Corporate Bond Issuers Back Up the Trucks In Advance of Delivering New Deals
September 23, 2016   //   by Mischler MarCom   //   Debt Market Commentary, Recent Deals  

Quigley’s Corner 09.22.16- Corporate Bond Issuers Back Up The Trucks in Advance of Delivering Big Tranche(s) of Fresh Paper

 

Investment Grade New Issue Re-Cap – Backing up the Trucks

Global Market Recap

Deal-of-the Day: All That Glitters IS Gold..Man Sachs

Goldman Sachs Raising the Bar for Diversity and Inclusion Again, and Again
IG Primary & Secondary Market Talking Points

NICs, Bid-to-Covers, Tenors and Sizes

New Issues Priced

Indexes and New Issue Volume

Lipper Report/Fund Flows – Week ending September 14th

IG Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

Tomorrow’s Calendar

corporate bond issuersLast evening at 9:13PM I closed my “QC” commentary with this: “Folks, Q3 is about over.  You hear that sound?   That’s the sound of trucks?  They’re backing up to print between now and Election Day – BIG TIME. 12 IG issuers are in the pipeline with a whole lot of M&A deals getting closer.”  Well, today did not disappoint. Treasuries were better bid, yields fell, equity markets rallied the world over thanks to yesterday’s FOMC and BoJ dovishishness as issuers took note to quickly back up their trucks to print.  All told beforehand right here in the little ole “QC”.  Just in case any of you aren’t sure what I meant when I say “back up the truck” perhaps this visual might be of assistance because it’s what I mean when I say that:

All right, now we’re understand each other, let’s get to today!

Today’s IG dollar DCM saw those trucks line up and take charge once again featuring 9 IG Corporate issuers across 20 tranches totaling $17.05b.  Adding in one lone SSA visitor to the mix, the all-in IG day totals were 10 issuers, 21 tranches and $18.05b.

What’s more is that we blew right through the IG Corporate syndicate midpoint average forecast calling for $30.38b this week ….to the tune of over 25% having priced $38.013bMTD it’s more of the same people.  Syndicate estimates expected a September total of $116.02b and we’re now over 12% above that amount sitting pretty at  $130.218b. This week isn’t over and we have yet another full week left next week.  The record for September IG Corporate only issuance is $153.32b set in 2013.

Don’t forget that all-in IG issuance including SSA volume is now at $150.568.  The September all-in record, also set in 2013, is $192.14b. That’s’ $41.572b away.

12 deals remain in the pipeline while 14 M&A deals are on the M&A docket for some point before year end or early 2017…..and those are ones I know about!

………..What do you say?  Are we all up for shattering yet another record?  That’s the spirit!  I think so too!  Issuers line up, ready, aim, FIRE!

Today’s largest transaction was Air Liquide’s $4.5b 5-part Senior Unsecured Notes transaction with proceeds used to repay a portion of the bridge loan credit facility associated with its acquisition of Airgas that completed on May 23rd among others.  However, that’s not to say there weren’t other large new issues.  Team Mischler’s “Deal-of-the-Day” belongs to The Goldman Sachs Group, Inc. $3.5b two-part 5NC4 FXD/FRN for which we were honored to be a part of.

 

Global Market Recap

 

o   U.S. Treasuries – Solid session for USTs. Tremendous session for the long end in Europe.

o   Stocks – Stocks were led higher by NASDAQ. Strong in Europe & Asia closed higher.

o   Economic – U.S. data was mixed. Data in China & France was positive.

o   Currencies – USD lost ground vs. 4 of the Big 5. The Yen was the lone loser.

o   Commodities – Back to back strong days for the commodity market.

o   CDX IG: -2.49 to 76.01

o   CDX HY: -9.50 to 381.91

o   CDX EM: -4.62 to 227.04

*CDX levels are as of 3:30PM ET today.

-Tony Farren

 

Deal-of-the Day: All That Glitters IS Gold..man Sachs

 

Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
(bps)
5NC4 FRN 3mL+equiv 3mL+equiv 3mL+117 3mL+117 <20> bps 3.5 112/110 <3>
5NC4 FXD +140a +125a (+/-5) +120 +120 <20> bps 3.5 117/115 <3>

Mischler Financial is always privileged and honored to be named an active Co-Manager for The Goldman Sachs Group, Inc.  Today we served as a 0.5% active Co-Manager on today’s $3.5b two-part 5NC4 FXD/FRN Senior Unsecured Global Notes new issue. Hop on into the “QC” and let me show you around the new dashboard for my relative value study.

