IFR SNAPSHOT - The IG primary issuance spigot is still running
The US investment-grade corporate primary is still pouring out deals, with at least five offerings slated for sale today, adding to the 29 deals already sold in this holiday-shortened week.
The high-yield primary expects one issue to be priced today.
The ECM arena remains steady this week, with a variety of offerings from convertibles to secondary block trades. Strategy, the bitcoin treasury company formerly known as MicroStrategy, raised US$2bn from a CB sale last night.
A busy calendar for US economic data releases this morning begins with weekly jobless claims and the Philadelphia Fed Manufacturing Index for February. The Leading Indicators report for January is due at 10:00am New York time. And there are four Fed speakers today, one day after the Fed minutes were released covering the last FOMC meeting.
"Overall, it was a widely consensus round of data that has done little to shift the market's broader understanding of the direction of the real economy," BMO said in a report after the first round of data.
In the IG primary on Wednesday, 11 offerings were priced totaling US$18.450bn in 15 tranches, lifting weekly IG issuance to US$49.95bn and February IG volume to US$110.665bn, according to IFR data. The average IG new issue concession on Wednesday was 1.89bp and the average order book was 4.27x, according to the data. The average progression from initial price thoughts to pricing was 24.85bp tighter.
Yesterday's IG volume pushed the weekly total well ahead of supply expectations for US$40bn, BMO said.
"Despite this week’s heavy supply, demand in the primary market remains exceptionally strong," BMO said. "Yesterday’s tranches came more than four times oversubscribed on average alongside new issue concessions that remained in the low single digits."
In the HY primary yesterday, two offerings were priced totaling US$1.6bn, pushing weekly HY volume to US$2.6bn and February HY volume US$18.366bn.
The average IG bond spread was unchanged at 79bp on Wednesday and the HY bond spread widened by 6bp to 268bp, according to ICE BofA data. US yields across asset classes were mixed yesterday.
"IG index spreads were unchanged during yesterday’s session amid a QT-inspired rally in Treasuries, though underlying secondary market demand metrics were relatively weak," BMO said.
Bank of America Research said in a report late yesterday, "For spreads to trade this tight everything must go right, including technicals. And the technicals are strong in part due to the combination of elevated yields and lower interest rate risks."
HIGH GRADE
The US investment-grade bond market is slowing from the frantic pace it set over the past two days, with at least five high-grade offerings expected to price on Thursday.
Private credit firm Oaktree Specialty Lending is looking to price a US$300m five-year senior unsecured note. Property and casualty insurer Selective Insurance Group is raising the same amount but via a longer-dated offering of a 10-year note.
Lender Westpac New Zealand is marketing a five-year bond. Truck lessor Paccar Financial is issuing a three-year senior unsecured note.
Brazilian energy company Raizen announced a two-part deal, comprising a 12-year senior unsecured note and a tap of its 6.95% 2054 green bond.
LEVERAGE/HIGH YIELD
The primary market for junk bonds remains active, with at least one deal expected to price today.
Amsted Industries has set initial price thoughts of 6.5%-6.75% on a US$400m eight-year non-call three bond.
The industrial components manufacturer will use proceeds to refinance debt.
STRUCTURED FINANCE
The structured finance market continues to churn out deals after two aircraft issuers came to market yesterday.
KKR-Altavair and Pimco-AerCap partnerships raised a combined US$1.183bn on Wednesday.
Also yesterday, T-Mobile priced a US$500m offering backed by wireless equipment installment plans.
Meanwhile, a string of borrowers are readying deals, including Toyota, Social Finance and Affirm.
LATAM
Two Brazilian companies are expected to price bonds today.
Raizen announced a benchmark offering comprising a 12-year note and a reopening of its green notes maturing in 2054. Price thoughts are in the areas of 255bp and 275bp over US Treasuries, respectively. Bank of America, Citigroup, Itau, JP Morgan and Morgan Stanley are the global coordinators.
Itau Unibanco is out with a benchmark five-year dollar-denominated senior unsecured note offering. Price thoughts are in the 6.35% area. Itau, Bank of America, Citigroup, JP Morgan and UBS are the bookrunners.
EQUITIES
Strategy, the bitcoin treasury company formerly known as MicroStrategy, raised US$2bn from the sale last night of a five-year convertible bond but was forced to offer significant concessions to investors.
Morgan Stanley, Barclays, Citigroup and Goldman Sachs priced new CB at zero-percent coupon and a conversion price of US$433.43, a 35% premium to US$321.05 VWAP reference price. The banks had marketed the CB at a fixed zero-percent coupon and a higher 40%-50% conversion premium for one day on Wednesday.
“I was surprised that pricing was pushed so wide,” said one banker. “But there are concerns regarding the capacity of prime brokers to support crypto CBs, as well as saturation from the Strategy complex.”
Strategy is using the money to advance a strategy of acquiring bitcoin, adding to the 478,740 bitcoin it owned as of February 17. The new CB is in addition to US$6.2bn of converts the company issued last year and US$8.5bn of converts outstanding, according to LSEG data.
Strategy’s US$3bn zero-coupon CB maturing in 2029 and convertible at share prices above US$672.40 fell two points yesterday to 84 cents on the dollar as investors made room for the CB. That sell-off forced the banks to widen the discount (conversion premium) in pricing the new CB.
TD Securities and Moelis were also enlisted as bookrunners.
In an otherwise light week for ECM, Diversified Energy raised US$123m late Wednesday from a one-day marketed follow-on stock offering it is using to fund an acquisition.
Citigroup and Mizuho priced 8.5m Diversified shares at US$14.50, a 3.4% discount to the US$15.01 Wednesday closing price but 13.3% below the US$16.73 pre-launch price.
The banks publicly marketed the offering for one day after an earlier wall-cross.
The energy E&P is using the money to help fund the US$207m cash component of a US$1.275bn cash-and-stock purchase of multi-basin E&P Maverick Natural Resources.
PE-backed healthcare software provider Waystar expects to price a circa US$800m all-secondary stock offering after the market close Thursday, concluding two days of marketing for the first-time follow-on issuer.
JP Morgan, Goldman Sachs and Barclays told investors early Thursday the secondary sale of 18m shares is multiple-times covered.
EQT, Canada Pension Plan Investment Board and Bain Capital are selling portions of their ownership stakes in the offering.
Waystar shares eased 2.7% Wednesday in the first day of marketing to US$43.86, nearly double the US$21.50 price it went public at in June last year.