IFR SNAPSHOT-Eight IG deals expected in primary

8 min read
EMEA
John J. Doran

Issuers are once again being enticed into the investment-grade primary, with a mixed bag of eight deals on offer today.

Five deals priced on Tuesday, totaling US$4.19bn, pushing weekly issuance to US$21.415bn, according to IFR data. Monthly issuance stands at US$45.575bn and year-to-date volume is US$569.318bn, according to IFR.

On Monday we saw nine deals totaling US$17.225bn.

HIGH GRADE

Financial companies are leading the way in an eight-deal day for high-grade, including REITs.

British telecom Vodafone is in the market with 30 and 40-year notes, while Lloyds Bank Group is issuing a US$500m AT1, which is the first UK-based bank to issue in US dollars since Barclays tapped the bond market in March.

Such issuance has been particularly volatile amid Brexit concerns, but with Lloyds’ initial price thoughts starting at 7.25% area it may draw demand from a deep US investor space starved of Yankee financial issuance.

Yankee issuance from European financials is down 34% year over year, according to IFR data.

Such borrowers only issued US$46.65bn across 36 tranches year to date versus US$69.05bn from 58 tranches over the same period last year.

Today’s real estate borrowers are Realty Income, Boston Properties, American Campus Communities Operating Partnership.

Other issuers include water treatment company Pentair Finance SARL, and reinsurance companies PartnerRe Finance and AXIS Speciality Finance.

Tuesday’s deals mostly performed well as MetLife bonds are tightening by as much as 3bp in the secondary, according to MarketAxess data.

On the other hand, NXP’s 2026 issuance is one of the most actively traded bonds in the secondary trading flat to wide of where it priced the day prior.

HIGH YIELD

Outfront Media and Aker BP are readying deals for pricing in the US junk bond market on Tuesday amid a largely solid tone as investors continue to bet on US rate cuts later this year.

Outfront Media, an outdoor billboard company, is looking to raise US$550m through an eight-year non-call three bond to refinance its existing 5.25% 2022 bonds.

Also in the mix, Cumulus Media New Holdings Inc with US$300m 7-year, NC-3 senior secured first lien note offering. The radio broadcasting company said it would use proceeds to partially repay the existing indebtedness.

Meanwhile, Aker, a Ba1/BB+/BBB- rated Norwegian oil and gas company, has launched a five-year non-call two at a yield of 4.75% that appears to be getting some decent traction.

Not only is the final yield coming inside price talk of 4.875%-5.125%, but the deal has been upsized to US$750m from US$500m. Proceeds are going toward repaying an outstanding revolver.

This comes despite oil price taking another leg down in early trading as investors bet on weaker demand ahead and a rise in US crude inventories.

This follows a deal from Graphic Packaging, which printed a US$300m eight-year bond at par to yield 4.75% on Tuesday, with proceeds also going toward repaying existing debt.

And more supply is likely this week, as Harsco, Multi-Color and US Renal Care all prepare acquisition driven financings.

STRUCTURED FINANCE

A handful of deals are expected to be priced today.

In the ABS market, Automotive Rentals Inc will price a US$553.5m fleet lease ABS today, according to a lead.

In CMBS, JP Morgan’s latest conduit deal, the US$612.18m JPMCC 2019-COR5, is also due to be priced today.

More ABS is expected later in the week with Wendy’s whole business deal and a sub-prime auto loan ABS from Westlake Financial Services both at price guidance stage.

Meanwhile, the RMBS pipeline is filling up with a debut mortgage servicing rights deal from Two Harbors Investment Corp, backed by a US$400m portion of the firm’s Fannie Mae mortgage servicing rights, announced on Tuesday.

Sole bookrunner Credit Suisse is expected to price the deal early next week.

This follows the pricing of two RMBS deals on Tuesday: a prime jumbo deal from AIG and a credit risk transfer deal from Freddie Mac.

Fannie Mae’s latest Mortgage Lender Sentiment Survey on Wednesday had positive spin on the bond market. Expectations of demand for new mortgages and refinancing has hit a three-year high, while the pace of easing in credit standards has also slowed, the survey said.

LATAM

Uruguay-based Mineral Logistics is the sole deal expected to price on Wednesday after IPTs of high 7% were set on the US$454m deal yesterday.

Peru may also be posting IPTs as soon as this afternoon, a source close to the deal said. The sovereign is wrapping up a roadshow today ahead of a dual-currency offering.

The US dollar and local currency bonds could be up to US$3.5bn in size, the government announced.

Proceeds will be used to buy back outstanding bonds and to finance the 2020 budget.

Joining the pipeline of issuers tapping dollar deals, Mexican bank Banorte also announced a roadshow yesterday. The bank mandated Goldman Sachs, BofAML, Morgan Stanley and MUFG ahead of a potential 144/RegS dollar note. The roadshow ends June 18.

Elsewhere, Barbados announced a set of options for dollar bond holders as it moves forward with a controversial restructuring.

The sovereign is offering to exchange their bonds for an amortizing step-up note due 2033, which will be issued at a 66.67% discount, and a new 3.25% amortizer due 2044 to be issued at par.

EQUITIES

CrowdStrike, a fast-growing cybersecurity firm run by former McAfee executives, raised US$612m after pricing its IPO US$4.00 a share above the already upwardly revised range.

Goldman Sachs, JP Morgan, Bank of America Merrill Lynch and Barclays sold 18m Crowdstrike shares at US$34 each, above the already revised US$28-$30 range and well above the original US$19-$23 targeted at launch.

It was a stunning outcome considering only a select number of IPOs ever price more than $1 above range, but it reflected strong demand for a company that grew its top-line by 110% to nearly US$250m last year but made a net loss of US$140.1m.

CrowdStrike priced 62% above the midpoint of the original range, the most since Splunk in 2012 and the fifth most since 2002, a banker close to the deal said.

The offer values CrowdStrike at US$7.6bn on a fully diluted basis, versus the US$3bn valuation it fetched in a private funding round earlier this year.

The shares are expected to open trading this morning at around 10:00 am on Nasdaq under the symbol “CRWD”.

CrowdStrike is the first of three IPOs that are expected to price this week.

Israeli e-commerce company Fiverr will set final terms on an up to US$105m IPO later tonight after closing the books yesterday on 5.26m shares marketed at US$18-$20 each.

PetSmart-backed e-commerce company Chewy’s up to US$790m IPO is scheduled to price tomorrow night. Morgan Stanley, JP Morgan and Allen & Co expect to close the books on 41.6m shares at 4:00 pm this afternoon after marketing at a US$17-$19 range.

The only new deal of note last night was an all-primary offering of 4.34m shares (12% of outstanding) in Israel-based/Nasdaq-listed digital printer Kornit Digital.

Citigroup, Goldman Sachs and Barclays are embarking on two days of marketing before pricing the deal post-close Thursday.

Kornit Digital closed at US$29.36 last night, up 57% since the start of the year.