M&A Leads The Way in Day’s Debt Market Issuance: Mischler Comments
March 18, 2015   //   by Mischler MarCom   //   Uncategorised  

Quigley’s Corner 03.17.15

  • Investment Grade New Issue Re-Cap
  • IG Primary Market Talking Points – M&A Deals Lead The Way; Deep Dive Into Credit Spread Calculations
  • Special Announcement:  Mischler Financial Group, Inc. Tribute to Corey Remsburg and the Lead the Way Fund
  • Everything Syndicate & Secondary from today’s debt capital markets

U.S. equity and Treasury markets were up today as domestic manufacturing, production, utilization and housing data was weaker than expected fueling speculation in the nation that rates may stay “lower-for-longer” amidst slower economic growth – the latter which this column has been extolling for a while now!  The IG fixed income primary markets got off to a slower than usual start but still hosted 4 issuers who printed 10 tranches between them totaling $6.70b.  There were no visitors from the SSA space to add to today’s IG total. 

Editorial Correction: Last Friday’s $1.5b Citigroup Inc. SEC registered $1,000 par fixed-to-floating rate non-cumulative PerpNC5 preferred Series “O” priced 5.875% at par after which it floats at 3mL+405.9. I had incorrectly written “fixed until 2020…..then floats at 3mL+429.9.” Apologies for any confusion therein. –RQ

IG Primary Market Talking Points – M&A Leads The Way; Deep Dive Into Credit Spreads– An Interesting Read Folks

  • M&A represented 7 out of 10 tranches today, and 80.60% of today’s IG new issue volume with the well telegraphed “biggie” being the Merck KGaA deal.  The German pharma giant issued a $4 billion five-part thru its EMD Finance LLC. Moody’s “Baa1” rating followed the agency’s one-notch December downgrade of Merck KGaA.  Leverage from Merck’s acquisition will increase to 4.5x from 1.8x.  Hence, order books closed at a very modest $6.1 billion or 1.52-times oversubscribed. Market participants anticipated much stronger demand for this top pharma-linked name. It was the credit story that saw demand slip and a complete absence of spread compression throughout price discovery.
  • APT Pipelines issued a two-part $1.4 billion 10s/20s transaction today, proceeds of which will be used to partly fund the Queensland Curtis LNG Pipeline acquisition. The deal was re-launched and increased to $1.1 billion from $1 billion, but also illustrated another M&A deal that offered no compression at all from IPTs to the launch.
  • Campbell’s Soup also issued today following a 32-month absence from the DCM.  Today’s deal carried lower Moody’s ratings than their prior transaction due to softer sales in the Company’s soups and beverages units.  The agency said ratings could be further pressured in the near future in part due to a more challenging operating environment coupled with potential acquisitions and share repurchases.  The final books on Campbell were $375mm or 1.25x bid-to-cover……..for an issuer that hadn’t tapped the DCM in over two and a half years!  Again, a credit story as opposed to overall market mechanics.
  • The reason for the aforementioned deal color is because investors chimed in today that some deals seemed to be struggling or not quite meeting with the demand that many market participants anticipated.  There are indeed definite signs of indigestion given the back-to-back record $50bn weeks of new product we just came out of.
  • Furthermore, taking a look at last Friday’s secondary trading performance of last week’s IG and SSA new issuance, of the 79 deals that priced, only 39 (49%) tightened versus new issue pricing while 26 or 33% widened and 14 (18%) were flat.
  • A word about spreads – S&P Global Fixed Income Research was unchanged.  A ha!  What gives here readers?  Great question and here’s the answer:  Despite the widening across all four major IG asset classes and 16 of the 19 major industries, S&P’s method for computing spreads is a composite method as opposed to an index so, each series actually runs independently as opposed to the smaller parts being “components” of the “aggregate.”  Therefore with respect to movements in the “AAA”, “AA”, “A” and “BBB” or industry spreads that tend to move in tandem with an investment-grade spread, it doesn’t necessarily have to be the case – it’s all a matter of how the math works out that particular day.  So, while many saw IG Corporate spreads push out 1bp, a widely used S&P Index was flat creating the false expectation of a relatively neutral market.
  • The average spread compression across today’s 10 IG Corporate-only new issues was 3.90 bps from IPTs to the launch.  That’s a 10.23 bps swing from last week’s average 14.13 bps compression across 72 IG Corporate issuers and that’s thanks to the two large M&A related transactions that priced in today’s session.

