By Sebastian Pellejero and Liz Hoffman 

Goldman Sachs Group Inc. bankers were marketing bonds for Verizon Communications Inc. and Exxon Mobil Corp. on Tuesday when investors countered with an offer: If Goldman were interested in raising some cash for itself, they would be interested in buying.

Goldman did just that, issuing $2.5 billion of bonds due in 2030 at 3 percentage points over a government rate. It was a player two ways -- issuer and underwriter -- when the window briefly cracked open for blue-chip companies to raise cash by selling bonds. By Wednesday morning, the window had shut again, with far fewer deals in the market, bankers and investors said.

Companies issued around $28 billion in bonds Tuesday. Exxon sold $8.5 billion and PepsiCo Inc. sold $6.5 billion, and both said they would use the proceeds to pay off shorter-term debt known as commercial paper. There were zero deals on Monday.

The ability of companies -- particularly big, creditworthy ones -- to keep funding their operations is a key measure of the turmoil that has gripped markets in recent days as the coronavirus outbreak worsens. The picture is bleaker for low-rated companies; high-yield bond issuance has virtually stopped.

"Any day the markets are functioning is a good day," said Tom Murphy, head of investment-grade credit at Columbia Threadneedle. "It's a healthy development for investors to get a sense for where paper really clears, and it's good for companies who need access to liquidity."

Former Federal Reserve heads Ben Bernanke and Janet Yellen said Wednesday that the central bank should consider purchasing highly rated corporate bonds, which central banks in Europe, Japan and the U.K. already have done.

The Fed would need to ask Congress for that authority. So far, the central bank has limited its market purchases to government bonds and commercial paper. The moves, unprecedented since the 2008 financial crisis, are meant to provide liquidity and free up banks to lend.

In a sign of worry over whether they will be able to raise fresh debt, big companies are drawing down their credit lines from banks. Borrowers include names hard-hit by the downturn such as Boeing Co., diner chain Denny's Corp., Southwest Airlines Co., Wynn Resorts Ltd. and Marriott International Inc., which on Tuesday started furloughing thousands of employees.

Since March 11, 16 U.S. companies have said they plan to draw down more than $39 billion on their credit lines, according to Bank of America Corp. data.

Just 40 companies with investment-grade credit ratings have sold bonds in March, according to Dealogic, the fewest since at least 2018.

Companies with little cash compared to near-term debt -- a sign that they may need to borrow -- include food processors Archer Daniels Midland Co. and Bunge Ltd., as well as FedEx Corp and truck-rental firm Ryder System Inc., according to Bank of America. The bank itself sold $3 billion of 30-year notes charging around 4% on Tuesday.

Write to Sebastian Pellejero at sebastian.pellejero@wsj.com and Liz Hoffman at liz.hoffman@wsj.com

 

(END) Dow Jones Newswires

March 18, 2020 13:09 ET (17:09 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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