Four bonds hit market as AB InBev jumbo bond looms

By Hillary Flynn

NEW YORK, Jan 11 (IFR) - Four investment-grade borrowers hit the US primary bond market on Monday, taking advantage of better tone and tighter spreads - and jumping in ahead of an awaited mega-deal soon from AB InBev.

The maker of Budweiser, Stella Artois and Corona began holding investor calls Monday for what is expected to be the largest bond ever at some US$50bn-$60bn.

"I don't expect issuers really to try to compete with AB InBev," one syndicate banker told IFR.

"The guys wanting to come later this week on Tuesday, Wednesday or Thursday are probably a little upset that they weren't able to come today."

Texas oil and gas name EOG Resources (NYSE: EOG - news) stepped in with the first energy-related trade of the year, with IPTs of T+210bp-220bp on a 10-year and T+225bp-235bp on a 20-year.

As its outstanding 10-year 3.15% 2025 bonds are trading at about G+150bp, the issuer looked to be offering a very high new issue concession of 60bp.

"EOG is starting fairly wide to its secondaries, but that's a function of the oil and gas space," the banker said.

"The fact that they're the first energy/utility company to come this year (means) they're going to be conservative."

Monday's other offerings were five-year senior unsecured bonds from Royal Bank of Canada (LSE: 0QKU.L - news) and Rabobank, and a US$600m two-parter of three and seven-year bonds from Ecolab (NYSE: ECL - news) .

The broader market tone was improved after last week's rout in equities, with stocks opening higher before trading slightly down by mid-morning.

On the credit side, the CDX IG25 index was 0.8bp tighter at 98.4bp, while the equivalent high-yield index was up 0.2 points to 99.225, according to Tradeweb.

All of the eight deals that priced on Friday as markets began to make a comeback were also trading at least 1bp-2bp tighter in secondary.

Syndicate desks expected US$25bn-$30bn of issuance this week, but a mega-trade from AB Inbev to help fund its SABMiller (Amsterdam: MI8.AS - news) acquisition would put those numbers through the roof.

The brewer has hired Bank of America Merrill Lynch, Barclays (Swiss: BARC.SW - news) and Deutsche Bank (Other OTC: DBAGF - news) to hold calls with investors on Monday and Tuesday. (Reporting by Hillary Flynn; Editing by Natalie Harrison and Marc Carnegie)