So relative value, as we all know is part art and part science but today’s fair value study is much more creative shall we say.  Always careful to tell the right story in the best way I can, this evening’s deal review will walk you through the “logic” art and science.

J.P. Morgan issued a 5NC4 back in August that many concluded priced about 12 bps behind where a bullet would issue.  What happened at the break, however, changed the logic as it tightened 10 bps points.  Given the same structure, let’s look at today’s Goldman deal in as straight-line approach as we can.  Let’s compare it to the outstanding GS 5-year – the 2.625% due 4/25/2021  – that was G+114 at yesterday’s close. That implies today’s new issue that priced at T+120 came with a 6 bp concession. The trick is valuing the 1-year optionality.  What is that worth?  Additionally, the same structured JPM 2.625% due 8/15/2021 (A3/A-) was also G+114 this morning pre-announcement.  Goldman’s deal is A3/NA) so, factoring let’s say a nickel or 5 bps for the S&P ratings differential one could argue that fair value on today’s new print is +119 or 1 bp NIC.  I could also take an average of the two approaches and call it 3.5 bps NIC.  One thing is for sure, now that both JPM and GS have issued this structure, we’ll likely see more of its kind ahead.  I can also tell you that the session closed with Goldman’s new 5NC4 fixed rate tranche framed in a 117/115 market or, not coincidentally, 3 bps tighter and effectively absorbing the 3 bps NIC.  The FRNs traded at 3mL+112/ or 5 tighter on the bid side.  All good stuff.

When markets re-open, like they did today, post FOMC and BOJ doldrums, we all like to see big banks pave the way by leading the way and setting the tone. Goldman did just that, but it didn’t stop there.

………and here’s a look at final book sizes and the oversubscription rate:

 

GS Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
FRN 1,250 $2.5b 2x
FXD 2,250 $8b 3.56x


Goldman Sachs Raising the Bar for Diversity and Inclusion Again, and Again

I’m actually having difficulty finding new creative ways to thank the “Fine” crew over at the firm with the Midas touch.  Goldman Sachs’ D&I private eye is Jonny Fine.  He’s nurturing an entire syndicate culture under his watch which is the mandate from the inner sanctum at Goldman Sachs.  Today I had no fewer than 5 hands on deck with me for questions, answers, updates, posts, bulletins, announcements, color…..you name it, they are always there for us on deal day or not, the nation’s oldest SDVBE.  There are just a couple of firms out there that shape their D&I promotions with actionable results on deal day. Goldman is tops. They get it by reviewing and scrutinizing our distribution capabilities. I/we learned years ago to vet only the highest caliber middle market accounts.  It’s a lot of work; it’s a lot of late nights on the DCM front.  Without divulging too much, word-of-mouth as to what we do here at Mischler has resulted in top 25 issuers asking us to put together non-deal roadshows for them. Trust me they are large well-known issuers to all of you.  Other tier I issuers, if you will, have been so impressed with our distribution that they are forming partnerships with us to bring our middle markets accounts to sell “other” products to them, away from new issues.  All because they are hearing about our quality investor base.

Firms like Goldman Sachs and Citigroup, to name another are demanding and they expect results. However, when delivered they help us become the best we can be. They then take us to the next level resulting in the aforementioned opportunities. We take what we do seriously and we WILL NEVER take it for granted. When we are rewarded for that hard work, we apportion some of that toward our give back initiatives to those who served, those who sacrificed, and/or their families and children.  It’s all very circular and one feeds the other. We grow our business; we help wounded veterans, we hire and train veterans returning home after active duty. Case in point: Jonathan Herrick another resident former US Marine who personifies what we’re trying to accomplish here in the bigger picture. We train them to keep them here and make them part of our corporate culture. Quality middle market accounts, such as those MFG client investment managers who count on Mischler’s symbiotic relationships with the 6-pack lead underwriters, like those on today’s Goldman Sachs transaction, represent the best incremental distribution network on the Street.  I’d put these institutional accounts up against anyone else’s and call them the best.  They are here throughout the U.S., Europe, Asia. They are banks, insurance companies, re-insurers, they manage endowments and foundations, they are pension funds, they are RIAs, commercial banks, private wealth managers, SFOs, MFOs, captive insurance, etc.  Thanks to firms like Goldman Sachs among others, we reward their high quality patronage and that’s when they begin transacting treasuries, or equities; ABS and MBS business, agencies and municipals both primary and secondary.

