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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

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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)