Three issuers brave high-grade market for US$2.6bn
(Refiles to fix formatting)
By Natalie Harrison, Danielle Robinson and Mike Gambale
NEW YORK, Sept 30 (IFR) - Three corporate borrowers braved
the US investment-grade bond market on Tuesday, getting a warm
welcome from investors after days of volatility soured the tone
for new issuance.
US$2.6bn priced in Tuesday's session amid tighter credit
spreads, and bankers said there should be more deals ahead - and
more strong demand - as long as conditions remain steady.
The CDX IG 22 index tightened by 2bp to 64.5bp, according to
Tradeweb, retracing much of the previous day's losses, while
cash bonds narrowed a couple of basis points and equity markets
steadied.
"If we open up tomorrow and things look steady, more issuers
will definitely look," said one syndicate banker.
The biggest trade of the day came from Triple B rated BAE
Systems, which amassed a US$5bn book for its dual-tranche issue
at the peak before leads narrowed levels.
The 10-year was ratcheted in by 15bp, while the 30-year was
tightened 25bp. Final books were heard around US$4bn.
Leads began marketing the transaction with initial price
thoughts set at Treasuries plus 150bp area for the 10-year, and
180bp area for the 30-year piece.
The US$800m 3.80% 10-year priced at T+135bp and the US$300m
4.75% 30-year at T+160bp. In a positive sign for the market,
they were spotted at 3bp and 1bp tighter, respectively, in the
secondary.
Even (Taiwan OTC: 6436.TWO - news) after significant narrowing during bookbuilding, the
BAE trade offered considerable pick-up to secondaries and
perceived fair value, especially for an industry which has not
seen much in the way of paper.
"There has been minimal new issuance in the defense sector
this year," Morningstar (NasdaqGS: MORN - news) credit analyst Thomas Myhre said.
"With its defensive qualities in a more volatile corporate
bond environment, we view this as an attractive offering."
Comparables include BAE's 6.375% 2019s at a G-spread of
98bp.
Subtract 13bp for that note's high dollar price and then add
40-45bp for the credit curve between five and 10-year
maturities, and fair value looked to be around 125bp-130bp on
the 10-year.
Based on that, the new issue concession appeared to be
around 5-10bp on both tranches, based on IFR calculations,
though the banker put the NIC (NasdaqGS: EGOV - news) closer to 10bp on the 10 and
slightly lower on the 30.
"The important thing is that the demand for all the deals
today was strong. It shows investors still have plenty of cash
to put to work," the syndicate banker said.
Single A rated SC Johnson & Sons Inc raised US$500m from a
no-grow deal that was also split between 10-year and 30-year
slices.
Leads priced a US$250m 3.35% 2024 at T+87.5bp and a US$250m
4.35% 2044 at T+120bp, versus guidance of 90bp area and 125bp
area.
Books were heard to be decent at around US$2.5bn in total,
with concessions estimated at 7.5bp on the 10-year and double
that on the 30-year.
The other deal to price Tuesday was a re-marketed issue for
MetLife Inc (NYSE: MET - news) , consisting of a US$499.924m 3-year and a US$499.924
30-year that attracted a combined US$5.1bn in orders.
GROSS MISCALCULATION
Even with the slowdown in volumes in the past couple of
sessions, September's US$128.718bn issuance tally is the
third-largest month ever, according to IFR data.
Bankers believe issuance will pick up ahead of upcoming
earnings blackouts, and many say Bill Gross's surprise departure
from Pimco may not cause the mass sell-off that some at first
had feared.
"If it was going to happen, it would be happening now in
real time," said one head of credit research at a non-US bank.
Although there could be some pressure in certain parts of
the market caused by outflows from Pimco, one factor which could
temper the impact could be pension funds opting to transfer
their bonds to other funds rather than paid back in cash.
This can be done by using a "redemptions in kind" feature.
"I think the redemptions in kind is a real possibility in
this case," said one head of investment-grade bond research at a
US bank.
But he cautioned there could still be some selling pressure
if Pimco's damage control efforts aren't effective.
BAE SYSTEMS HOLDINGS INC
BAE Systems Holdings Inc (BALN), Baa2/ BBB+/BBB+, announced
a US$ benchmark 144a/RegS 2-part offering that consists of a
10-year (10/07/2024) and 30-year (10/07/2044) senior unsecured
notes. The notes are guaranteed by BAE Systems (LSE: BA.L - news) plc, and contain
a MWC. The active bookrunners include Citigroup (NYSE: C - news) , Deutsche Bank (Xetra: 514000 - news)
and Goldman Sachs (NYSE: GS-PB - news) . UOP: GCP. Settle: 10/07/2014.
IPTs: 10-year T+150bp area, 30-year T+180bp area
PRICE GUIDANCE: 10-year T+140bp area, 30-year T+165bp area.
Area +/- 5bp.
LAUNCH: US$1.1bn 2-part. US$800m 10-year at T+135bp, US$300m
30-year at T+160bp
PRICED: US$1.1bn 2-part total.
- US$800m 3.80% 10-year (10/07/2024). At 99.703, yld 3.836%.
T+135bp. MWC+20bp.
- US$300m 4.75% 30-year (10/07/2044). At 99.477, yld 4.783%.
T+160bp. MWC+25bp.
