The US investment-grade corporate primary expects a handful of issuers today, including a jumbo M&A offering, looking to get into the market before Wednesday's CPI report, a critical gauge of inflation.
At least three offerings are expected to price following the six issues sold on Monday.
The high-yield corporate primary expects two issues to price. In the ECM arena, ServiceTitan saw heavy investor demand for its Nasdaq IPO ahead of pricing late Wednesday. It is only the third software IPO of 2024 and one of the year’s last of size.
There is a smattering of economic data releases today, including the NFIB Small Business Optimism Index and the revised Q3 Productivity and Costs report. No Fed speakers are scheduled this week because of the blackout ahead of the FOMC meeting next week.
The CME FedWatch Tool forecasts an 86.1% probability that the Federal Reserve's FOMC will cut the fed funds rate by 25bp on December 18 at its two-day meeting next week.
Deutsche Bank Research said US Treasury yields moved higher ahead of tomorrow’s CPI report for November.
"That release is going to be crucial one, as it’s probably the last big piece of the jigsaw ahead of the Fed’s policy decision next week, where a rate cut is now priced in as an 86% probability," Deutsche Bank said.
BMO said, "With CPI looming tomorrow, the bulk of the week's remaining supply is expected to come today with neutral risk tone and a mostly empty data slate unlikely to stand in the way of supply."
In the IG primary on Monday, six issues, dominated by more than US$6bn of Yankee bond offerings from banks, were priced totaling US$7.5bn, lifting December IG volume to US$30.95bn, according to IFR data. The average new issue concession for Monday's offerings was 2.57bp and the average order book was 2.18x subscribed, according to the data. The average progression from initial price thoughts to pricing was 20.13bp tighter.
In the HY primary, one offering was priced totaling US$500m, lifting December volume to US$5.625bn.
The average IG bond spread remained unchanged for the third consecutive market session at 81bp on Monday and the HY bond spread was unchanged at 267bp, according to ICE BofA data. US yields across asset classes were higher yesterday.
"High grade spreads were unchanged or modestly narrower during yesterday's session, outperforming other risk assets given a 0.5bp widening in IG CDX and a 0.6% selloff in equities," BMO said.
Bank of America Research noted that the recent market developments suggest stronger demand for IG from both retail and institutional investors.
Also, BofA said that supply should slow down seasonally after this week.
"That means IG spreads could re-visit the 77bps November tights later in December," BofA said.
HIGH GRADE
At least three US investment-grade bond offerings are expected to price on Tuesday.
Alternative asset manager Brookfield is issuing a 30-year non-call 10 subordinated note, while regional lender M&T Bank is raising funds from a two-part senior unsecured transaction. The latter deal is coming in a sustainability bond format.
Insurance brokerage Arthur J Gallagher is marketing a five-part bond to help finance its recently announced US$13.4bn acquisition of AssuredPartners. Gallagher had done a follow-on stock sale on Monday as part of the M&A financing.
The bond offering includes three, five, seven, 10 and 30-year senior unsecured notes.
LEVERAGE/HIGH YIELD
Diebold Nixdorf has joined the pipeline with a US$950m senior secured offering of 5.25-year non-call two bonds, which are expected to price on Thursday.
The ATM maker, which has recently emerged from bankruptcy, is using proceeds from the bond and a new revolving credit facility to pay down existing borrowings.
Meanwhile, two acquisition-driven trades are expected to price later today.
Goat Holdco is out with a US$750m seven-year non-call three offering to help fund Apollo’s acquisition of Barnes Group, a provider of engineered products for the industrial and aerospace sectors.
And Saks Global is readying pricing on a US$2bn five-year non-call two bond that will finance the high-end retailer’s purchase of Neiman Marcus and Bergdorf Goodman for US$2.7bn.
STRUCTURED FINANCE
At least four asset-backed offerings are on their way to price this week, signaling that the sector, which is experiencing a record year in issuance, is not ready to shut down yet.
Yesterday Jersey Mike's Subs released price guidance on its US$850m whole business securitization. The sandwich chain's US$750m seven-year Triple B rated note is assessed at US Treasuries plus 165bp-175bp.
