US CORP BOND WRAP-Quiet primary sees more acquisition financings

By Natalie Harrison and Davide Scigliuzzo

NEW YORK, June 16 (IFR) - US corporates such as Cardinal Health and TI Automotive pushed ahead with bond deals backing acquisitions on Tuesday in a bid to lock in cheap rates before credit spreads widen even further.

Financial markets were steadier on Tuesday, but after two weeks of volatility - sparked by fears of a Greek default and nervousness around a Fed rate rise - credit spreads are now significantly wider than their post credit-crisis lows.

Spreads on Triple A and Single A corporates reached 2015 highs of Treasuries plus 76bp and 90bp respectively on Monday and are around 30bp higher than their post crisis lows, according to Bank of America Merrill Lynch data.

In high-yield, the widening has been more dramatic with average spreads moving 22bp over the past 10 days to T+471bp, although they remain below highs of 542bp seen in January.

Still, with a Fed hike nearing and potential fallout from Greece, bankers are advising clients to move now.

"Rates are usually a reason to go to market faster," said one senior leveraged finance banker.

"New (KOSDAQ: 160550.KQ - news) issues are going slow, but as many companies have pushed out 2015-2017 maturities, they can be patient. The deals you will see are those that have to get done."

Cardinal Health (NYSE: CAH - news) is looking to raise US$1.5bn to finance its purchase of Cordis and the Harvard Drug Group with a three-tranche issue split between three-, 10- and 30-year tranches.

The deal is the biggest of four high-grade deals due to price today, including from Union Pacific Corp, PacifiCorp and Valley National Bancorp (NYSE: VLY - news) .

Just two deals are pricing in the high-yield market today, but another banker said activity should pick up after the FOMC statement on Wednesday. Rates are not expected to be raised, but a move is inevitable by the end of the year, analysts say.

Split-rated IPALCO Enterprises has set price talk of T+185bp area on a US$405m five-year issue, while mortgage insurer Radian Group is due to price a new US$300m deal.

At initial price talk of 5.125%-5.25% on the new five-year unsecured bond, Radian is seen offering a generous premium over its own curve, where its 5.5% 2019 unsecureds were spotted trading at a yield of around 4.6% mid-market, MarketAxess shows.

Auto part maker TI Automotive also announced a US$550m high-yield bond, which along with new loans, will finance its US$2.5bn buyout by private investment firm Bain Capital, announced back in January. The bond is due to price next Wednesday after a week-long roadshow.

Some deals with more aggressive use of proceeds have also surfaced in the leveraged financed markets - a sign that confidence is still fairly high.

First Advantage, for example, has revived a loan deal it pulled in November to finance a dividend to its private equity sponsor Symphony Technology Group on the back of reverse enquiry from investors, the banker said.

Meanwhile, recent new issues are performing well.

Sealed Air's new 10-year bond, for example, the longest-dated note priced in the US high-yield market last week, was spotted trading at 101.25 on Tuesday, while ATS Automation's eight-year issue was quoted at 101. Both notes priced at par. (Reporting by Natalie Harrison and Davide Scigliuzzo; Editing by Shankar Ramakrishnan)