2nd UPDATE: High-Grade Bond Sales Reach $12 Billion For Second Day
March 09 2010 - 5:11PM
Dow Jones News
Companies sold $12 billion in investment-grade bonds Tuesday for
the second day in a row, taking advantage of renewed investor
confidence to raise money to acquire rivals, refinance debts or
repay a government bailout.
Demand was so robust Monday that some companies were able to
borrow more than they had planned or pay less than anticipated. The
appetite for new bonds illustrates how pension funds, insurance
companies and other investors 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, which raised doubts about bonds in general. But
the European Union's steps to address that situation and reports of
economic recovery in the U.S. have revived investors'
confidence.
"There is a cautious perception that sovereign risk has been
somewhat reduced and this gives investors a chance to return to the
market," said Scott MacDonald, director of research at Aladdin
Capital Holdings in Stamford, Conn.
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 include 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 a
five-year note of at least $500 million. Smaller deals from Georgia
Power Co. and Transalta Corp. (TAC, TA.T) were also on tap
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.
Activity wasn't limited to U.S. companies or the U.S. market.
South Korea's Shinhan Bank, the main banking unit of Shinhan
Financial Group (SHG, 055550.SE), raised $700 million in a 5.5-year
bond sale Monday, offering a yield of 4.408%.
-By Romy Varghese and Kellie Geressy-Nilsen, Dow Jones
Newswires; 215-656-8263; romy.varghese@dowjones.com
(Anusha Shrivastava, Prabha Natarajan, Michael Aneiro and Kejal
Vyas contributed to this report.)
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