BOOK: US$4bn total. 10-year: US$2.8bn, 30-year: US$1.2bn
NIC: BAE market cap US$14.89bn, NOC market cap US$27.53bn
10-year: 5-10bp (Subtract 13bp from 6.375% '19 G+85bp. 5/10s
curve worth about 40-45bp, for fair value of G+125-130bp)
OR
(vs. NOC 3.25% 2023, add 25-30bp for difference in market
cap, for fair value of G+125-130bp)
30-year: 5-10bp (10/30s curve 25bp, for fair value of
G+150-155bp)
COMPS:
6.375% June 1, 2019 at G+98bp (US$117)
NOC (Baa2/BBB) 3.250% August 1, 2023 at G+100bp
NOC (Baa2/BBB) 4.750% June 1, 2043 at G+139bp
RTN (A3/A) 2.500% December 15, 2022 at G+81bp
SC JOHNSON & SONS INC
SC Johnson & Sons Inc (SCJOHN), A-/A-, announced a US$500m
(no grow) 144A 2-part offering that consists of a 10-year
(9/30/2024) and 30-year (9/30/2044) senior unsecured notes. The
notes contain a CoC at US$101, a MWC and a 3-month par on the
10-year tranche and a 6-month par call on the 30-year tranche.
The active bookrunners are Bank of America, Barclays (LSE: BARC.L - news) , Citigroup
and Morgan Stanley (Xetra: 885836 - news) . UOP: GCP. Settle: T+3.
IPTs: 10-year: low 100s, 30-year: 10/30s curve worth 25bp
PRICE GUIDANCE: 10-year T+90bp area (+/- 2.5bp), 30-year
T+125bp area (+/- 5bp)
LAUNCH: US$500m 2-part. US$250m 10-year at T+87.5bp, US$250m
30-year at T+120bp.
PRICED: US$500m 2-part total.
- US$250m 3.35% 10-year (9/30/2024). At 99.908, yld 3.361%.
T+87.5bp. MWC+15bp. 1st pay: 3/30/2015.
- US$250m 4.35% 30-year (9/30/2044). At 99.552, yld 4.377%.
T+120bp. MWC+20bp. 1st pay: 3/30/2015.
BOOK: US$2.5bn total.
NIC: 10-year: 7.5bp (10/30s curve worth G+80bp)
30-year: 15bp (vs. 4.00% May 2043 comp of T+105bp)
COMPS:
SCJ (-/A-/A-) 4.000% May 15, 2043 at T+105bp
SCJ (-/A-/A-) 4.800% September 1, 2040 at T+107bp (US$108.5)
KMB (A2/A) 2.400% June 1, 2023 at G+65bp
KBM (A2/A) 3.700% June 1, 2043 at T+95bp (US$92.33)
CL (Aa3/AA-) 3.250% March 15, 2024 at G+68bp
PG (Aa3/AA-) 3.100% August 15, 2023 at G+53bp
PG (Aa3/AA-) 5.550% March 5, 2037 at T+85bp (US$121.9)
EL (A2/A+) 2.350% August 15, 2022 at G+73bp
EL (A2/A+) 3.700% August 15, 2042 at T+105bp (US$91.09)
GIS (A3/BBB+) 3.650% February 15, 2024 at G+105bp
GIS (A3/BBB+) 4.150% February 15, 2043 at T+125bp
SYY (A2/A-) 3.500% October 2, 2024 at G+100bp
SYY (A2/A-) 4.500% October 2, 2044 at T+130bp
METLIFE INC
MetLife Inc, A3/A-, announced a remarketing Series E
2-tranche that consists of US$499.924m 3-year (6/15/2017) and a
US$499.924 30-year (6/15/2044) senior component debentures. The
active bookrunners include Citigroup, Deutsche Bank and Goldman
Sachs, with Credit Suisse (NYSE: CS - news) , HSBC, UBS (NYSEArca: FBGX - news) and WFS as passive
bookrunners. UOP: MetLife, Inc. will not receive any of the
proceeds from the Remarketing. Proceeds from the Remarketing
attributable to the Series E Debentures that are part of
"normal" Common Equity Units.
IPTs: 3-year +90bp area, 30-year +160bp area
PRICE GUIDANCE: 3-year T+80bp area, 30-year T+150bp area.
Area is +/- 5bp.
LAUNCH: US$999.848m 2-part. US$499.924m 3-year at T+75bp,
US$499.924m 30-year at T+145bp.
PRICED: US$999.848m 2-part total.
- US$499.924m 1.903% (post settle) 3-year (12/15/2017). At
100.3053 (clean px), 100.4559 (dirty px). T+75bp.
- US$499.924m 4.721% (post settle) 30-year (12/15/2044). At
100.9382 (clean px), 101.0888 (dirty px). T+145bp.
BOOK: Total book US$5.1bn. 3-year: US$2.9bn, 30-year:
US$2.2bn
Sep Monthly Volumes
Year Volume
2013 $143.903
2014 $128.718
2010 $112.410
2012 $109.251
2007 $85.359
2009 $78.900
2006 $61.409
2011 $52.506
2004 $51.895
2005 $48.920
2003 $47.747
2002 $34.818
2008 $17.580
Top 5 Months All Time
Date Amount
Sep-13 $143.903bn
May-08 $133.929bn
Sep-14 $128.718bn
Nov-12 $125.643bn
Oct Monthly Volumes
Year Volume
2013 $79.189
2012 $81.000
2011 $48.535
2010 $52.618
2009 $51.057
2008 $21.451
2007 $77.269
2006 $57.204
2005 $32.850
2004 $31.218
2003 $39.266
2002 $21.390
(Reporting by Mike Gambale, Natalie Harrison and Danielle
Robinson; Editing by Marc Carnegie)