Strong investor demand continued to drive oversubscribed deals, negligible new issue concessions, and post-pricing tightening in the secondary market.
Thermo Fisher priced $2.5bn of 3y) $1bn T+52, 5y)$1bn T+72, 10y)$500mm T+87 in a transaction that was multiple times oversubscribed. Zimmer Biomet(Baa2/BBB) also raised $500mm of a 5-year at T+103, while Oglethorpe Power completed a 30-year financing at T+175. BNP Paribas also priced a $2bn 11NC10 Preferred transaction.
11/27: Post-holiday issuance started strong on Monday, as expected. With the 10-year Treasury breaking through 4.4%, corporate and FIG issuers took full advantage. Home Depot raised $2bn in a 3-part offering of 2y)$500mm T+26, 3y)$750mm T+43, 5y)$750mm T+58. Blue Owl Credit Income also raised $550mm of a 5-year at T+362.5bps and Citibank priced $2.5bn of a 2y)$2bn fixed T+87.5 and 2y)FRN SOFRIX + 106bps.
11/26: The week began with a handful of corporate borrowers getting ahead of the Thanksgiving holiday. Consolidated Edison raised a 10+year and 30-year for $600mm(T+115) and $900mm(T+137.5) respectively. Norfolk Southern also came to market for a two-tranche $1bn transaction of $400mm of a 10+year(T+112.5) and $600mm of a 40-year(T+137.5).
With arguably 3 full weeks remaining for corporate borrowers to tap the markets, market participants expect next week’s new issue pace to be active.
11/25: Bayer tapped the market Thursday with a $5.75bn multi-tranche offering: 3y)$1bn T+ 155, 5y)$1bn T+185, 7y)$1,25vb T+200, 10y)$1.75bn, 30y)$750mm T+225. Other issuers that raised debt capital late in the week included State Street($1.5bn), Blackstone Private Credit($500mm), Banco Santander(AT1 $1.15bn PerpNC5, $1.35bn PerpNC10), Socal Edison($200mm Pref) and American Airlines($1bn 5NC2email@example.com%)).
November’s new issue volume stands at over $70bn. Notwithstanding the Thanksgiving holiday, market talk is that there are both enough eligible days in the month remaining and issuers wanting to raise capital to reach $100bn +/- for the month.
Borrowers came into the market to raise more than $10bn in total. Notably among others: Toyota raised $2bn in a two-tranche offering, comprised of a 3-year(T+75) and a 7-year(T+105); Tapestry raised $4.5bn in the biggest deal of the day. The offering was comprised of 2y(T+220), 3y(T+230), 5y(T+290), 7y(T+320), 10y(T+340). Tapestry’s transaction was to fund the acquisition of Capri. Also in the market were Ameren, Charles Schwab, Barclays, and Deutsche Bank.
The Treasury market rally on the heels of a benign CPI report will likely fuel an active IG new issue activity through year-end. With the high close of the 10-year Treasury at 5% on October 19th, rates have come down almost 60bps in less than a month. Risk assets have also rallied, causing corporate spreads to perform, or at least hold, amidst the dramatic rally in Treasuries.
Ares Capital Corp came to market with a sizable $900mm offering of 10-year notes (T+265); IQVIA raised $1.25bn in a 6-year(T+185) financing, and Highwoods Realty issued $350mm of a 12-year(T+337.5).
Issuers get ready to go to market to ensure the calendar is active until Thanksgiving, after which issuance is likely to resume in earnest.
Monday saw a handful of transactions, including American Honda(fixed rate 5y, T+100), O’Reilly Automotive($750mm 3y, T+95), KKR Capital($400mm 5y, T+337.5), and the Federal Republic of Brazil priced $2bn of a 10-year at a 6.25% coupon. Between the public and a few private transactions, issuance volume was between $2.5-$3bn, reflecting a smaller average transaction size than has been the norm over the past several weeks.
One transaction came to market Friday for $500mm for Polaris, an off-road vehicle manufacturer. Friday is less likely to bring transactions. The week before Thanksgiving is often active as issuers aim to raise capital ahead of the holiday and year-end slowdown.
