U.S. Corporate Bond Sellers Are Preparing an Onslaught of Deals

(Bloomberg) -- U.S. corporate bond markets are primed for an avalanche of sales as companies report earnings after the presidential election dampened issuance last week.

Blue-chip issuers may sell $30 billion in debt this week, including as many as 10 bonds on Monday alone, according to an informal survey of high-grade dealers. It would be the first day with a double-digit deal count since Sept. 29, and a stark turnaround after just one company sold debt last week.

In leveraged finance, a surge of sales may kick off this week ahead of Thanksgiving Day in late November, market participants said. Junk bonds could see a couple of weeks of issuance exceeding $10 billion dollars while more than 20 leveraged loan deals may launch before the holiday.

In high-grade, Waste Management Inc. raised $2.5 billion last week to repay a revolving credit facility, scoring some of its cheapest borrowing costs ever just months after burning investors with a controversial debt redemption. The bonds traded tighter in the secondary market, potentially flashing a greenlight to issuers contemplating deals.

“We have a number of issuers who’ve indicated, if there is stability post election, that they want to come to market and take advantage of the positive technicals and the resilience in spreads,” said Stephen Philipson, head of fixed income and capital markets at U.S. Bancorp.

Corporate earnings continue this week, potentially freeing up companies such as McDonald’s Corp., Walt Disney Co. and Cisco Systems Inc. to sell debt.

Private credit vehicles called business development companies will also report earnings, with $7 billion lender FS KKR Capital Corp. among the pack. Aside from freeing the firms to sell debt, the dispatches will provide a peek into the $850 billion private debt market, which is seeing a decline in loan amendments and a pickup in activity.

Credit rallied last week as the prospect of a Joe Biden presidency and Republican controlled Senate would likely cap any significant regulatory overhauls and limit massive debt-funded stimulus, keeping rates suppressed.

Pacific Investment Management Co. is adding exposure to travel and tourism debt in anticipation of a coronavirus vaccine in the near future, according to Mark Kiesel, chief investment officer for global credit at the $1.9 trillion money manager.

Record-Low Yields

The pipeline for high-yield debt sales was quiet as of Friday, but that could change quickly as opportunistic issuers seek to take advantage of low borrowing costs. As of Friday, yields for junk-rated bonds were just 10 basis points off the record low of 4.83% set in June 2014, according to Bloomberg Barclays index data.

In the leveraged loan market, Centerfield Media has an investor call scheduled on Monday for its $500 million in term loans to help refinance existing debt. Potters Industries LLC also has a call with investors that day for its $390 million offering. Commitments on that deal are due Nov. 19.

Debt sales for Blackstone Group Inc.’s acquisition of Ancestry.com Inc. is among the offerings that could kick off in the coming weeks if the tone in credit markets remains positive.

Finally, in the distressed debt world, the final tender deadline for Revlon Inc.’s bond exchange comes Tuesday, Nov. 10, after investors submitted just over 36% of eligible bonds as of last week.

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