The corporate primaries remain a very busy place these days, with at least eight IG offerings and four HY deals slated for sale on Wednesday.
The IG primary saw nine deals priced on Tuesday, totaling US$10.37bn, pushing weekly volume to US$22.17bn and monthly to US$188.23bn, according to IFR data.
Year-to-date IG volume, now at US$962.8bn, is edging towards US$1trn - almost five months into 2020, according to IFR. For the same period in 2019, IG volume stood at US$501.293bn.
The average new issue concession on Tuesday increased to 15.9bp from 11.4bps on Monday, while the average break performance improved to -11.9bp from -8.0bp on Monday, Bank of America said. This week's new issues are trading 8.4bp tighter on average from pricing.
BofA said more than 80 US IG companies have announced US$114bn of credit line drawdowns since the beginning of March, of which 40 issued corporate bonds shortly thereafter.
HIGH GRADE
With US$22.17bn priced in the high-grade bond market so far this week, May becomes the third largest volume month ever at US$188bn.
Including today there are still six and a half trading days left in May, but borrowers would have to print a lot of paper to reach the US$256bn mark set in March and the US$288bn record set in April.
At least eight issuers are contributing to the push Wednesday including a three-part deal from Comcast.
The telecommunications company is offering 10, 20 and 30-year maturities for the second time this year, following up on a US$4bn four-part issuance from March.
Toyota Motor Credit is also back in the market Wednesday after pricing a US$4bn three-part bond in March.
Comerica is out with a new deal for the first time this year shopping a preferred stock US$350m perpetual non-call five that is split-rated across high yield and high grade with Baa2/BB+ ratings.
A number of other banks are in the market today including Banco Santander, First Horizon National and Western Alliance.
Other issuers include steel producer Nucor and dental equipment maker Dentsply Sirona.
Secondaries continue to tighten in as average high-grade credit spreads moved to 206bp over Treasuries, in from 220bp last week.
However, an uneasiness persists as market participants brace for an uptick in Covid-19 cases as the country starts to reopen.
HIGH YIELD
At least four high-yield deals are expected to price in the primary market today continuing the robust issuance seen in the past couple of weeks.
The strength of the primary was on show on Tuesday - six deals priced for a total US$3.1bn with all of the deals upsized.
Today, auto parts manufacturer Cooper Standard Automotive is expected with a US$250m four-year non-call two senior secured note, and nutrition company Herbalife is expected to price a US$600m 5.25-year non-call 2.25 senior note.
Newell Brands, which manufactures consumer and commercial products including Rubbermaid containers, is also offering US$500m senior unsecured bullet notes due 2025 to be priced today.
Joining those three is Goodyear Tire & Rubber Co which is tapping the 9.5% 2025 notes it sold last Wednesday for an additional US$150m to take the total outstanding to US$750m.
The notes performed well in secondary trading, climbing above 103 on Tuesday, according to MarketAxess.
Commercial printing and communications company RR Donnelley is also in the market with a public debt exchange, offering up to US$300m of 8.25% senior notes due 2027 for its existing 2021 debentures and notes maturing across 2021-2024.
The exchange offer ends June 16.
Average high-yield bond spreads tightened 6bp on Tuesday to 735bp over Treasuries, according to ICE BofA data.
STRUCTURED FINANCE
Primary activity in the US commercial mortgage-backed securities market has picked up speed with Freddie Mac likely to bring a second deal to the market this week.
The second biggest mortgage finance agency looks to price a US$418.79m small-balance multi-family securitization later this year following the sale of a US$988.78m Series K multi-family transaction on Tuesday.
Final spreads on the senior tranches of Freddie's SPC K-109 CMBS showed they returned to levels prior to ones seen before the Covid-19 market sell-off in March. nL8N2D16K4
Agency CMBS have been supported by Federal Reserve's weekly purchases, which began in late March and have slowed in recent weeks with signs of stabilization in the sector.
Private-label CMBS issuance has remained modest as bankers tried to configure their offerings to the liking of investors, analysts and fund managers said.
Market participants are monitoring the rise on loan forbearance especially on loans tied to retail and hotel properties, which have seen their revenues plummet during the pandemic.
