Weekly Bond Issuance Nears Record, Coke Selling Subordinated-Libor Notes

The weekly record for high-grade corporate bond issuance is within reach but unlikely to be broken just yet, while Coca-Cola Co. (KO) is on track to price part of a three-part deal below the three-month London interbank offered rate, or Libor.

A little more than $4.8 billion would have to be sold Friday to break the $42.9 billion record set in March 2009, according to data provider Dealogic. The weekly tally as of Thursday was $38.1 billion, the fifth-largest in records going back to 1995.

Coke is the only benchmark-size offering in the U.S. credit markets. It jumped into the market to repay commercial paper just after the monthly U.S. employment report beat consensus expectations, spurring a rally. Markit's CDX North America Investment-Grade Index, a measure of the health for the market, improved 1% following the report.

As companies race to the markets to take advantage of record-low financing costs, estimates for monthly issuance are as high as $100 billion for this month. In February, the market absorbed $99 billion, breaking a record for that month, according to Dealogic.

Coke's three-part bond issue features two-year floating-rate notes, and three- and six-year fixed-rate notes. A size hasn't been determined but the deal has received more than $4 billion of orders, according to a person familiar with the matter.

Early pricing guidance suggests the FRNs have so much demand they might be sold at 0.02 to 0.05 percentage points below the three-month London interbank offered rate, or Libor, which is currently 0.474%.

"It's obviously not common" for a deal to price below Libor, said an underwriter working on the deal, "but Coke is seen as an ultra-quality credit."

Procter & Gamble issued $1 billion of FRNs last month for 0.08 points below Libor.

Pricing guidance on Coke's three- and six-year notes is 0.35 points and around 0.82 points above Treasurys, according to a person familiar with the matter.

The fixed-notes are seeing "large interest" comparable to the PepsiCo Inc. (PEP) and TransCanada Corp. (TRP, TRP.T) deals sold in recent weeks, said portfolio manager Jesse Fogarty at Cutwater Asset Management.

"Investors continually are searching for yield in the front-end to supplement the miniscule Treasury yields," he said. "We are buying the three-year fixed deal for some of our high quality accounts where we can pick up some additional yield while not taking on much credit risk."

The Coke notes are expected to be rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.

Also in the high-grade market, Marriott International Inc. (MAR) is adding $200 million to an outstanding issue of 3% coupon bonds due 2019. Pricing guidance is 1.72 percentage points over Treasurys.

-By Patrick McGee, Dow Jones Newswires; 212-416-2382; patrick.mcgee@dowjones.com

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