Air Lease taps primary market; supply slows; high-grade inflows drop; bonds mixed

By Cristal Cody

Tupelo, Miss., May 24 – Air Lease Corp. tapped the high-grade primary market on Friday with a $300 million offering of two-year floating-rate medium-term notes.

Canadian Imperial Bank of Commerce and Toronto-Dominion Bank also priced Canadian dollar-denominated five-year rate reset preferred issues during the session.

Otherwise, market activity stayed fairly quiet on Friday ahead of the early market closure and Memorial Day holiday weekend.

The bond markets closed at 2 p.m. ET on Friday and will reopen on Tuesday.

The Markit CDX North American Investment Grade 32 index ended the session flat to modestly softer at a spread of 65 basis points.

Investment-grade companies priced more than $15 billion of notes over the week, missing syndicate forecasts of about $20 billion to $25 billion supply.

About $15 billion of issuance is forecast for the upcoming short market week, according to syndicate sources.

Inflows declined this week across the high-grade space.

“Flows for this past week ending on May 22 shows that U.S. mutual fund and ETF investors bought the dip,” Yuri Seliger, a credit strategist with BofA Merrill Lynch, said in a research note released on Friday. “As risk assets sold off flows turned positive for both stocks and high-yield bonds. That was funded with high-grade and government bonds, where inflows instead declined.”

Inflows to high grade, which includes corporate bonds, mortgages, agencies and Treasuries, declined to $310 million from $3.65 billion in the previous week.

The short-term high-grade space had an outflow of $220 million, down from a $960 million inflow a week earlier, Seliger said.

Excluding short-term inflows fell to $540 million from $2.69 billion.

High-grade flows were lower for both funds, to $80 million from $1.55 billion, and ETFs, to $230 million from $2.1 billion, according to the report.

Lipper US Fund Flows on Thursday reported corporate investment-grade funds had outflows of $756 million for the week ended May 22, compared to inflows of $2.18 billion in the prior week and $3.3 billion of inflows in the previous week.

In the secondary market on Friday, bank and financial paper traded mostly flat to modestly tighter, while bonds in the energy sector were mostly unchanged, a source said.

Tyson Foods, Inc.’s $1 billion of 5.1% senior notes due Sept. 28, 2048 reopened earlier this year were flat on the day but are trading nearly 30 bps tighter than issuance.

New issues priced this week were mixed in secondary trading with energy names mostly weaker, according to market sources.

Consumers Energy Co.’s $300 million of 3.75% first mortgage bonds due Feb. 15, 2050 (Aa3/A/A+) priced on Wednesday at a spread of 100 basis points over Treasuries softened to the 101 bps bid area.

The electric and gas utility is based in Jackson, Miss.

Ohio Power Co.’s 4% senior notes due June 1, 2049 priced on Monday were quoted weaker at 120 bps bid.

The company sold $450 million of the notes (A2/A-/) at a spread of Treasuries plus 118 bps.

Ohio Power is a Columbus, Ohio-based electricity provider and subsidiary of the American Electric Power Co., Inc.

Air Lease prices $300 million

Air Lease priced $300 million of two-year floating-rate medium-term notes (/BBB/BBB/Kroll: A-) on Friday at par to yield Libor plus 67 bps, according to an FWP filed with the Securities and Exchange Commission.

Wells Fargo Securities LLC was the bookrunner.

Air Lease is a Los Angeles-based aircraft leasing company.

Tyson Foods remains tight

Tyson Foods’ 5.1% senior notes due Sept. 28, 2048 headed out on Friday unchanged at 202.7 bps bid, a market source said.

Tyson priced the $1 billion add-on to the notes (Baa2/BBB/BBB) on Feb. 13 at a spread of 230 bps over Treasuries.

The notes originally priced Sept. 25, 2018 in a $500 million offering at a Treasuries plus 190 bps spread. The total outstanding is $1.5 billion.

The meat and food production company is based in Springdale, Ark.

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