11/8: Activity was broad-based, from a maturity, rating and industry perspective. Highlights include:
-A front-end 3-tranche PepsiCo offering: 1) $1bn SOFR +40 FRN; 2) $800mm 2y Fixed T+35; $700mm 3y Fixed T+65
-LPL Holdings(Baa3/BBB-): $500mm Fixed T+225, 6.75% coupon
-Oncor Electric Delivery( (A2/A+): $800mm Fixed T+115, 5.65% coupon
-Apollo Global(A2/A): $500mm 10y Fixed T+195, 6.375% coupon
*UBS issued $3,5bn of Tier 1 securities, its first such entry into this market since its acquisition of Credit Suisse
*Westpac, Eversource Energy, Sealed Air and several utilities also tapped the market to avail themselves of the relief rally in Treasuries that has ensured since last week’s FOMC meeting.
11/7: Issuers continue to take full advantage of the relief rally offered up by the Fed last week. The benchmark deal of the day was Charter Communication’s two-tranche offering of 3- and 11-year notes. The 3-year was $1.1bn and priced at a spread of +150 with a coupon of 6.15% and the 11-year was priced at a spread of +210 to the 10-year Treasury with a coupon of 6.65%. The 3-year in particular is a novel piece of paper for Charter, which typically issues longer-dated debt. That said, with the rally in spreads, the Company’s prudent liquidity management objectives, and investor appetite for a short-dated maturity made the offering seem like the perfect fit for today’s market.
Also in corporates, VW came to market with $1.5bn of 3- and 5-year notes at 6% and 6.2% respectively split evenly and Ares raised $500mm in 3-years with a coupon of 6.375%. Textron, Alliant Energy and Ameriprise each also tapped the market.
11/5: Issuers lit up the screens as a multitude of issuers across industries, and ratings profiles came to market today. Among the notables were Roche Holdings’ $5bn 5-tranche offering, Enbridge’s $3.5bn Baa1/BBB+ offering of 3-, 5- and 30-year maturities. RTX (BBB+), the aerospace and defense conglomerate also issued $11bn as the largest deal of the day. Simon Property Group and Targa also each raised $1bn and $2bn respectively on a day that was among the busiest in many months.
11/3: On the heels of a dovish FOMC statement on Wednesday, and Friday’s weaker than expected jobs report, the equity and bond markets rallied and in came a handful of issuers to take advantage of the bounce in market sentiment and rally in Treasuries.
Ford Motor Credit showcased its new investment grade ratings and raised $2.75bn in a 2 tranche offering of $1.5bn of 5- and $1.25bn of 10-year notes. Ford is now rated Ba1/BBB-/BBB- by Moody’s, S&P and Fitch respectively. The offering was well oversubscribed and was able to capitalize on the tightening of Ford spreads immediately following the upgrade.
Humana also raised $1.35bn in a two tranche deal of 5- and 10-year notes for coupons of 5.788% and 6.146% respectively.
With a limited number of eligible issuance days left in 2023, we expect the calendar to be extremely busy in coming days, particularly given the market reset on the heels of Wednesday’s FOMC meeting.
11/1: Earlier in the week issuers jumped in ahead of the FOMC Monday with over $20bn priced on Monday, as Morgan Stanley tapped the market for $6bn in 4 tranches, Altria jumped in for $1bn of 5- and 10-year notes and the big deal of the day was Bristol Myers $4.5bn 4-tranche 7-, 10-, 30- and 40-year transaction. Use of proceeds is GCP and the financing of their acquisition of Mirati. Quest priced $750mm and a handful of banks came to market, including Santander with $3.75 bn of a three tranche deal comprised of 4-year FRNs as well as 5- and 10-year fixed rate notes. Tuesday issuance was modest with a deal from Standard Charter and modest size deals from GATX and Camden Properties.
- Last week American Express tapped the market for $2.5bn and Citi joined last week’s long list of bank borrowers to raise debt capital
- A key driver to new issue volume has historically been M&A. 2023’s total reported ytd global M&A deal volume of $2 trillion is down by over 30% vs the same period in 2022, and recent events may keep CEOs and Boards on the sidelines for at least the near term