The US investment-grade bond primary continues its run today with at least 11 offerings slated for sale as issuers and investors ride the wave triggered by the 50bp fed funds rate cut last week.
In the high-yield primary six issues are expected to price today.
Rounding out a busy day in markets, a number of economic data reports, including the Philadelphia Fed Manufacturing Business Outlook Survey and the Conference Board's Consumer Confidence Index, are expected today as well as Fed speakers, including Fed Governor Bowman, who is a voting member.
Yesterday's economic data showed positive numbers for the US, which helped bolster hopes for a soft landing, Deutsche Bank Research said today in a report. The data gave impetus to a S&P 500 record high, the 40th of the year, Deutsche said.
"For now at least, investors are still completely split on the size of the Fed’s next move, with futures pricing in a 54% chance of another 50bp cut in November," Deutsche Bank said. "So we might find ourselves with a real sense of deja vu over the coming weeks if that remains in the balance."
On Monday 12 IG offerings were priced totaling US$13.35bn, lifting September issuance to US$149.150bn, according to IFR data. The average new issue concession for the issues was 0.64bp and the average order book was 3.99x covered, according to the data. The average move from initial price thoughts to pricing was 26.77bp tighter.
"The $13bn of supply priced today, and $25-$30bn expected for this week feels relatively benign, particularly following $85bn and $39bn of supply during the first and second weeks of September," Bank of America Research said late yesterday. "However, the issuance this week is significantly elevated relative to the typical supply seasonals. That means the underlying strong pace of IG supply is showing no signs of slowing."
In the HY arena yesterday three issues were priced totaling US$1.25bn, pushing September volume to US$28.68bn, according to IFR.
The average IG bond spread narrowed by 1bp to 92bp on Monday and the HY bond spread was unchanged at 315bp, according to ICE BofA data.
"High grade spreads narrowed 1bp yesterday on the back of continued heavy secondary market activity with IG volumes running 27% above the average Monday over the past year," BMO said. "In the high yield market, volumes were 40% above the average Monday during the past twelve months according to TRACE statistics."
HIGH GRADE
The US high-grade bond market is not letting up, with at least 11 offerings expected to price on Tuesday.
Deals for funding agreement-backed notes will come from MetLife, New York Life Insurance and Jackson National Life Insurance. Chemical producer Huntsman International is issuing a US$300m 10-year senior unsecured note.
Direct lenders Blackstone Private Credit Fund and North Haven Private Income Fund are selling offerings of short-dated paper today.
Credit Agricole is marketing a US dollar benchmark perpetual non-call 10 note for Additional Tier 1 capital at revised IPTs of 7.125% area.
There is no shortage of Yankee paper today. Norwegian oil company Aker BP is marketing 10 and 30-year senior unsecured bonds, while Meituan, NBN and Korea National Oil are also issuing bonds.
LEVERAGE/HIGH YIELD
The US high-yield bond primary is set for another busy day as borrowers continue to march to market, largely to refinance debt.
Online furniture store Wayfair, miner Coronado, E&P firm EnQuest, food distributor KeHE, energy company NorthRiver Midstream and Mativ Holdings, a manufacturer of specialty materials, are all expected to price bonds today.
Meanwhile, borrowers continue to join the pipeline.
Sable International, the finance subsidiary of Cable & Wireless, has set initial price thoughts of 7.25%-7.50% on a US$500m eight-year non-call three secured deal. Proceeds from the bond, which is expected to price on Wednesday, are going to pay down debt maturing in 2027.
LABL, a packaging and label producer, is also approaching investors with a US$950m seven-year non-call three offering to refinance debt. Marketing continues through Wednesday.
STRUCTURED FINANCE
Dealmakers are pushing asset-backed issues along in what is shaping up to be another busy week for the sector.
Yesterday five issuers – General Motors, Exeter, PEAC Solutions, Marriott Vacation and ITE – released price guidance on their offerings, which will raise over US$3bn combined.
Other ABS issuers in the market this week include Ally, Vantage, Capital Automotive and Cherry Technologies.
In the CMBS market, a group of lenders yesterday announced a US$1.1bn 10-year conduit issue for pricing later this week.
LATAM
Special-purpose vehicle Kingston Airport Revenue Finance is marketing a senior secured bond via Citigroup as sole bookrunner. The potential fundraising of up to US$440m has a 12-year tenor. The notes will be backed by rights to 53.22% of the gross revenues from the Norman Manley International Airport, plus a top-up agreement with the government of Jamaica.
Usinas Siderurgicas de Minas Gerais said today that it will buy back US$320m of its 5.875% senior notes due 2026, increasing the maximum amount it planned to tender from US$285m. The early deadline was yesterday.
Yesterday, LatAm sovereign five-year CDS widened 4bp for Brazil and 2bp each elsewhere in the region, according to Lucror Analytics.
EQUITIES
Hawaiian Electric Industries raised US$500m late Monday from a well-flagged stock sale to help the struggling utility fund an up to US$2bn legal bill to cover damages arising from last year’s fatal wildfires on the island of Maui.
Wells Fargo, Barclays and Guggenheim Securities priced the sale of 54.1m shares or roughly a third of the utility’s expanded shares outstanding at US$9.25, a hefty 15% discount to Monday’s US$10.90 closing price.
On August 2, Hawaiian Electric told investors it planned to finance its US$1.99bn share of the US$4bn overall settlement through a mix of debt, common equity and equity-linked securities, “or other potential options”.
The stock sale also came just days after Hawaiian Electric revealed plans to raise US$250m via an ATM with the same three banks.
The utility is seeking to resolve a “going concern” assessment in its financial statements until it develops and implements its financing plan. The assessment has already prompted Hawaiian Electric to suspend its dividend.
Elsewhere, cloud data management software firm Snowflake signaled a change in direction by launching a dual-tranche US$2bn convertible bond offering, earmarking more than a quarter of the proceeds to buy back stock and another slug for equity derivatives to offset earnings dilution to a premium share price.
Goldman Sachs, JP Morgan and Barclays are marketing the three-year and five-year CBs at the same 0%–0.5% coupon and 32.5%–37.5% conversion premium for pricing after the close tomorrow.
Snowflake is buying back US$575m worth of stock in conjunction with the offering to facilitate delta hedging by arbs participating in the deal. The company is also purchasing capped calls on both CBs, providing additional support to a battered stock and offsetting earnings dilution from the CBs.
Amid slowing growth and heavy competition, Snowflake shares have fallen more than 40% this year and remain 70% below their 2021 highs.
FrontView REIT launched an up to US$277m NYSE IPO early Tuesday, emerging from an estimated backlog of hopefuls aiming to go public before the US presidential election in November.
Morgan Stanley, JP Morgan, Wells Fargo and Bank of America are marketing 13.2m shares in the net lease REIT at US$17-$21 for pricing on Tuesday, October 1.
Alongside the IPO, FrontView plans to internalize its management and, in order to do so, has issued US$39m of new stock to its founder and current external manager Stephen Preston.
FrontView is using the remaining IPO proceeds to repay debt.
Elsewhere in REIT land, InvenTrust Properties raised US$224m from an upsized overnight stock sale, its first since its NYSE listing in late 2021.
After an earlier wall-cross, a syndicate led by JP Morgan, Bank of America and Wells Fargo priced 8m shares of the retail landlord at US$28, a 5% discount to Monday’s closing price of US$29.49.
The offering was upsized from 6.5m shares at launch.
The Sunbelt-focused REIT will use the proceeds mostly to fund acquisitions and repay debt.