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US IG WRAP-Blazing market logs fourth-largest week ever
By Danielle Robinson
NEW YORK, May 7 (IFR) - Eight borrowers were raising US$7.4bn in the high-grade market on Thursday, pushing the week's tally past US$50bn to become the fourth-largest of all time and the third-busiest of 2015.
Boston Scientific's US$1.85bn acquisition financing, Chevron Phillips Chemical's US$1.4bn deal and Anglo American (LSE: AAL.L - news) 's US$1.5bn offering helped push the week so far to US$52.525bn.
It is only the fifth time there has been more than US$50bn priced in the investment-grade market in a single week - and four of them have occurred this year.
Booming M&A and share buyback activity has helped push the year's deal volume to US$519.1bn, well past the US$431.2bn over the same period in 2014.
This week's onslaught, amid renewed Treasury rate volatility, has caused new issue concessions to balloon.
And with some US$80bn or more of new issues forecast for this month, syndicate managers are warning that borrowers should expect higher funding costs to continue.
"We have gone from new issue concessions of 0bp-5bp in March to a weaker environment where NICs are 10bp-15bp," Jonny Fine, head of debt syndicate at Goldman Sachs (NYSE: GS-PB - news) , told IFR.
"The real risk to the market over the course of a busy May for new issues is extreme volatility in Treasuries."
On Thursday Baa2/BBB- rated Anglo American paid as much as 19bp of NIC (NasdaqGS: EGOV - news) on a US$1.5bn trade, while most other issuers paid double-digit concessions.
Apple (NasdaqGS: AAPL - news) paid a 10bp concession on its US$8bn deal Wednesday to finance share buybacks, while Shell (LSE: RDSB.L - news) offered 11bp-16bp on a US$10bn trade.
AbbVie (Xetra: 4AB.DE - news) fared better earlier in the week, with a 0bp-5bp concessions on its US$16.7bn deal, but that was on top of secondary spreads that had already adjusted wider in anticipation of its acquisition financing for Pharmacyclics (NasdaqGS: PCYC - news) .
What a borrower pays in concession will be very name and sector specific, say bankers, and it's likely cell phone chip maker Qualcomm (Swiss: QCOM.SW - news) will command tight pricing on a debut deal of up to US$10bn. Its roadshow is due to end Monday.
Treasury yields rebounded somewhat from a violent selloff on Wednesday, but at 2.178% the 10-year was still about 34bp wider than it was a month ago. The 30-year was trading at 2.906% Thursday afternoon, about 8bp tighter on the day. (Reporting by Danielle Robinson; Editing by Natalie Harrison)
