High-grade supply quiet; credit spreads ease; Japan Finance starts roadshow; Desjardins eyed

By Cristal Cody

Tupelo, Miss., Jan. 27 – Investment-grade issuers stood down on Monday with no corporate or sovereign, supranational and agency issuance reported priced during the session as credit spreads widened.

Syndicate sources attributed the lack of bond supply to growing concerns over a deadly coronavirus that’s spread from China.

The Markit CDX North American Investment Grade 33 index softened to a spread of 49.45 basis points from 46.7 bps on Friday.

Stocks closed down more than 1% with the Dow Jones industrial average off by 1.57%, while Treasury yields fell on risk-off demand.

About $20 billion to $25 billion of high-grade volume was forecast for the week with front-loaded bond issuance expected ahead of the Federal Reserve’s monetary policy decision due on Wednesday, according to syndicate sources.

More than $17 billion of high-grade corporate bonds were priced last week, bringing year to date issuance to over $100 billion.

No rate changes are anticipated from the Federal Reserve at the January meeting, sources report.

One high-grade deal was reported on Monday.

Phoenix Group Holdings plc will issue $750 million of fixed-rate perpetual restricted tier 1 contingent convertible notes to help finance its £3.2 billion acquisition of ReAssure Group plc.

Meanwhile on Monday, Japan Finance Organization for Municipalities (A1/A+/) kicked off a roadshow for a dual currency bond deal that includes Rule 144A and Regulation S dollar-denominated green bonds and a debut offering of euro-denominated notes.

J.P. Morgan Securities plc, Mizuho Securities Co., Ltd., Merrill Lynch International and Barclays are the bookrunners.

Also, a possible offering from Federation des caisses Desjardins du Quebec (A2/A+/AA-) is being eyed, according to market sources.

DBRS on Friday assigned a rating to the company’s nonviable contingent capital subordinated debt (DBRS: A).

The Federation, a Montreal-based organization that supports the Desjardins caisses, completed a U.S. roadshow on Wednesday via Goldman Sachs & Co. LLC and RBC Capital Markets, LLC.

Elsewhere in the secondary market, high-grade bonds were mostly flat to wider on the day, a source said.

Charter Communications, Inc.’s 4.8% senior secured notes due March 1, 2050 eased another 2 bps on Monday after softening about 10 bps on Friday.

Phoenix Group prices $750 million

Phoenix Group Holdings priced $750 million of fixed-rate perpetual restricted tier 1 contingent convertible notes (//BBB-) at par to yield 5.625%, according to an offering memorandum on Monday.

The interest rate will reset April 26, 2025 and every following fifth year at the CMT rate plus 403.5 bps.

Joint lead managers were BofA Securities, Inc., Citigroup Global Markets Ltd., HSBC Bank plc, J.P. Morgan Securities plc and Natixis.

Phoenix Group Holdings is a London-based insurance service provider.

Charter softens

Charter Communications’ 4.8% senior secured notes due March 1, 2050 (Ba1/BBB-/BBB-) eased about 2 bps to 230 bps bid on Monday, a source said.

Charter reopened the notes on Dec. 2 in a $1.3 billion add-on at 101.964 to yield 4.677% and a spread of Treasuries plus 240 bps.

Charter originally sold the notes in a $1.5 billion offering on Oct. 15 at 99.436 to yield 4.836% and a spread of Treasuries plus 260 bps. The total outstanding is $2.8 billion.

The notes were issued through subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp.

The broadband communications company is based in Stamford, Conn.

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