US high-grade deluge finally tapers off

Thu Jan 16, 2014 5:49pm EST

NEW YORK, Jan 16 (IFR) - This week's deluge of new US high-grade issuance slowed to a manageable trickle on Thursday, with just four deals coming to market to raise USD3bn.

Borrowers from the FIG sector dominated again, with Legg Mason issuing USD400m of 5.625% 30-year bonds; Wells Fargo following up its earnings release earlier in the week with a USD1.5bn 3.0% issue of seven-year notes; and New York Life coming with a USD600m FA-backed three-year.

The fourth deal came from Brazilian chemical company Braskem, which priced a USD500m 10-year.

Demand was strong, despite USD36.8bn having priced in the previous three days, with all four receiving good oversubscription and pricing at the tight end of guidance.

"It's been very constructive today, with no sign of indigestion," said one syndicate manager. "And pretty much all deals are trading pretty well."

Brokerage firm Legg Mason (Baa1/BBB) was able to price a USD400m 30-year 42.5bp tighter than its 237.5bp initial price thoughts, at 195bp over Treasuries, after lead managers Citi and JPM built a book of USD2.3bn.

At that pricing the deal came 5-10bp tighter than fair value of 200-205bp, based on Invesco (A3/A-) 5.375% 2043s at T+135bp and adding 65-70bp for the ratings difference.

The deal is its first in the senior unsecured since Legg Mason issued 5.5% 2019s two years ago.

Wells Fargo meanwhile priced USD1.5bn of 3% seven-year notes, maturing in January 2021, at T+75bp from initial thoughts of 80bp area, with USD2.8bn of orders for the self-led trade.

At that level it offered investors a 5bp new-issue concession versus its outstanding 4.6% April 2021s trading at T+15bp bid or G+68-70bp.

New York Life was able to double its FA-backed three-year deal to USD600m, after bookrunners Credit Suisse, Goldman Sachs and JPM built a USD1.25bn book.

The deal was priced at 40bp, from guidance of 40-42bp and initial price thoughts in the high 40s.

Braskem priced a USS500m 10-year, coming flat to its curve after generating some USD5.5bn in demand.

The new 2024 priced at par to yield 6.45% or 360.7bp over Treasuries, the tight end of 6.50% area (+/-5bp) guidance.

With the underlying 2022s trading at a G-spread of around 360bp or a yield of 6.43%, investors garnered a negligible new issue premium.

The deal is being done in conjunction with a tender for more expensive shorter-dated debt, namely its 8% 2017s, 7.25% 2018s and 7% 2020s.

The SEC-registered trade was led by Bradesco, Citi, CA-CIB, Deutsche Bank and HSBC. Standard Chartered Bank was the co-manager. Expected ratings are Baa3/BBB-/BBB-.

The market should be quiet on Friday, as syndicate bankers leave early for a well-earned three-day weekend after the second consecutive week of more than USD30bn in new issuance.

More FIG issuers will surely be coming to market next week.

LEGG MASON

Legg Mason Inc, Baa1/BBB, announced a USD300m SEC registered 30-year senior notes. The notes contain a CoC put at 101. The active bookrunners are Citigroup and JP Morgan. UOP: to repay outstanding borrowings under a five-year term loan facility maturing in 2017. IPT: T+237.5bp area PRICE GUIDANCE: T+200bp area (+/- 5bp) LAUNCH: USD400m (upsized USD300m) at T+195bp PRICED: USD400m 5.625% 30-year (1/15/2044). At 98.435, yld 5.735%. T+195bp. MWC+30bp. 1st pay: 7/15/2014. BOOK: USD2.3bn NIC: negative 5-10bp. Ratings difference versus Invesco: +65-70. = FV of 200-205bp COMP: Invesco (A3/A-) 5.375% 11/2043 T+135bp. + 65-70bp ratings diff = FV of 205bp

WELLS FARGO

Wells Fargo & Co, A2/A+/AA-, announced a USD benchmark SEC registered 7-year senior notes self-led offering. UOP: general corporate purposes. IPT: T+80bp area PRICE GUIDANCE: T+75-80bp LAUNCH: USD1.5bn at T+75bp PRICED: USD1.5bn 3.0% 7-year (1/22/2021). At 99.831, yld 3.027%. T+75bp. 1st pay: 7/22/2014. BOOK: USD2.8bn NIC: 5bp vs 4.6% April 2021s COMPS: 2.15% January 15, 2019 at G+51bp 4.60% April 1, 2021 at G+68-70bp 3.50% March 8, 2022 at G+85bp

NEW YORK LIFE GLOBAL FUNDING

New York Life Global Funding (NYL), Aa1/AA+/AAA, announced a USD300m 144A/RegS 3-year (3/01/2017) FA-backed notes. The active bookrunners are Credit Suisse, Goldman Sachs and JP Morgan. Settle: T+5 (1/24/2014). IPT: high 40s PRICE GUIDANCE: T+40-42bp LAUNCH: USD600m (upsized from USD300m) at T+40bp PRICED: USD600m. Cpn 1.125%. Due 3/1/2017. Ip USD99.787. Yld 1.195%. T+40bp. BOOK: USD1.25bn NIC: flat COMP: 1.30% October 30, 2017 at G+40bp

BRASKEM

Braskem Finance Ltd announced a SEC-registered senior unsecured USD benchmark 10-year via bookrunners Bradesco, Citigroup, Credit Agricole, Deutsche Bank and HSBC. Standard Chartered Bank is the co-manager. UOP: fund tender offer. Settlement date is February 3 2014. Expected ratings are Baa3/BBB-/BBB-. IPT: high 6% PRICE GUIDANCE: 6.50% area (+/-5bp). LAUNCH: PRICED: BOOK: North of USD2bn NIC: COMPS: 5.750% April 15, 2021 at G+360bp 5.375% May 2, 2022 at G+360bp

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