Morning Commentary: Ford Credit leads off 2023 primary as junk opens flat on Tuesday

By Paul A. Harris

Portland, Ore., Jan. 3 – Ford Motor Credit Co. LLC kicked off the new year with a benchmark offering of senior notes with three-year and seven-year maturities (expected ratings Ba2/BB+/BB+).

The public deal includes fixed- and/or floating-rate notes due March 6, 2026, with initial guidance in the 7 3/8% area.

The offering also includes fixed-rate notes due March 6, 2030 with initial guidance in the 7¾% area.

The benchmark offering was heard to be playing to $6 billion of demand across all tranches, according to a sellside source.

Coming on the heels of an ultra-quiet December in the new issue market, Ford's offering will be playing to high-yield investors with ample or better cash to put to work, the source remarked.

The existing Ford Motor Credit 7.35% senior notes due November 2027, which priced Nov. 1 in a deal sized at $1.5 billion, were basically unchanged at 102½, yielding around 6¾%, on news of the new offering, the sellsider said.

The junk bond market opened unchanged to slightly better on Tuesday, sources said.

With the S&P 500 stock index down 0.74% at mid-morning, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was incrementally higher at $73.71, up 0.08%, or 10 cents.

The last big liquid junk bond deal of 2022 was basically unchanged from the old year, according to the sellsider, who spotted the Chart Industries, Inc. 7½% senior secured notes due January 2030 (Ba3/B+) in the context of 101, in odd lot trading.

The $1.46 billion tranche priced at 98.661 to yield 7¾% on Dec. 8.

Meanwhile, the source spotted the Chart Industries 9½% senior notes due January 2031 (B3/B) inactive at 102.

The $510 million tranche priced at 97.949 to yield 9 7/8% on the same day.

Fund flows

High-yield ETFs saw $326 million of daily cash inflows last Friday, according to a market source.

Actively managed high-yield funds sustained $157 million of outflows on that day.

During the past two weeks the combined funds saw $103 million of net inflows, according to the market source.

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