Coronavirus | Wall Street firms to storm primary markets next week
Blue-chip companies are expected to storm primary markets next week, before sales taper in a typical December lull, even as investors focus on a new coronaviruses variant that caused a global rout on Friday.
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Wall Street syndicate desks predict $35 billion of new investment-grade issuance next week and $55 billion for December. Corporate credit was a part of the global markets selloff on Friday with cruise lines, car renters and movie theaters bearing the brunt of the virus mutation fears.
The slump could affect sales if it continues into next week, but so far this year markets have rebounded quickly from any weakness and supply has only taken slight pauses, according to Barclays Plc credit strategist Scott Schachter. He said that trend may continue.
In an interview Friday, Schachter said that issuers likely still need to tap markets before new issue markets hit the normal late December slowdown.
Scott Kimball, head of investments for U.S. fixed income at BMO Global Asset Management said a potential deceleration may be a good thing for investors looking for opportunities in the primary market, which is starting to get sloppy and needs to take a breather. CDW Corp., a IT services company, paid no new issue concessions for $2.5 billion high-grade deal, thanks to demand that peaked at $5 billion.
Kimball said in an interview Friday that it was just a revolving door of new issuance and there hasn't been a generation of enough concessions to participate too broadly.
General Electric Co. said it will buy back $25 billion of bonds, expanding one of the biggest debt repurchases ever, after finding strong demand from investors to sell the securities. As much as $23 billion of securities were sought to be bought back by GE, and it now expects to cut its debt levels by more than 80 billion by the end of the year.
There are no deals currently in the pipeline as sales activity dwindled before Thursday s U.S. holiday. The deteriorating backdrop has recently caused some companies to sell debt before the tone begins to weaken, with yields rising to 4.66% this week -- the highest in nearly a year.
Three meetings for leveraged loans are on the table next week, including an incremental offering for the financial software firm Confluence Technologies Inc. that funds its sponsors takeover of two companies. Food processing tool company Bettcher Industries Inc. is slated to hold a call for a $385 million financing package that supports its buyout by KKR.
Lender commitments are due Tuesday for American Physician Partners $520 million refinancing loan after the company sweetened pricing on the sale, cut its tenor and added financial maintenance covenants. It is expected that debt buyers will be watching for November ISM manufacturing survey results on Wednesday, which will provide a check on whether companies feel the fourth quarter will be the worst for supply chain bottlenecks. Mattress sellers, flooring manufacturers and makers of clean energy equipment are warning that stretched supply chains and runaway freight bills have pushed them to the brink of ruin.
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