U.S. primary debt markets will be wide open next week as investors readily take the announcement of the sell its portfolio of corporate bonds purchased through an emergency lending facility during the pandemic.
The supply of quality bonds is expected to increase for the remainder of the month, after $ 20.25 billion sold in the shortened holiday week. June estimates center on $ 110 billion of fresh supply. In riskier new issues, monster leveraged buyouts come back and bring with them some important deals in the leveraged loan market.
Citigroup Inc. strategists say the Fed’s presence continue to be felt through the corporate credit markets, even though it is formally pulling out of its small corporate bonds.
“Credit facilities in the primary and secondary markets are a model for future shocks,” wrote the strategists led by Daniel Sorid. “The Fed thus retains an invisible presence in the corporate bond market which investors value at around 30 basis points at the index level.”
Risk premia barely budged after the Fed’s announcement this week, with the decision to unwind the program being “another sign of the strength of the corporate bond market, not a signal of a broader view of downsizing asset classes, ”according to Barclays Plc strategist Brad. Rogoff.
The leveraged financial market will kick off next week with a call to lenders on Monday to Culligan International Co.’s $ 2.25 billion term loans to finance its takeover by BDT Capital.
A call is also set for Monday for $ 1.5 billion from Quikrete Holdings Inc. term loan that was postponed in April. The commitments mature on June 10 for the loan, which will partially finance the acquisition by the concrete supplier of Forterra Inc. Hertz Global Holdings Inc. reach out to investors next week with $ 1.65 billion in term loans to fund the car rental company’s reorganization plan.
The US high yield bond pipeline is calm at the start of the week. The riskiest segment of the junk food market, CCCs, has been recently resilient, even in the face of retail cash outflows. A steady rally for CCCs could continue to encourage riskier issuers to issue new debt, like the Canadian aircraft maker Bombardier Inc. which was able to increase the size of its new bond sale this week.
All eyes will be on AMC Entertainment Holdings Inc.’s C-rated debt, which has been boosted by the retail stock trading mania. Its second ranking bonds at 12% have risen above par this week, a stunning return from their low of just 5 cents on the dollar last November.
Retail investors continue their series of adding money to high quality funds and removing them from high yields. Premium American corporate funds reported inflows of $ 1.72 billion in the week ended June 2, according to Refinitiv Lipper. The unwanted funds recorded an outflow of $ 384.7 million.
Within troubled debt, Sequential Brands Group, owner of brands including Jessica Simpson, has a default waiver until Tuesday, June 8, when it is required to provide first quarter financial statements. Washington Prime Group’s forbearance agreement expires the next day, June 9, pending another extension for the mall operator.
– With the help of Katherine Doherty, Lara Wieczezynski, Gowri Gurumurthy and Jeremy Hill