loans to mostly prime borrowers who financed home solar installations. Loans have balances of US$10K-US$50K, rates of 3.99%-8.99% and maturities of 10 to 20 years, according to KBRA.

BNP structured the deal and is a joint lead with Deutsche Bank.


With the window finally open in the LatAm primaries, bankers are expecting more activity going into February.

Positive technicals appear to be overshadowing concerns in the broader markets, with EM debt funds enjoying net inflows of US$200.403 the week ending January 23, according to Lipper.

That marks the third consecutive weekly inflow into the asset class after a series of outflows in December and early January.

“EM still looks hot. We saw another week of inflows so it is an opportune time for people to look at the market,” said a banker.

“We expect to see more deals going into February as we started late this year.

This comes after Colombia and TermoCandelaria tapped the dollar market this week for a total of US$2.41bn.

Regional development CAF also raised EUR750m through a five-year bond and it is now preparing roadshows for a dollar trade as well.

Aside from sovereigns such as Chile and Brazil, markets are also wondering whether Pemex may finally take a run at the market, though investors are awaiting more details from the government about plans to support the debt-laden firm.


The first month of 2019 looks set to finish without a US IPO after the first deal of the year, LNG upstart New Fortress Energy’s US$420m IPO, failed to price last night.

The ongoing US government shutdown, which has left the US SEC unable to declare IPO registration statements effective, meant New Fortress was never going to be able to price as scheduled.

However, New Fortress is expected clarify the deal’s status later this morning.

The company will likely refile its registration statement with fixed price terms, an underwriting source said, taking advantage of little-used provisions that would enable it to get automatic effectiveness in 20 days’ time.

The new price will likely be below the US$17-$19 range at which New Fortress had been marketing its shares.

New Fortress’s other option is to simply wait until the SEC reopens to revive the deal.

When it launched the IPO earlier this month, it took a calculated risk that by the time its roadshow was over, the SEC would have resumed normal operations.

UK-based cancer biotech NuCana opted to withdraw a US$75m stock sale, a move that followed a 19.5% slump in its share price yesterday while the deal was being marketed.

In a statement, NuCana said in a statement it was “not in the best interest of its shareholders to raise equity capital in the current market environment”.

The company, which was looking to sell stock at levels below the price at which it went public in 2017, had £77 million of cash as at December 31.

After three days of marketing, Canadian cannabis company Hexo raised C$50m from the sale of 7.7m shares at C$6.50, a 14.4% file-to-offer discount.

CIBC and BMO Capital Markets led the offering, which priced a day after Hexo began trading on the NYSE American Exchange in addition to its Toronto listing.