The IG primary is idle this Friday.
But the high-yield primary is expected to end the week on a busy note with at least three deals due to be priced.
For the week ended April 24, Lipper US Fund Flows reported that investment-grade funds saw a net inflow of US$5.864bn - the second biggest weekly inflows on record - and high-yield funds saw a net outflow of US$520.633m.
Investment-grade bond supply for next week is expected to come in around the US$20bn area.
Earnings next week include Apple, General Motors, CVS Caremark, and Berkshire Hathaway.
HIGH GRADE
No investment grade deals are in the primary today as weekly issuance ends at just US$7.15bn - well below the US$20bn area supply that was expected.
Syndicate bankers said the reason for the low supply this week is that financial issuers continue to come with less issuance year-over-year and many corporate names remain in earnings blackout. It was also Easter week.
Average US investment grade spreads remain tight at 117bp over Treasuries and fund flows were strong.
“If I’m a syndicate manager I am beating hell out of every banker and telling them and every issuer to print now,” Ronald Quigley, managing director for Mischler Financial Group, wrote in the Quigley report.
“Get it while everyone is starving for it.”
Investors and bankers noted that Bristol-Myers Squibb’s funding for the acquisition of Celgene could come as early as next week, especially with inflows as high as they are.
But others thought the following week was more likely as this remains a popular travel time for spring vacation.
In the secondary, US autos are surging after Ford posted positive earnings late Thursday.
Ford, rated Baa3/BBB/BBB has been trading like a junk credit but has moved as much as 45bp tighter with its 3.815% 2027s trading hands at 220bp over Treasuries.
HIGH YIELD
The high yield market had a rare week of fund outflows this week, but issuers have been able to find support for new deals.
The week is expected to finish on a busy note with three deals ending roadshows on Friday, in addition to a drive-by offering from United Rentals, which was announced on Friday morning.
The equipment rental firm, rated Ba3/BB-, is expected to price a US$750m 10.5 year senior note.
Truck Hero, which designs and sells accessories for pick-up trucks, is expected to price a US$335m bond to fund the acquisition of market peer Lund International. Lead bank Jefferies has tightened some of the covenants and shortened the tenor from a 7NC3 to a 5NC2 offering.
Brookfield Property REIT is expected to price a US$750m 7NC3 offering, with price talk in the 5.75% area.
And Moss Creek Resources, a subsidiary of oil and gas production firm Surge Energy, also finishes a deal roadshow on Friday for a US$500m 8NC3 senior unsecured deal, with price talk in the 10% area.
STRUCTURED FINANCE
MetLife could price its first securitization deal of the year on Friday, a US$420m RMBS backed by seasoned performing and re-performing mortgages. Credit Suisse (structuring) and Citi are joint leads on the deal.
ABS volumes in the year-to-date have lagged last year’s figures, according to IFR data. Issuers have sold US$81.85bn so far this year, compared with US$89.4bn in the same period in 2018.
Credit quality was a hot topic of discussion at IMN’s fourth Credit Risk Transfer Symposium, held in New York on Thursday.
Several speakers flagged rising debt-to-income levels over 45% being referenced in CRT deals, and an increasing number of borrowers that obtained mortgages through Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs, which support affordable loans.
These tend to have a weaker collateral profile than traditional loans, wrote Bank of America Merrill Lynch analysts in a report on April 12.
Mike Reynolds, vice president of single family credit risk transfer at Freddie Mac, said on a panel at the IMN conference that the agency “has not moved the credit box”.
LATAM
The week ends with three issuers raising US$2.2bn in the primary market.
Empresa de Transmision Electrica (ETESA), the Panamanian energy company solely owned by the state, issued a debut benchmark US$500m 30-year note at 5.125%.
While Chile-based pulp and paper firm Celulosa Arauco placed a US$1bn two-part 10 and 30-year note with 4.25% and 5.50% coupons respectively.
The American subsidiary of Brazilian meat processor JBS issued a US$700m three-part note with 5.875%, 5.750% and 6.5% coupons.
As a whole, activity declined from the previous week, which saw as many as five issuers coming to market.
The backdrop for emerging markets turned rougher this past week amid worries regarding Argentina’s presidential election and the strengthening of the US dollar.
Yet, Thursday’s offerings were being viewed as “well placed,” according to a syndicate banker following the deal, who also pointed to positive performance in the secondary market.
Emerging markets continued to see outflows this week of around US$721m, more than double the US$239m outflows seen the week before, according to Lipper data.
EQUITIES
Uber Technologies is off and running with its IPO that has the ride-hailing company targeting a valuation of as much as US$85bn on a fully diluted basis.
Uber is seeking to raise up to US$9bn on the base offering being marketed at US$44-$50 apiece.
Secondary sellers, including founder Travis Kalanick and venture-backers, are selling an 27m additional shares as part of the underwriters’ overallotment option.
PayPal has agreed to invest US$500m in concurrent private placement at the IPO price.
Uber management led by Dara Khosrowshahi are conducting salesforce teach-ins at the underwriting banks today. The formal roadshow to institutional investors kicks off Monday in London before returning to the US.
Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch, Barclays, Citigroup and Allen & Company are joint bookrunners on the offering. They expect to price the offering after the market close May 9.
Headhunter Group, Russia’s largest online jobs site, launched an up to US$220m Nasdaq IPO last night.
Morgan Stanley, Goldman Sachs, Credit Suisse and VTB Capital are marketing 16.3m ADSs, all secondary, at US$11.00–$13.50 for pricing on May 8.
A global roadshow kicked off this morning in Moscow, heads to London Monday, and then travels to US with an initial stop in New York Wednesday.
Act II Global Acquisition, a healthy living-focused SPAC headed by former Hain Celestial Group founder and executive chairman Irwin Simon, raised US$261m in its IPO last night.
Cantor Fitzgerald, the sole bookrunner, priced an upsized offering of 26.1m units from 25m units at US$10 apiece. Act II is expected to begin trading on Nasdaq at approximately 10:00 am under the symbol “ACTTU”.