The investment-grade primary is set to welcome nine offerings on Thursday, as the HY sector slows to a trickle after eight deals yesterday.
Also, today marks the ninth straight day of nine or more high-grade issuers selling debt in the primary, according to IFR data records.
On Wednesday, nine IG deals totaling US$13.17bn were priced, swelling weekly volumes to US$52.82bn and monthly issuance to US$152.445, according to IFR data. Year-to-date IG volume stands at US$927.015bn, according to IFR.
The average new issue concession increased to 10.5bp on Wednesday from 7.4bp on Tuesday, while the average break performance improved to -3.8bp on Wednesday from -2.8bp on Tuesday, Bank of America said in a research report.
This week's new issues are trading 4.3bp tighter on average from pricing. CDX IG widened 4.00bp, and CDX HY dropped 1.15pts.
More than 80 US IG companies have announced around US$115bn of credit line drawdowns since the beginning of March, of which 39 have issued corporate bonds shortly thereafter, BofA said.
"With the primary market wide open, we think more will follow," the bank said. "In addition, companies have also increased the sizes of their revolver/credit facilities without actually drawing."
HIGH GRADE
Some of today's deals have the potential to be quite large, including a three-part deal form Honeywell International.
The aerospace and building technologies company plans to raise some US$6bn to permanently reduce the undrawn commitments under the delayed draw term-loan agreement entered into on March 26, according to a filing.
Bank of America is also out with a US$1bn four-year non call three fixed-to-float note, whose proceeds are slated to address social issues related to the COVID-19 pandemic.
Meanwhile, airplane parts manufacturer Raytheon Technologies is offering 10-year in the area of 195bp over Treasuries and a 30-year at 220bp over.
UnitedHealth priced a US$5bn five-part bond on Wednesday that some speculated could have climbed to US$10bn in size. While it received considerable demand that peaked at US$25bn, books settled at US$19bn after price tightening.
The UnitedHealth bonds are among the most actively traded Thursday moving, tighter on the break by as much as 3bp, according to MarketAxess data.
Other issuers Thursday include medical device manufacturer Boston Scientific, paint supplier PPG Industries, Canadian insurance company Manulife Financial, Royal Bank of Scotland's investment banking arm NatWest Markets and investment firm Antares Holdings.
HIGH YIELD
The high-yield primary is expected to be quieter today after a frantic Wednesday saw eight issuers raise US$4.67bn.
That did not include a US$3.32bn investment-grade rated secured bond from high-yield rated Royal Caribbean Cruises.
Chemical producer Olin, rated Ba3/BB-, is expected to price today US$500m of senior notes due 2025.
The company had its senior unsecured rating downgraded by Moody's from Ba2 to Ba3 on Wednesday following a corporate rating downgrade by S&P from BB to BB- on Tuesday. Both agencies have negative outlooks on the firm.
The company amended its credit agreement on May 11 to give lenders on its revolver and delayed draw term loan liens on some of its assets.
Olin's credit agreement amendment enhances the company's liquidity position, but provides security to lenders senior to unsecured debtholders, resulting in a downgrade to the unsecured debt ratings, said Ben Nelson, Moody's senior credit Officer and lead analyst for Olin Corporation.
BMC Software is also expected to wrap up the US$1.1bn of dollar notes and €370m euro bonds to fund its acquisition of Compuware today.
Price talk is at 7.125%-7.25% on the 2025 dollar first lien and 9.125%-9.25% on the 2026 dollar second lien, and 6.50%-6.625% on the euro 2025 first liens.
The lighter high-yield calendar today follows a softening in average high-yield spreads on Thursday, with the index moving 19bp wider to 761bp over Treasuries.
STRUCTURED FINANCE
The US asset-backed securities market will likely hum along on Thursday with SoFi Lending Corp looking to price a US$483m student loan transaction.
Another deal rolled into the auto sector as Honda is pre-marketing a US$947.369m prime loan deal, HAROT 2020-2, for sale next week. The Japanese carmaker priced a US$1.5bn offering in February. nL8N2CW5RF
The two-part SoFi offering, SOFI 2020-C, comes on the heel of the US$324m student loan securitization from Education Credit Management Corp a week ago.
