High-quality US $ 20 billion bid expected next week


(Bloomberg) – The supply of higher quality bonds is expected to remain stable next week, as companies are drawn by tight spreads and strong investor demand.

Union offices are asking for $ 15 billion to $ 20 billion in new, high-quality securities, a higher percentage from private issuers after this week’s bid was dominated by banks.

This does not mean that the banks will not be represented. Much like the increase in issuance that followed the release of results three months ago, financial institutions should continue to borrow. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. have yet to sell any new bonds after reporting second quarter results. JPMorgan could be the next big bank to issue debt, according to Arnold Kakuda, senior financial analyst at Bloomberg Intelligence.

Read more: Wall Street banks take on more debt as balance sheets inflate

Borrowing conditions remain favorable. The benchmark 10-year Treasury yield fell for the third week in a row, pushing all-in financing costs even lower for high-quality companies that have enjoyed cheap debt year-round. Meanwhile, investment grade bond spreads have remained for weeks near the tightest level since before the Great Financial Crisis.

“A common theme in credit markets in recent months has been the lack of volatility,” Barclays Plc strategists led by Bradford Elliott wrote on Friday.

In the coming months, investors should watch for the possibility that higher rates will affect the composition of the credit supply. A rate hike is likely to shift the new bond offering to shorter durations and encourage floating rate trading, Bank of America Corp. strategists wrote Thursday. led by Hans Mikkelsen.

“The higher rate outlook means even more upfront and floating rate offers in the second half of 2021,” Mikkelson wrote.

High efficiency

Carnival Corp. seeks to reduce borrowing costs by selling new junk bonds to refinance debt sold during the height of the pandemic at nearly triple the current cost. The cruise line’s new offering could be sold as early as next week, and early price talks are in the range of 4% to 4.125%, according to people familiar with the transaction.

The proceeds will fund a take-over bid, launched last week, to buy back up to half of Carnival’s $ 4 billion in three-year guaranteed notes with a whopping 11.5% coupon.

Meanwhile, McGraw-Hill Education Inc. is expected to sell $ 1.15 billion in junk bonds and a $ 1.15 billion leveraged loan to fund its buyout by Platinum Equity LLC. The bond documents include unusually aggressive provisions that will make it easier for the textbook company to get into debt on future acquisitions.

Regarding leveraged loans in the United States, a call to lenders is expected Monday for the $ 3.5 billion term loan from Pilot Travel Centers LLC to refinance debt and finance the buyout of preferred stakes in circulation.

Commitments due next week for Whataburger LLC’s $ 2.3 billion term loan to refinance existing debt and Verizon Media’s $ 1.5 billion term loans to fund its acquisition by Apollo Global Management .

In credit trouble, GTT Communications Inc.’s forbearance agreement with lenders is due to expire on Tuesday. The company is seeking creditors’ support for a planned bankruptcy filing and is discussing a plan that would give its junior bondholders equity in a reorganized company.

Exela Technologies, the latest leveraged firm to tap hot stock markets, said it had listed options contracts on NYSE Arca as of July 16. The company recently launched a stock offering that raised $ 85 million and reduced debt.

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