All of it began with a soldier, it grew further thanks to earning a minority certification, and as it flourished it’s been supported by a great operations/back office unit that is as buttoned up as our own front line.  Capital continues to grow with each and every DCM opportunity and we do have award winning debt capital markets coverage and fabulous distribution. So, we get it.  And we really do thank Team Goldman.  Our success is a direct result of what Team Goldman Sachs has done to help us become the best we can be. That is genuine and is delivered from every single employee here to all of you at GS.

Thank you Jonny Fine, James White, Jessica “Jess” Stern and the Fine folks at Team GS Syndicate from Tony Shan to Matt Jackson – you guys are the best, and today’s two new additions Elizabeth Plunkett and Jason Ghilarducci.  The two are learning from the best in the business at 200 West Street.  Leave it on the floor every night and be proud that you’re not only at a great firm,  but you are all part of doing amazing things for social responsibility while working on Wall Street. That IS something to brag about.

IG Primary & Secondary Market Talking Points

 

  • Arch Capital Group Ltd., upsized today’s $25 par PerpNC5 non-cumulative preferred, Series “E” transaction to $450mm from $250mm at the launch and at the tightest side of guidance.
  • For the week ended September 21st, Lipper U.S. Fund Flows reported an inflow of $2.122b into Corporate Investment Grade Funds (2016 YTD net inflow of $35.591b) and a net outflow of $273.5m from High Yield Funds (2016 YTD net inflow of $7.433b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 20 IG Corporate-only new issues was 22.13 bps.
  • BAML’s IG Master Index was unchanged at +142.  +106 represents the post-Crisis low dating back to July 2007.
  • Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at +139.  The “LUACOAS” wide since 2012 is +215. The tight is +135.
  • Standard & Poor’s Global Fixed Income Research was unchanged at +190.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.3b on Wednesday versus $19.1b Tuesday and $17b the previous Wednesday.
  • The 10-DMA stands at $15.4b.

 

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

 

Have a great evening!
Ron Quigley, Managing Director, Head of Fixed Income Syndicate

Above is the opening extract from Quigley’s Corner aka “QC”  Thursday Sept 22 2016 distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest and largest minority broker-dealer owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer, the QC observations is one of three distinctive research content pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.

To receive Quigley’s Corner, please contact Ron Quigley, Managing Director and Head of Fixed Income Syndicate via email: rquigley@mischlerfinancial.com or via phone.

*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones Newswire, IFR, Informa Global Markets, Internal Mischler, LCDNews, Market News International, Prospect News, Standard & Poor’s Ratings Services, S, Thomson Reuters and of course, a career of sources, contacts, movers and shakers from syndicate desks to accounts; from issuers to originators; from academicians to heads of research, and a host of financial journalists, et al.

Mischler Financial Group’s “U.S. Syndicate Closing Commentary”  is produced weekly by Mischler Financial Group. No part of this document may be reproduced in any manner without the permission of Mischler Financial Group. Although the statements of fact have been obtained from and are based upon sources Mischler Financial Group believes reliable, we do not guarantee their accuracy, and any such information may be incomplete.  All opinions and estimates included in this report are subject to change without notice.  This report is for informational purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security.   Mischler Financial Group, its affiliates and their respective officers, directors, partners and employees, including persons involved in the preparation of this report, may from time to time maintain a long or short position in, or purchase or sell a position in, hold or act as market-makers or advisors or brokers in relation to the securities (or related securities, financial products, options, warrants, rights, or derivatives), of companies mentioned in this report or be represented on the board of such companies. Neither Mischler Financial Group nor any officer or employee of Mischler Financial Group or any affiliate thereof accepts any liability whatsoever for any direct, indirect or consequential damages or losses arising from any use of this report or its contents.  “Mischler Financial” Group and the Mischler Financial Group. Article It was a no print day today as corporate debt issuers respected both the impact of the BoJ and FOMC. Corporate Bond Issuers Back Up the Trucks