The IG primary is out of the starting gate for 2022 with at least seven offerings slated for sale on Monday.
Against a backdrop of rising Omicron cases and fears of its impact on the economy as well as global political tensions, the IG market is stepping lively into the new year. Among the FIG issuers today was Santander.
BMO said, "High grade credit market participants will focus on supply this week, with expectations suggesting roughly $40bn. Several issuers are likely set to evaluate the market this morning but the bulk of supply should come beginning on Tuesday."
"Supply in January is expected around $135-140bn, which would put the start to the year in line with that of 2021 ($137bn) and 2020 ($142bn)," BMO said. "Given our expectation for heavy issuance in 2022 ($1.6trn gross), we expect the risk to this month's estimate lies to the upside."
Meanwhile, the high-yield arena remains quiet for today
To end the year, the average investment-grade bond spread widened by 1bp to 98bp on Friday, December 31 and the average high-yield bond spread edged out by 1bp to 310bp, just 9bp above the new post financial crisis HY tight of 301bp set on December 28 last week, according to ICE BofA data.
For the week ended December 29, Lipper US Fund Flows reported that the investment-grade funds net inflow was US$2.218bn and the high-yield funds net inflow was US$1.722bn. The domestic equities net inflow was US$19.6bn and the international equities net inflow was US$4.261bn.
HIGH GRADE
At least seven investment-grade borrowers are out in the market on Monday, with FIG borrowers dominating the issuance slate.
Insurers MetLife, Global Atlantic Financial Group and CNO Financial Group were selling funding agreement-backed notes. Two Yankee deals are also set to come from Santander and Bank of Nova Scotia. The latter bank was looking to land a five-part bond distributed across three year, five year and 10 year maturities.
Asset manager Blackstone was offering a two-part senior unsecured note split across a 10-year and a 30-year.
The lone industrial borrower on Monday's calendar, Caterpillar looked to tap the short-end of the yield curve, in line with its last two forays into the bond market in 2021. The construction equipment maker announced a three-part senior unsecured note which included two-year fixed, two-year floater and five-year fixed tranches.
Though Monday will offer up plenty of fresh supply for investors coming into the new year, syndicate bankers were expecting the pace of issuance to pick up the following day.
"High grade credit market participants will focus on supply this week, with expectations suggesting roughly $40bn. Several issuers are likely set to evaluate the market this morning but the bulk of supply should come beginning on Tuesday," said BMO Capital Markets analysts.
HIGH YIELD
The high-yield market is off to a quiet start in 2022 with no deals expected to hit the primary today.
High-yield spreads ended 2021 at 310bp over Treasuries, 76bp tighter from the start of the year. The market ended December on a high note, wrote CreditSights analysts on Monday, gaining 1.9% in total return to leave full-year 2021 returns at 5.4%.
Cinema chain AMC Entertainment Holdings CEO Adam Aron laid out the company's intentions to repair its balance sheet this year after taking on heavy amounts of high-cost debt to survive in 2020 and 2021.
"If we can, in 2022 I’d like to refinance some of our debt to reduce our interest expense, push out some debt maturities by several years and loosen covenants," Aron wrote on Twitter. "With an improving financial position, one of our 2022 goals is to strengthen our balance sheet. There is no guarantee of success, but we will try very hard to get this done. We are always thinking of creative ways to make AMC’s future more secure.”
STRUCTURED FINANCE
The structured finance primary is off to a quiet start on the first business day of 2022, coming off a record year of issuance across sectors stemming from historic low interest rates and financing for deal-making.
Banks projected supply across ABS, CMBS and RMBS will cool from their all-time highs set in 2021 but would still come in at elevated levels. Uncertainties from Covid on borrowing conditions and likely rate hikes from the Fed are major head-winds for the market. Moreover, the phase-out of Libor is another factor that may inject some volatility, analysts said.
Several CMBS issuers filed 15G last week for likely deals in the coming days.
Private-label CMBS supply reached an record peak of US$155bn in 2021, which was about 2.5 times more than the amount in 2020 and 36% higher in 2019, according to BTIG. Roughly half of last year's issuance came from single-asset, single-borrower securitizations, while approximately 30% came from CRE CLO and the rest stemmed from conduit transactions.
Conduit activity has been dampened because investors have been reluctant to own fixed-rate paper backed by hotel and mall loans as those sectors have struggled to recover in the wake of the pandemic.
There is some optimism that the multi-loan structure is poised for a pickup. "We believe CMBS conduit issuance could further recover over the next one to two years given a heavy maturity schedule and improving macro-economic conditions/performance of stabilized CRE assets," BTIG analyst Eric Hagen wrote in a research note on Monday.
LATAM
The LatAm primary is stirring at the start of the year, with offerings in the works.
Banco de Credito e Inversiones, A2/A-/A-, said it mandated BNP Paribas (Suisse) SA and Credit Suisse as joint bookrunners to arrange a fixed-income investor call on Tuesday, January 4. An inaugural Swiss franc senior unsecured green bond offering is expected. BNP Paribas is the sustainability structuring adviser.
Energy infrastructure company Sempra Infrastructure Partners mandated JP Morgan, BBVA, Credit Agricole CIB, MUFG, and SMBC Nikko to start fixed-income investor calls on Tuesday. JP Morgan will be coordinating logistics. The expected US dollar benchmark 144A/RegS senior unsecured note offering is expected to be rated Baa3/BBB-/BBB+.
Bank of America Research updated its Top 10 LatAm Ideas Quarterly for 1Q 2022, which is based on stocks the bank covers in the region that will significantly outperform or underperform peers during the quarter. Included in the list are JBS, Eletrobras and Bradesco, earmarked at buys, according to BofA.
EQUITIES
Bankers are looking to revive interest in biotech IPOs early in the new year with Amylyx Pharmaceuticals, CinCor Pharma and Vigil Neuroscience each launching Nasdaq offerings this morning for pricing this Thursday, January 6.
Though biotech stocks badly underperformed the broader market in 2021, new treatments for central nervous system disorders were still popular investments.
Leading 2022’s first batch of new offerings, Amylyx and Vigil hope to carry the CNS theme into the new year.
Amylyx is seeking up to US$175m to fund development of its treatment for amyotrophic lateral sclerosis (ALS), better known as Lou Gehrig’s disease.
Goldman Sachs, SVB Leerink and Evercore are marketing 8.8m shares at US$18-$20, valuing Amylyx at US$1bn.
Amylyx recently launched Phase III trials of its ALS drug in Canada, the US and Europe as a follow up to an already completed Phase II trial it is using to seek expedited FDA approval.
Vigil is now looking to raise roughly US$120m from an IPO that would fund a Phase I trial for a rare cause of early-onset dementia.
Morgan Stanley, Jefferies, Stifel and Guggenheim Securities are marketing 7m Vigil shares at US$15-$17 apiece, valuing the biotech at around US$500m.
The banks had planned to market the offering in December but elected to hold off.
CinCor Pharma is looking to revive interest in new treatments for cardiovascular diseases with its US$187m Nasdaq IPO.
Morgan Stanley, Jefferies and Evercore are marketing 11m shares at US$15-$17, valuing CinCor at roughly US$640m.
The offering is being used to fund a Phase II trial on a treatment for uncontrolled high blood pressure.
December saw relatively few new IPO filings in anticipation of January launches, though private equity firm TPG and software firm Justworks are among those companies that have filed recently to position themselves for a potential January debut.
Updated story: Adds deal to LatAm