Initial price thoughts on the US$432.35m Triple A three-year note was about 190bp to 200bp over swaps and those on the Double A rated US26.125m nine-year tranche was swaps plus 325bp to 350bp, a source familiar with the deal said.
SoFi's latest private student loan notes compared with a spread of 190bp over swaps on ECMC's five-year Triple A note sold last week.
The two classes of SoFi notes have fetched books multiple times oversubscribed ahead of pricing, according to the source.
Student loan ABS issuance is expected to hold steady at US$13bn in 2020 amid the Covid-19 pandemic due to elevated refinancing among private student loans at the start of the year, Wells Fargo analysts said.
LATAM
The primary market is quiet on Thursday as LatAm corporates take a breather following a busy few weeks.
This week has seen much slower primary issuance as corporates fall under earnings blackouts, said bankers.
So far, Bogota-owned Grupo Energia Bogota remains the lone issuer for the week.
On Tuesday, it sold US$400m of a 4.875% 10-year bond, raising dollars to go toward its 2020-2022 financing plan.
A second Colombian issuer, GNB Sudameris was expected to come to market sometime this week, but has so far failed to emerge.
The deal is expected to comprise an unsecured subordinated note. It is being led by Bank of America, Citi, and Goldman Sachs.
EQUITIES
This week’s sell-off in stocks and signs of investor deal fatigue are slowing the pace of US ECM towards the end of a busy week of issuance.
PNC Financial Services’ mammoth US$12.1bn sell-down of its long-held BlackRock stake late Tuesday and a raft of follow-on stock sales and convertible bond financings this week may have saturated demand.
ECM bankers say this has led to a widening in offering discounts and weighed on aftermarket performance, forcing some issuers to scale back their offerings.
In a better sign, Swiss cancer drug developer ADC Therapeutics, which is bringing this week’s only non-SPAC IPO, appears in good shape ahead of what is now a US$185m offering set to price after the close tonight.
In an amended SEC filing this morning, ADC upped the size of the IPO to 10.3m ADSs from 7.4m at launch, though the price range (US$16-$18 a share) remains the same.
Morgan Stanley, Bank of America and Cowen are well-oversubscribed at the new terms, underwriting sources said.
Though quieter than previous sessions, yesterday’s post-close saw two follow-ons launched and the pricing of two follow-ons, two convertible bonds and two IPOs (SPACs) already in the market.
Comstock Resources raised US$200m overnight from a deal led by Citigroup, BMO Capital Markets, Mizuho and Wells Fargo.
In the first stock sale out of the struggling E&P sector in recent memory, Comstock sold 40m shares at US$5.00, a hefty 23.1% discount to last sale.
It is using the proceeds to repay debt, including a portion of the US$210m outstanding principal on a convertible bond.
Vector Group, an owner of cigarette brands and New York real estate broker Douglas Elliman, raised US$55m from an all-primary block trade via Jefferies. The bank sold 5m shares at $10.85 or a 5.4% discount to last sale.
Last night also saw the pricing of marketed follow-ons from biotech Axcella Health (US$52m) and cybersecurity software firm Ping Identity (US$204m), the latter marking the start of sponsor Vista Equity Partners’ monetization of its controlling stake following last September’s successful IPO.
Veeco Instruments (US$125m) and Plug Power (US$200m) added to this week’s flow of CBs with overnight pricings.
Plug Power’s five-year CB broke new ground as the first-ever US convertible green bond.
Morgan Stanley, acting as sole bookrunner, priced the security at a coupon of 3.75% and a conversion premium of 22.5% versus talk at 3.25%-3.75%, up 20%-22.5%.
SPACs Jaws Acquisition (US$600m) and GigCapital3 (US$200m) are both expected to debut on the NYSE this morning after pricing their offerings overnight. Their symbols are “GIK” and “JAWS”, respectively.