IFR SNAPSHOT-Investment grade and high yield see busy primaries

8 min read
John J. Doran

At least eight deals will rush the investment-grade primary market on Tuesday, continuing an issuance trend that ignited last week.

Monday saw four IG deals totaling US$4.8bn, pushing monthly issuance to US$43.975bn and 2019 year-to-date issuance to US$255.443bn.

And not to be left behind, the high yield primary expects at least three offerings to price on Tuesday, with more announcements as well. Monday saw two deals priced.

Meanwhile, S&P Global Ratings released a report on credit conditions, titled the “Next Debt Crisis: Will Liquidity Hold?”.

In short, it says, “The stage is set for another global credit downturn, but the next crisis, if any, is unlikely to be as dramatic as in 2008-2009.”

That’s because, S&P said, the increased debt is largely driven by advanced-economy sovereign borrowing and domestic-funded Chinese companies, thus mitigating contagion risk.

Even so, S&P Global Ratings did say that while contagion risk is lower than in 2008-2009, risks are elevated.

Low rates pushed investors into speculative-grade and non-traditional fixed-income products.

“These markets tend to be less liquid and more volatile, and could seize in the event of a financial shock or panic.”


Bank of America is likely to be one of the largest issuers today with its two-part self led deal consisting of six-year non-call five and 31-year non-call 30 fixed-to-float notes.

SunTrust Bank is also in the market with a five-year senior unsecured note for general corporate purposes on the heels of BB&T from the day prior as the two companies work toward completing a US$66bn merger - the largest bank merger since the financial crisis. nL8N20Y619

Other financials include Ameriprise Financial and ANZ New Zealand International.

Additionally, insurance agency American International Group (AIG), California-based Alexandria Real Estate Equities and wireless infrastructure company American Tower are also in the market.

Also, Southern California Edison Company announced a US$ benchmark 2-part deal which will consist of a 10-year and a 30-year tranche.

Meanwhile, Triple B debt concerns remain top of mind in the space and the S&P Global Ratings report shows that non-financial US corporate leverage is up over 2009 levels.

Median debt to EBITDA ratios are up to 3.2 times levered compared with 2.8 times during the financial crisis, according to the report.


A busy day is expected in high yield with three new announcements hitting the wires and almost US$2.5bn expected to price on Tuesday.

At least three deals are expected to clear today, with telecoms firm Frontier Communications marketing a US$1.65bn 8NC3 first lien secured note, and oil producer Centennial Resource Production out with a US$500m 8NC3 senior unsecured offering.

In addition, Target Hospitality is due to price its US$340m 5NC2 senior secured note to fund the merger of Target Lodging and Signor Holdings, which provide workforce housing primarily in the oil-rich Permian Basin in Texas. Price talk is in the 9% area for the B2/B rated deal.

A new deal from semiconductor packaging firm Amkor Technology was announced on Tuesday, which is expected to price on Wednesday.

The B1/BB rated company is marketing a US$525m 8.5NC3 senior unsecured offering via Bank of America Merrill Lynch and Morgan Stanley.

Two deals priced on Monday, with crane manufacturer Manitowoc Company pricing a 7NC3 senior secured second lien note at 9%, wide of initial 8% area whispers and price talk of 8.875%-9%.

And gas distributor Sunoco priced an upsized US$600m 8NC3 senior unsecured note at 6%, in line with price talk.


A big slice of the week’s ABS supply will price today and pull in spreads in the process.

Luxury carmaker BMW launched its US$800m Triple A rated lease deal this morning. Its shortest 1-year class is expected to hit at EDSF+15bp, or 3bp-5bp tighter than guidance.

Small business lender Kabbage also launched its US$700m deal, with its top class of 3-year AAs at IS+135bp.

The trade increased from US$610m and many classes tightened.

Also on deck for today are Driven Brands’ US$300m whole business deal, OneMain’s US$526.3m subprime auto ABS and Wyndham’s US$400m timeshare trade.

Those trades are a first of their kind from the issuers of 2019, which got off to a slow start following a sharp fourth-quarter sell-off.

But ABS spreads have rallied since then, particularly for more mainstream and liquid names.

Yesterday, benchmark subprime auto issuer Santander Consumer USA sold the Triple B portion of its roughly US$1bn bond deal within 5bp of the issuer’s lowest DRIVE print, according to IFR data.

The US$118.26m 3.60-year BBB/Baa3 class priced at IS+120bp after being talked in the 125bp-130bp area.


The LatAm primary bond markets have suddenly opened across hard currencies with Brazil’s Petrobras leading the way as it prepares to price a two-part dollar trade.

With Carnival season just ended, Brazilian state-controlled oil firm has wasted little time to come to market setting initial price thoughts of 6.05% area on a tap of 2029s and low 7s on a new 30-year bond.

Proceeds are going to fund a tender for bonds maturing between 2021 and 2025.

Elsewhere, two Mexican issuers - cement firm Cemex and bank Banorte - are looking to raise euros and Swiss francs, respectively, marking the first hard currency deals out of that country since late January, according to IFR data.

Cemex released guidance of 3.25%-3.375% on a EUR400m no grow 2026 bond, and will price it at 3.125% after books reached more than EUR1.8bn.

Banorte, meanwhile, has opened books on a CHF150m 3.5-year senior unsecured bond at MS+200bp area. Also in the Swiss market is Santander Chile which has set a spread of MS+67bp on a 5.5-year bond.


Between Monday’s market close and Tuesday’s open there fell a remarkably quiet period despite a strong market backdrop and elevated ECM activity in recent weeks.

JP Morgan and Goldman Sachs shared risk on a US$66.7m overnight block of online insurance broker Hamilton Lane.

The banks reoffered 1.45m secondary shares at US$46.00, the low end of the US$46.00–$46.25 range and a 1.2% discount to last sale.

After the close, Essential Properties Realty Trust launched a US$180m, all-primary stock sale that it will market for two days.

A syndicate of banks led by Citigroup, Barclays and Bank of America Merrill Lynch are looking to place 10.6m new shares, nearly 25% of outstanding, after the market close Wednesday.

Essential Properties is using proceeds to repay the US$83m of revolver borrowings outstanding on a US$300m facility, so the raise is more opportunistic.

In addition to the pre-open Monday launches of Alight (US$800m) and Levi Strauss & Co (US$587mm), Chinese online brokerage Up Fintech formally launched bookbuilding yesterday afternoon of its roughly US$90m IPO.

Citigroup and Deutsche Bank, which had pre-marketed the IPO to Asian accounts, are looking to sell 13m shares at US$5–$7 each for pricing on March 19.