Hot high-grade keeps up momentum with near USD9bn day

Tue Apr 1, 2014 6:34pm EDT

NEW YORK, April 1 - Financials and utilities dominated a busy day in the US high-grade market on Tuesday, with nearly USD9bn raised in what continue to be virtually perfect conditions for borrowers.

With earnings blackout periods looming for corporates, eight issuers seized the moment to price USD8.8bn in new issuance, pushing the week's two-day total to a hefty USD13.425bn.

Highlights included a 100-year bond by Massachusetts Institute of Technology and a USD2.5bn offering of 10 and 30-year securities by Saudi Electricity that saw almost USD13bn of orders.

Strong demand also followed Union Electric d/b/a Ameren Missouri, which saw some USD2bn of orders at the peak for just USD350m of 10-year notes.

The securities priced tighter than the T+83bp level at launch on higher-rated (Aa2/A/A+) MidAmerican Energy Co's 10.5-year transaction the day before.

On the FIG side, Deutsche Bank, Citigroup and NY Life Global Funding pounced on a surge of demand for investment-grade bonds to price senior unsecured transactions at aggressive levels.

Dovish comments from new Federal Reserve chairwoman Janet Yellen on Monday combined with a booming equity market, end of quarter buying, low dealer inventories and diminished supply heading into earnings blackout periods to create ideal issuance conditions.

"Things are just flying off the shelf again," one head of debt syndicate told IFR. "The strength of deals today is just reflective of the markets over the past few days."

Deutsche Bank (A2/A) was able to price a US$1.25bn tap of its outstanding 2.5% February 2019s, considerably larger than what was first expected.

The bank was first thought to be coming with a deal of around US$500m-US$1bn maximum, with initial price thoughts in the mid 80bp area over Treasuries versus a T+73bp level on the outstandings pre-announcement.

But about US$2bn of demand poured in, including a number of sizeable anchor orders, which prompted DB to bump up the size and squeeze in pricing to T+78bp, or a new issue concession of 6bp.

Investors in the original US$1bn issue in February have had a great run in the deal, which has traded in from a new issue spread of T+100bp.

Citigroup also pounced on the strong market conditions Tuesday, issuing US$2bn of 2.55% five-year notes maturing April 2019 and US$250m of five-year floaters.

Citi started out with talk in the mid 90s, which offered a nice pick-up to its closest comps, the 2.5% September 2018s at T+63bp or G+84bp.

More than US$4bn of orders poured into the deal, enabling Citi to pull in guidance by around 5bp to 90bp area on the fixed.

Some accounts dropped out when the deal was launched at T+85bp, leaving a final order book of US$3.4bn on the fixed and US$360m on the FRN.

At T+85bp, the deal priced flat, or slightly through its 2018s if adjusted to account for the different maturities.

CITIGROUP

Citigroup Inc (C), Baa2/A-/A, announced a USD benchmark 5-year offering of FXD and/or FRN due 4/08/2019. Citigroup is sole lead manager. Settle: T+5.

IPT: mid T+90s.

PRICE GUIDANCE: 5yr FXD T+90bp area (+/- 5bp), 5yr FRN Libor equiv

LAUNCH: USD2.25bn 2-part. USD2bn 5yr fixed at T+85bp, USD250m 5yr FRN at 3mL+77bp.

PRICED: $2.25bn 2-tranche total.

-$2bn 2.55% 5-year (4/08/19) fixed. At 99.846, yld 2.583%. T+85bp. 1st pay: 10/08/14.

-$250m 5-year (4/08/19) FRN. At 100, floats at 3mL+77bp. 1st pay: 7/08/14.

BOOK: USD3.4bn fixed; USD360m FRN

NIC: flat (neg3bp if 0-3bp added for mat extension)

COMPS:

2.50% September 26, 2018 at T+63bp, G+84bp

DEUTSCHE BANK AG (LONDON BRANCH)

Deutsche Bank AG (London Branch), A2/A/A+, announced a SEC registered tap of 2.50% 2/13/2019 senior notes. DB sole books.