On Tuesday, Argentic Investment Management priced a floating-rate commercial real estate CLO deal, AREIT 2020-CRE4, which has no hotel and retail exposure. nL8N2D16NX
The offering's Triple AAA 2.7-year tranche cleared at a spread of 262bp over Libor, which is in line with secondary market levels.
LATAM
The primary market continues its quiet streak on Wednesday without any new issuances or mandates, as of this morning.
Only two deals remain in the pipeline, Colombian bank GNB Sudameris and CAF.
CAF is marketing a social bond being led by BNP, Bank of America, and Credit Agricole.
Investors calls on the new RegS note started earlier this week on May 18.
"The market is winding down, not only in LatAm but also in the investment-grade market," said a senior banker.
A slowdown of issuance in LatAm is said to be driven by earnings blackouts, coinciding with the Memorial Day weekend in the US.
"I think this week will be quiet given the long weekend," said a second LatAm banker.
The last LatAm corporate to sell dollars was Colombian Grupo Energia Bogota, selling US$400m via 4.875% 10-year note on May 12.
That bond has rallied nicely to close Tuesday at a dollar price of 104.10, according to MarketAxess data, up from a reoffer price of 99.026.
EQUITIES
Rocky trading performances yesterday in eight of the nine deals priced on Monday night failed to curb the flow of new equity deals.
Becton Dickinson last night launched of a two-part, US$3bn equity raise in the latest in a series of financings by the medical equipment maker to shore up its balance sheet.
JP Morgan, Barclays and Goldman Sachs are marketing the new equity, structured as an even mix of common stock and mandatory convertible preferred, throughout today’s session. The mandatory is being marketed with a 6%-6.5% dividend and 17.5%-22.5% conversion premium to reference on the common offering.
Becton Dickinson last week raised US$1.5bn from the sale of straight debt to fund near-term debt maturities.
Moderna, the Covid-19 vaccine hopeful, came under heavy pressure yesterday following its blockbuster US$1.34bn overnight block sale of stock. Its shares closed the session at US$71.67, well below the US$76.00 price on 17.6 shares sold the night before.
Morgan Stanley, sole bookrunner on Moderna, was able to increase the size of its commitment from US$1.25bn to US$1.34bn.
Any disappointment did not curb the bank’s appetite for risk.
Morgan Stanley executed a pair of block trades last night for home security specialist Alarm.com (US$266m) and home improvement retailer Floor & Decor (US$250m).
It offloaded 5.6m Alarm.com shares at US$47.50, a 4.7% discount to yesterday’s close, and 4.9m Floor & Decor shares at US$45.00, a 3% discount.
Credit Suisse also extended its balance sheet in executing a US$312m block sale of shares in Virgin Galactic on behalf of billionaire Richard Branson.
The bank reoffered the 20.65m shares in the space flight company, or just two-day's trading volume, at US$15.15 apiece, a 4.5% discount to last sale.
CoStar Group, a provider of data to commercial real estate industry, is seeking to raise US$1.25bn from a one-day marketed all-primary offering.
Goldman Sachs, JP Morgan, Bank of America and Citigroup are the joint books on the CoStar offering.
Avantor, the sponsor-backed lab services company, is in the last day of marketing its roughly US$800m, all-secondary stock sale. Its shares dipped 5.6% to US$17.65 yesterday on the first day of marketing.
Goldman Sachs and JP Morgan are joint books on Avantor.
In a promising sign for the IPO market, SelectQuote expects to price its up to US$475m after the market closes today, a day earlier than originally expected.
A syndicate of banks led by Credit Suisse and Morgan Stanley communicated the move to accelerate ahead of the market open Tuesday, while sticking to the original 25m shares being marketed at US$17-$19 apiece.
The decision reflected strong investor demand for the offering and a desire to limit market risk.
Inari Medical, a medical device specialist with an FDA-approved treatment for blood clots, remains on track for pricing an up to US$117m IPO on Thursday night.
Bank of America and Morgan Stanley, the joint bookrunners for Inari, are oversubscribed for an all-primary offering of 7.4m shares after marketing at a US$14-$16 range.