IFR SNAPSHOT-Three IG offerings on tap as primary remains active

8 min read
John J. Doran

The high-grade train continues to roll, with three deals expected to price on Wednesday.

Issuers are feeding into a market that has stabilized in the last five weeks, inviting investors, bruised last year, back in and seeing solid demand as a result.

On Tuesday, two IG offerings were sold, totaling US$1.4bn, according to IFR data, pushing up weekly issuance to US$7.1bn.

Commenting on the current state of the IG market, BAML said in a report, “The ingredients to the rally in US high grade have been low dealer inventories, strong foreign buying, small inflows to bond funds and ETFs, US institutional investors getting off the sidelines and weak supply volumes.”

A dollar invested in the US high-grade corporate bond index on January 1, 2018 is now worth a dollar again, plus recent gains, after taking a pummeling last year, BAML said.

“This year alone high grade has returned 2% while high yield is ahead by roughly 5%.”

Reflecting that sentiment in the spreads market, the one-day change saw IG flat to tighter and HY tighter, according to ICE BAML data. The ten-day change saw most asset classes tighter.

Year to date, the average IG spread is 26bp tighter over Treasuries, while the average HY spread is 118bp tighter.


Three issuers are in the investment grade primary market as many corporates remain in blackout and banks continue to underwhelm in volume.

Canada’s Bank of Nova Scotia is marketing a five-year US dollar bail-in bond, following in the heels of BMO’s deal last week. BP Capital Markets and Gaz Capital SA, the financing arm of natural gas holding company Gazprom, are also in the market.

The relative slow volume this week is not indicative of any weakness in the market, but more to do with corporate blackouts.

US domestic banks - with the exception of Bank of America this week - have paused issuance, and European banks seem to be finding more attractive pricing in their home currencies, syndicate bankers told IFR.


Strong demand is driving high yield bond spreads tighter in both new deals and secondary market trading.

KB Homes was able to tighten pricing on its two-part high yield offering on Tuesday, pricing a new US$300m 8NCL at 6.875%, inside price talk of 7% area. The home builder also priced a US$100m tap of its 7.625% 2023 note, which was priced at 105.25.

Clear Channel Worldwide Holdings has also been able to tighten price talk to 9.25%-9.50% on its US$2.2bn senior subordinated note, which is due to price and allocate on Thursday morning. Price whispers had been in the 10% area for the deal, which will refinance a 7.625% senior subordinated note that matures in March 2020.

The ICE BAML index shows average HY spreads are at 415bp, which has come in sharply since hitting a two-year high of 544bp on January 3, but remains wide of the moving two-year average of 372bp.

The only addition to the primary pipeline on Wednesday was a US$100m add on by Fortress Transportation & Infrastructure Investors to its 6.75% 2022 senior note, which is expected to price on Wednesday. Barclays is leading the sale.


The ABS market snapped up a fresh US$6.2bn blast of ABS supply in the past two days, with at least another US$571m of credit card supply from American Express.

The AmEx deal will make it the busiest week for ABS supply so far this year, according to IFR data. Only one other week in 2019 had supply above US$6.5bn as issuers remained cautious following December’s turmoil.

But as order books this week overflowed on many classes just hours after deals rolled out, bankers said to expect more supply while the market is hot.

While no new ABS trades are expected to price this week, seven more are in the forward pipeline, according to 15G filings. After that more supply is expected to come ahead of the annual ABS Vegas conference at the end of February.

Wells Fargo analysts said they expect ABS spreads to tighten in further this month given the backdrop of accommodative Fed policy and a still stable US economic environment.


Highly rated Latin American development bank Corporacion Andina de Fomento (CAF), Aa3/AA-/AA-, launched a US$1.25bn three-year SEC-registered deal at mid-swaps plus 72bp after books closed at US$1.7bn.

That was tightened in from guidance of MS+73bp area and initial price thoughts of 75bp area. The deal is expected to launch and price later on Wednesday.

Other than that, the only other action so far in primary is from Russian gas company Gazprom, Baa3/BBB-/BBB-, which set final guidance on a seven-year deal at 5.2% area plus/minus 5bp. That was tightened from 5.375% area at guidance stage and IPTs of 5.50%-5.625%.

Bankers have predicted more Russian corporate deals could emerge if Gazprom goes well.

But so far, a possible US dollar deal from Brazil that bankers have been talking about of late, has not emerged.

“There’s definitely potential for more deals,” said one LatAm syndicate banker.

“Markets are a bit softer this morning, but the tone overall is fairly positive.”

There are a couple of issuers roadshowing this week, including Brazil’s Eldorado, a pulp and paper mill company operator, which could potentially price this week, according to one of the banks involved in that deal.


ECM activity appears to be building some momentum even though earnings are very much the main focus in financial markets.

Last night’s activity was led by the launch of a first-time follow-on from China e-commerce platform Pinduoduo.

The company is selling 37m ADSs and selling shareholders 14.8m for US$1.6bn of proceeds based on last night’s US$30.33 closing price.

Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch, CICC and China Renaissance will look to price the deal tomorrow night.

Royal Caribbean Cruises was the subject of a US$559m unregistered block trade. Barclays reoffered 4.8m shares this morning at US$116.50 versus a closing price of US$118.22.

Biotech Aeglea Bio Therapeutics raised US$60m in an overnight offering of common stock and pre-funded warrants.

JP Morgan and Evercore led the public offering of 3.75m shares at US$8.00 a share and the same number of shares with existing shareholders at US$7.99.

The offer price represents a 15% discount to last sale.

Special purpose acquisition company Wealthbridge Acquisition secured US$50m on its IPO, comprised of 5m units at US$10.00 apiece. Chardan was sole books.

Wealthbridge, which intends to pursue acquisitions in China with a focus on civil aviation or technology, is structured as investor-friendly one share, one-half warrant per unit with the right to purchase one share for 10 warrants after an acquisition.

Wealthbridge will debut on Nasdaq today under the ticker “HHHHU”.