What’s the net conclusion of all this techno fodder?  Is it a question of market indigestion, or is it more the individual credit stories today?  I believe despite, some indigestion, it IS the latter.

So, it’s business as usual.  This week will be very a very busy as anticipated and today’s several isolated “story” new issues combined with some technical explanations of spread action should serve to extinguish any concern!  This is after all a financial “No Spin Zone!”  I know….I know….. It’s much more fun when I write about Vlad-the-Terrible, but I gotta cover my bases readers!

The WTD and MTD Pace of IG Corporate-only New Issue Volume vs. Syndicate Forecasts


IG Corporate New Issuance This Week’s
Volume Forecasts
vs. CurrentWTD –  $6.70b March
Volume Forecasts
vs. Current
MTD – $108.75b
Low-End Avg. $24.76b 27.06% $124.52b 87.34%
Midpoint Avg. $26.07b 25.70% $125.60b 86.58%
High-End Avg. $27.38b 24.47% $126.67b 85.85%
The Low $20b 33.50% $110b 98.86%
The High $35b 19.14% $150b 72.50%


Special Announcement:  Mischler Financial Group, Inc. Tribute to Corey Remsburg and the Lead the Way Fund. 

As you are all aware, Mischler Financial Group, Inc., is our nation’s oldest Service Disabled Veteran broker dealer.  As such, we of course fulfill the 51% SDVBE ownership mandate….. by a long shot.  In fact, 88% of our firm is owned by West Point graduates who have served their country honorably from our Founder and Chairman, Walt Mischler – who served two tours in Vietnam – to Dean Chamberlain, our CEO who carries inside him a metal shoulder – the results of a parachute jump during his service.  Every May and November – the months of Memorial Day and Veteran’s Day respectively, Mischler Financial donates 10% of its profits to a carefully-selected organization that we believe sets the highest standards and makes the greatest impact in the course of supporting the service-disabled veteran community.  Last Memorial (please check your incoming “QC” dated 5-20-2014 **SPECIAL EDITION**) I wrote about Mischler’s dedication of its profits to the US Army Rangers Lead the Way Fund to help disabled US Army Rangers and their families.

Here is a follow-up to what those proceeds are used for:

A true American hero, Cory Remsburg, who received a two minute standing ovation at the 2014 State of the Union Address, is a U.S. Army Ranger veteran who was severely injured after his numerous deployments.   As my CEO often tells the story at our meetings, his son Jackson Chamberlain became a man when he shook Congressional Medal of Honor winner Cory Remsburg’s bionic hand at the Lead the Way event that Mischler Financial sponsored last Spring.

The Lead the Way Fund was created in memory of Sgt. Jimmy Regan (a former Duke Lacrosse Player who enlisted to become a Ranger).  His father, also named Jim, served as my CEO’s mentor when Dean was a junior trader.  Jim created the Fund with his wife in the memory of their son.  President Barack Obama developed a personal friendship with SFC Remsburg and went out of his way this past Friday to visit Cory at the dedication of his new home built through this wonderful organization that is so dear to all of us here at Mischler Financial.  Please take a few moments to read the article and watch the video.

The video:  http://www.cnn.com/videos/us/2015/03/16/newday-good-stuff-brown-obama-cory-remsburg.cnn

All of us here at Mischler Financial are humbled and yet at the same time honored for our very small part in supporting such a great cause as the Lead the Way fund.  We all thank you for your time to appreciate not only our veterans but to better understand the shared ethos here at nation’s oldest SDVBE.

Below please find a synopsis of all things Syndicate and Secondary, including a deep dive into the day’s data as seen from the perch of Mischler’s Fixed Income Syndicate and Capital Markets desk(s). Have a great evening and remember to put your green on tomorrow.  The “QC” certainly will!

Ron Quigley

Above is the opening extract from Quigley’s Corner aka “QC” Tuesday March 17 edition distributed via email to clients of Mischler Financial, the investment industry’s oldest and largest minority investment bank/institutional brokerage owned and operated by Service-Disabled Veterans.

Cited by Wall Street Letter for “2015 WSL Award, Best Research/BrokerDealer,” the QC observations provide 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 bond new issuance and 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: 203.276.6646

*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, Stone & McCarthy Research, 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 logo are trademarks of Mischler Financial Group. All rights reserved.