An uncertain outlook for credit markets is casting a cloud over supply expectations for investment-grade corporates, though one Australian borrower was added to the pipeline on Wednesday.
While May is traditionally a busy month with companies emerging from their blackout periods, issuance windows could be disrupted by renewed fears over US regional banks or any other idiosyncratic event. Investors, too, are being cautious, showing a strong preference for stable, low-beta and liquid names with short-dated offerings.
French retailer Carrefour (Baa1/BBB, Moody's/S&P) and Belgian grid operator Fluvius System Operator (A3, Moody's) on Tuesday, for example, paid strikingly different new issue premiums of around 5bp and 20bp, respectively, for a €500m no grow long seven-year sustainability-linked bond and a €700m 10-year issue.
"Issue size makes a difference and Carrefour's was also an SLB, but Fluvius is an off-the-run name and don't have a strong investor base. In a less stable environment, names that are not fully followed will struggle a bit," said a syndicate banker who was on the Carrefour trade.
Even Carrefour was mindful of worsening sentiment throughout the day and pushed to get the deal done as quickly as possible, the banker said. Just a day after JP Morgan's takeover of First Republic Bank brought some relief to the markets, stress from US regional banks prompted a deep sell-off on Tuesday.
"There is a lack of conviction over the direction of the market, so everyone is looking for what the next catalyst could be, which should be the central bank meetings for now, and investing in names with greater stability," said a syndicate head.
"We'll have to see if this is going to be a longer theme or more of a small issue, but eventually it means that the market is open for a variety of premiums."
Pipeline builds
The euro high-grade corporate primary arena saw zero issuance on Wednesday as markets awaited the Federal Reserve's rate decision later in the evening. Still, there was a mandate announcement from Australia Pacific Airports (Melbourne).
The Melbourne airport operator (Baa1/BBB+, Moody's/S&P) is preparing to print a 10-year senior secured euro offering via BNP Paribas, Citigroup and Goldman Sachs. The company is holding investor calls and meetings that start on May 9.
If issued, the transaction would be the sixth euro deal from an Australian corporate this year as investors look for geographical diversification, while borrowers can achieve a diverse funding mix.
US company Corning (Baa1/BBB+, Moody's/S&P) is also marketing a two-tranche euro trade, consisting of an expected €300m three-year and a benchmark eight-year, via Goldman Sachs and JP Morgan.
Two days of calls started today, with bankers saying that the deal is expected to hit the market on Tuesday.
"We don't really have a tech sector name in the euro market so it's good to see this trade. I believe it's also the company's debut euro offering, so it's a good example of how corporates are not just refinancing in this market and that we're seeing new names," said the syndicate head.
Corning offers high-performance glass for computers and has previously issued in Japanese yen but not in euros, according to IFR data.