US CREDIT WEEK: $ 45 billion in high-quality transactions on tap

Wall Street is bracing for a wave of new debt sales next week, with two jumbo deals expected to kick off the busiest high-grade primary schedule since mid-April and high-yield issues are set to experience a break. first half record.

Blue-chip companies could raise between $ 40 billion and $ 45 billion next week, dominated by non-financial companies emerging from voluntary blackout periods. The two jumbo transactions are expected at the start of the week, according to Bloomberg’s Brian Smith. The high-end of the projection is nearly double this week’s supply volume of $ 26.15 billion and would make it the busiest week since record-breaking banking that led to a week of 52. billion dollars in mid-April.

Rates on 10-year U.S. government notes – a benchmark for global borrowing – plunged more than 10 basis points after U.S. job growth significantly underestimated April’s forecast, suggesting that the difficulty in attracting workers is jeopardizing the economic recovery.

While lower yields can boost issuance, especially for borrowers looking to refinance existing debt, uncertainty makes it harder for companies to plan their spending, according to Dominique Toublan, head of US credit strategy at BNP Paribas. HER.

“It was a big miss compared to expectations,” Toublan said in an interview on Friday. “It seems the experts don’t quite understand the dynamics of payroll. Is there anything else we don’t understand?

Related: Northern Trust Relies on Duration on Low Rates for Longer

Record sales

The issuance blitz in the high yielding US primary market seems almost unstoppable, thanks to record borrowing costs and huge investor appetite for risky assets. The offer is around $ 1.5 billion unless it surpasses the current high of $ 210.44 billion set in the first half of 2020.

Chemical manufacturer Polar US Borrower LLC is expected to priced its $ 300 million senior unsecured bond on Tuesday, while a $ 450 million agreement to help finance the acquisition of Club Car by Platinum Equity from Ingersoll Rand may charge Thursday.

In the leveraged loan market, behavioral health software provider Therapy Brands Holdings LLC is set to close its $ 400 million in term loans to support its $ 1.2 billion acquisition by a private equity firm KKR & Co. There is a bank meeting for the $ 1.3 billion term loan from Hilton Grand Vacations to partially support the acquisition of Diamond Resorts International on May 10, as well as a meeting for the additional loan from $ 200 million from Pathway Vet Alliance LLC slated for Thursday.

More opportunistic borrowers could come as investors continue to pour money into U.S. leveraged loan funds, which have seen the the longest positive streak in 19 weeks between February and June 2018. Credit analysts at JPMorgan Chase & Co. revised upwards their supply expectations for US credit, especially leveraged loans. The bank now sees $ 775 billion in full-year leveraged loan issuance and $ 525 billion in high-yield bond sales – increases of $ 500 billion and $ 150 billion, respectively.

“Leveraged credit issuers are capitalizing on record yields in 2021 at an unprecedented rate as the rapid recovery in the global economy and the Fed’s easy monetary policy boost demand for high yield bonds and leveraged loans, ”strategists including Nelson Jantzen and Eric Beinstein wrote in a report Friday.

In the event of a credit in difficulty, the offer to purchase The bankruptcy of Hertz Global Holdings Inc. is coming to a head with an auction scheduled for Monday. A group of investors including Centerbridge Partners have prepared a new offer to counter the one currently chosen by the company, backed by Knighthead Capital Management and Certares Management, Bloomberg reported.

Also Monday, the cosmetics giant Ron Perelman publishes the results of the first quarter followed by a call to investors. Sequential Brands Group faces a forbearance deadline that day. Later this week, the forbearance agreement of mall owner Washington Prime will expire on May 12 pending another extension.

– With the help of Gowri Gurumurthy, Katherine Doherty and Jeannine Amodeo

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