US Credit Markets Absorbed $3.33 Billion Of New Issuance Monday
November 28 2011 - 8:21PM
Dow Jones News
Corporate-bond issuers were able to take advantage of favorable
market conditions in the U.S. Monday before newfound optimism
fizzled out in the afternoon.
No fewer than seven deals hit the U.S. credit markets as issuers
waiting for an opportune moment finally got their chance to meet
investors willing to take some risk.
High-grade new issuance totaled $3.33 billion Monday. Last week,
due to heightened concerns boiling in Europe and a holiday
interruption, no high-yield borrowers had entered the primary
market.
One syndicate manager said more deals are ready in the pipeline
for the remainder of this week, but he noted credit didn't perform
as well as equities Monday, so it is unclear how much will come
through the system.
"I imagine we're back in day-to-day mode for the time being," he
said.
Tesco PLC (TSCO.LN, TSCDY), the UK retail-grocery giant, was the
largest corporate issuer Monday with a $1 billion private
placement. The two-part borrowing included 2% coupon, three-year
bonds priced to yield 2.036%, reflecting a risk premium to
Treasurys of 165 basis points, and 2.70% coupon, five-year notes
priced to yield 2.723%, offering a spread of 180 basis points over
Treasurys. A basis point is one-hundredth of a percentage
point.
The bonds were rated A3 by Moody's Investors Service and A-minus
by Standard & Poor's and Fitch Ratings.
Knoxville, Tenn.-based Scripps Networks Interactive Inc (SNI)
marketed $500 million in five-year notes priced to yield 2.726%,
for a risk premium to Treasurys of 180 basis points, according to a
person familiar with the deal.
Canadian Pacific Railway Co. (CP, CP.T) sold a $500 million deal
evenly structured with 10-year and 30-year maturities. The 10-year
portion was sold at 2.75 percentage points over Treasurys and the
30-year bonds were being sold at 3.0 percentage points over
Treasurys, according to a person familiar with the deal.
Long-term investors also mopped up a rare 50-year bond deal from
DTE Energy Co. (DTE). The bonds featured a 6.50% coupon. Favorable
conditions allowed the Detroit, Mich., electric-and-natural-gas
provider to borrow $280 million, compared with an original
projection of $150 million.
The bonds are junior subordinated debentures due in 2061, with
credit ratings of Baa3 from Moody's Investors Service, an
equivalent BBB-minus from Standard & Poor's, and a BB-plus
rating--just below investment grade--from Fitch Ratings.
National Fuel Gas Co. (NFG) increased the size of its 10-year
bond offering by $150 million to $500 million. The 4.90% coupon
bonds were priced to yield 4.917%, a spread to Treasurys of 295
basis points.
According to data provider Dealogic, that coupon is the lowest
ever on a 10-year deal for National Fuel.
Other deals in Monday's market included a $250 million offering
from PG&E Corp. (PCG), also known as Pacific Gas &
Electric, which priced 30-year bonds at a yield of 4.521%--its
lowest ever for that maturity.
AGCO Corp. (AGCO) also sold $300 million of 5.875% coupon bonds
maturing in 10 years, at par. That too is the issuer's lowest yield
ever at that tenor, according to Dealogic.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382;
patrick.mcgee@dowjones.com
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