Ameren and Southwestern Electric Power also provided guidance on their Triple A rated recovery bonds with eight-year tenors. Ameren's US$476.1m green bond has guidance of US Treasuries plus 70bp-75bp, while Southwestern's US$336.7m security, which is not green, is assessed a tad wider at US Treasuries plus 75bp-80bp.
Also in the market is a US$119.5m offering from Octane Lending, which is backed by loans on recreational vehicles and boats.
Meanwhile, there is a hefty pipeline of RMBS deals heading into year-end, with at least eight non-QM issuers planning to come to market in the coming days. One of them is Balbec, which is seeking to raise US$354.7m with its fourth non-QM securitization of 2024.
LATAM
Ecuador is expected to price a US$1bn 18-year bond offering this afternoon to fund a debt-for-nature swap to support conservation efforts in the Amazon Basin. Special purpose vehicle Amazon Conservation DAC has opened price thoughts in the 190bp area over US Treasuries. Bank of America is sole bookrunner.
Also today, the City of Buenos Aires is slated to price an up to US$600m senior unsecured amortizer that will have an average life of seven to 10 years.
Yesterday, Pampa Energia raised US$360m from a 10-year non-call five senior unsecured note. The note priced at par to yield 7.875%. Deutsche Bank, Citigroup, JP Morgan and Santander were the bookrunners.
EQUITIES
ServiceTitan responded to heavy investor demand for its Nasdaq IPO by significantly lifting the marketing range ahead of pricing late Wednesday.
In only the third software IPO of 2024 and one of the year’s last IPOs of size, the trades-focused software platform revealed in an SEC filing it would now sell 8.8m Class A shares (unchanged) at US$65-$67, up from the US$52-$57 marketing range at launch last week.
The syndicate led by Goldman Sachs, Morgan Stanley, Wells Fargo and Citigroup also told accounts early Tuesday that it expected ServiceTitan’s offering to price at the top end or above the new range, raising proceeds of at least US$590m.
Books close at 4:00pm on Tuesday and are already multiple times covered ahead of pricing late Wednesday, according to multiple sources.
Still, the US IPO market remains overshadowed by a rush of late-year follow-on and CB issuance that has already generated more than US$10bn of proceeds this week.
Most of this sum can be attributed to Arthur J Gallagher’s monster US$8.5bn follow-on stock sale late Monday to fund its hefty US$13.45bn purchase of sponsor-backed rival insurance broker AssuredPartners.
After an earlier wall-cross and a day of marketing on Monday, a syndicate led by Morgan Stanley and Bank of America priced a full-sized offering of 30.4m Gallagher shares at US$280, a 5.6% file-to-offer discount (versus Friday’s closing price).
The offering ranks as the year’s second-biggest secondary ECM transaction after Boeing’s US$18.5bn common stock offering in late October (part of an overall $24.3bn equity/equity-linked financing).
In another sign of the rebound in the software sector, Datadog secured an upsized US$870m from a five-year convertible bond priced at issuer-friendly terms.
Morgan Stanley, Goldman Sachs and JP Morgan set pricing at a 0% coupon and 35% conversion premium after marketing a US$775m offering at 0%-0.5%, up 27.5%-32.5% through Monday’s session.
Datadog shares fell 4.4% to US$161.19, putting conversion at US$217.61. The company is using some of the money to fund a call spread meant to offset future dilution up to US$322.38, a 100% premium to Monday’s close.
The company is also buying back (for cash) US$112m of the US$747.4m outstanding principal of its 0.125% CB that matures in June 2025 and is convertible at US$92.30.
Riot Platforms secured US$525m from the upsized sale of a five-year convertible bond to fund the purchase of bitcoin, becoming the latest name to cash in on the current crypto-to-CB craze.
Citigroup and Cantor priced the CB at 0.75%, up 32.5% after marketing a US$500m offering at 0.75%–1.25% and 30%–35% through Monday’ session.
Solaris Energy Infrastructure (US$160m) and Protara Therapeutics (US$100m) also priced overnight stock sale to round out Monday’s activity.