UPDATE: High-Grade Bond Sales Reach $12 Billion For Second Day
March 09 2010 - 3:57PM
Dow Jones News
Highly rated companies offered over $12 billion in new bonds
Tuesday, after a $12 billion day Monday, as they take advantage of
low borrowing costs and investor appetite.
Indeed, a couple companies boosted the amount offered, and most
deals saw orders exceeding their size. Robust demand allowed some
companies to offer investors a smaller risk premium--less
compensation over risk-free Treasurys--than forecast when the deals
first came to market. Still, investors, as concerns over European
risk ebb, are eager for highly-rated bonds yielding more than
government securities.
"All in yields are extremely low, spreads are relatively
attractive and almost everyone expects rates to move higher
eventually," said Tom Murphy, portfolio manager at RiverSource
Investments in Minneapolis. "With corporate America seemingly more
sanguine about their business prospects, why not borrow to invest
for growth?"
New bond sales had slowed recently amid concerns over Greece's
fiscal position. But amid steps to address that situation, and as
reports continue to show economic recovery in the U.S., investors
are feeling more confident.
"Following a period of relative inactivity in the new issue
market, we have witnessed a resurgence of investor demand largely
driven by clarity and relief regarding Greece and its finances, a
supportive equity market and improving underlying technicals in the
corporate market," said Peter Aherne, head of North America Capital
Markets at Citigroup.
The largest deal Tuesday came from Swiss pharmaceutical giant
Novartis AG (NVS), which increased its three-part offering to $5
billion from $4 billion. Proceeds will finance its acquisition of a
52% stake in eye-care products maker Alcon from Nestle SA (NSRGY,
NESN.VX), according to the prospectus.
Other deals included Royal Bank of Scotland Group PLC's (RBS,
RBS.LN) $2 billion note, Amgen Inc.'s (AMGN) $1 billion bonds,
American Honda Finance's $1 billion issue, and Anadarko Petroleum
Corp.'s (APC) $750 million 30-year.
Real estate investment trust ProLogis (PLD) was also marketing
$1.1 billion in notes in order to pay down its debt. Denmark's
largest bank, Danske Bank AS (DNSKY, DANSKE.KO), was offering $750
million. Smaller deals from Georgia Power Co. and Transalta Corp.
(TAC, TA.T) were sold Tuesday.
Meanwhile, Citigroup Inc. (C) is offering about $2 billion in
$25 par 30-year trust preferred securities, or TRUPs, as part of
its agreement with regulators on repaying federal bailout
funds.
Guy LeBas, chief fixed-income strategist at Janney Capital
Markets in Philadelphia, said the tone in the corporate market is
"good" and pointed out that deals sold on Monday have also
performed well in the secondary market.
Brighter tone has extended to the high yield market, where
smaller deals have been in vogue for the past several days,
punctuated by an occasional larger issue, such as MGM Mirage's
(MGM) $845 million offering of senior secured 10-year notes,
announced on Monday.
Also on Monday, Building Materials came to market with $325
million in 10-year notes, and Sonic Automotive Inc. (SAH) said it
would sell $210 million of eight-year notes.
-By Romy Varghese, Dow Jones Newswires; 215-656-8263;
romy.varghese@dowjones.com
(Anusha Shrivastava, Prabha Natarajan and Michael Aneiro
contributed to this report.)
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