Ironshore Holdings plans 10-year notes sale, volatility remains in primary; BP bonds 'crushed'

By Andrea Heisinger and Cristal Cody

New York, May 4 - Fears coming from various fronts kept the investment-grade bond market empty on Tuesday, continuing the sluggish start to the week.

Ironshore Holdings (U.S.) Inc. announced a $250 million sale of 10-year notes that's expected to price on Wednesday, a source said.

Only one deal has priced so far this week - 4.9% seven-year senior unsecured notes from Lennox International Inc. - and it totaled $200 million. Spreads have continued to tighten in the market, but it hasn't led to more issuance.

Among the things contributing to volatility were worries about Greece, the financial sector and the cost and economic impact of the oil spill in the Gulf of Mexico.

"No one's going to issue until some [of this] is cleaned up," a source said of the volatility.

High-grade bonds weakened on Tuesday under the weight of concerns about European and Greek debt and weaker stocks.

"Corp spreads were definitely wider," one trader said. "Risk is out of fashion, for today anyway."

The CDX Series 14 North American high-grade index eased 8 basis points, a "big move for that index," a source said.

The CDX 14 moved out to a mid bid-asked spread level of 98 bps, a market source said.

In secondary trading, BP plc's high-grade debt was weaker on the massive Gulf of Mexico oil spill, and the financial sector overall widened, sources said.

Financials were "weak," one trader said. "It feels like we found a little bit of a floor as the day went on, nothing to write home about, but the bleeding did stop."

Overall Trace volume ended the day up more than 40% at nearly $12 billion, according to one source.

Meanwhile, Treasuries were tighter on concerns about Greek sovereign debt.

The yield on the 10-year benchmark Treasury note ended Tuesday 10 bps tighter at 3.59%. Also, the yield on the 30-year Treasury bond tightened 12 bps to 4.41%.

Ironshore plans 144A offering

Ironshore Holdings (U.S.) announced a $250 million sale of 10-year guaranteed senior unsecured notes, a market source said. Pricing is expected for Wednesday.

The notes (Baa3/BBB-) will be sold under Rule 144A and are guaranteed by parent company Ironshore Inc.

The bookrunners are Barclays Capital Inc. and Bank of America Merrill Lynch.

The U.S. arm of the commercial insurance company is based in New York.

Primary remains volatile

New bonds were nowhere to be seen on Tuesday as there was no improvement in the high-grade primary.

The tone was "in the toilet," a syndicate source said. It's unclear if issuance will pick up in the next couple of days.

"It depends on what happens," he said. If conditions are not good at the top of the day, it's unlikely new deals will price for the day.

Earnings season is "basically over," a source said, meaning that more companies can issue.

Strong earnings from several companies had pushed others into the investment-grade market, but that push is largely over. Now other factors are pushing them out, like the PIIGS and the financial and banking sector.

Although it was mostly the stock market that suffered for the day, jitters spread into the credit market.

"We're just sitting around," a source said of the slow flow of deals.

Financials wider

European debt concerns weighed on trading in high-grade bank paper early Tuesday, including from Goldman Sachs Group, Inc., according to sources.

"Goldman's out 15 to 20 basis points, Morgan Stanley's [benchmark 10-year notes] out 10," a source said. "The more off the run they are, the less they're moving."

Trading was thin over the day, sources said.

"It's been fairly quiet here as well. A lot of people are watching the stock market and what's going on with Greece," a trader said in the late afternoon. "It's a thin market right now."

BP bonds move out

Meanwhile in the secondary, the oil spill in the Gulf of Mexico is wreaking havoc on BP's bonds and other industrials, a source said.

"BP bonds are getting crushed," the source said. "Drilling companies are getting hammered."

BP's notes due 2020 moved out about 25 bps, the source said.

The White House said Tuesday that it will work to lift BP's liability limit on how much BP pays for other damages caused by the oil spill, such as lost wages and tourist revenue.

BP is a London-based fuel company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.