IPTs: low 80s

PRICE GUIDANCE: T+78bp (the number)

LAUNCH: USD1.25bn tap of 2.5% 2019s at T+78bp

PRICED: USD1.25bn tap of 2.5% 2/13/2019. 9.962. T+78bp

BOOK: USD2bn

NIC: 6bp

COMPS:

2.5% 2019s at T+72bp

UNION ELECTRIC DBA AMEREN MISSOURI

Union Electric dba Ameren Missouri (AEE), A2/A/A (s/s/s) announced a USD350m (no grow) SEC registered 10-year (4/15/2024) 10-year senior secured notes. The notes contain a 3mo par call prior to maturity. Bank of America, Morgan Stanley, Mitsubishi and Stifel are the active bookrunners. Co-managers: Blaylock, BNP Paribas, CL King, FITB, Keybanc and Royal Bank of Scotland. UOP: To repay at maturity USD104m aggregate principal amount of our 5.50% senior secured notes due May 15, 2014 and repay a portion of our short-term debt. Settle: T+3

IPTs: T+90bp area

PRICE GUIDANCE: T+80bp area (+/- 5bp)

LAUNCH: USD350m 10yr at T+75bp

PRICED: USD350m 3.50% 10-year (4/15/2024).99.982, yld 3.502%. T+75bp. MWC+15bp. 1st pay: 10/15/2014.

BOOK: USD1.4 final (peak USD2bn)

NIC: Negative 3bp to flat (+5bp for low dollar price = 83bp, -5bp 10/30 curve = FV of 78bp)

COMPS:

Union Electric 3.9% 2042 at T+78bp, $92.00

AEE 2.70% September 1, 2022 at T+43, G+64bp

MIDAM (A1/A) 3.60% April 1, 2024 at T+73, G+75bp

CMS (A1/A-) 3.375% August 15, 2023 T+67, at G+74bp

POM (A2/A) 3.60% March 15, 2024 at T+77bp, G+80bp

ETR (A3/A-) 3.70% June 1, 2024 at T+81bp, G+81bp

DUKE ENERGY

Duke Energy Corp (DUK), A3/BBB/BBB+, announced a USD750m SEC registered 2-part offering that consists of a 3-year (4/03/2017) FRN and a 10-year (4/15/24) senior unsecured fixed notes. The notes contain a MWC and a 3mo par call on the 10yr tranche. The active bookrunners are Barclays, Royal Bank of Canada, Scotia and UBS. UOP: To repurchase tax exempt bonds at Duke Energy Ohio, Inc. and for GCP, including repayment of CP. Pricing expected today. Settle: T+3 (4/04/2014).

IPTs: 3yr 3mL+mid/hi 40s, 10yr T+115bp area

PRICE GUIDANCE: 3yr FRN 3mL+40bp area (+/- 2bp), 10yr T+100-105bp

LAUNCH: USD1bn (upsized from USD750m) 2-part. USD400m 3yr FRN at 3mL+38bp, USD600m, 10yr at T+100bp

PRICED: $1bn 2 tranche total

-$400m 3-year (4/03/17) FRN. At 100, floats at 3mL+38bp.

-$600m 3.75% 10-year (4/15/24) fixed. At 99.941, yld 3.757%. T+100bp. MWC+15bp.

BOOK: USD4bn total

NIC: neg 2bp on FXD

COMP:

DUKE 3.95% 10/23s T+90 G+102

Sempra En. 4.05% 12/23 T+104 G+106

SCANA Corp 4.125% 2/ 22s G+158

NEW YORK LIFE GLOBAL FUNDING

New York Life Global Funding (NYLIFE), Aaa/AA+/AAA, announced a USD350m 144a/Reg S (no reg rights) FA-backed 18-month (10/05/2015) floating rate notes. The active bookrunners are Bank of America, Deutsche Bank andHSBC. UOP: to purchase the relevant funding agreements. Settle: T+3 (4/04/2014).

IPTs: 3mL+5bp area

PRICE GUIDANCE: 3mL+3-5bp

LAUNCH: USD425m (upsized from USD350m) 18mo FRN 3mL+3bp

PRICED: USD425m 18mo (10/05/2015) FRN. At 100, 3mL+3bp

BOOK: USD500m

NIC: flat

COMP:

KO 9/01/15 priced at L+1bp

CSCO 9/03/15 priced at L+5bp

MASSUCHESSETS INSTITUTE OF TECHNOLOGY (MIT)

Massachusetts Institute of Technology (MIT), Aaa/AAA, announced a USD550m 100-year (7/01/2114) taxable fixed rate 3(a)4 series C bond via Barclays, JP Morgan and Morgan Stanley. The deal is exempt from SEC-registration. The notes contain a MWC. Settle: T+5.

IPT: T+115-120

PRICE GUIDANCE: T+115bp area vs. 3.75% 11/2043

REVISED GUIDANCE: T+110bp area(+/-5bp) vs. 3.75% 11/2043

LAUNCH: USD550m 100yr at T+108bp

PRICED: $550m 4.678% 100-year (7/01/2114) at 100. T+108bp vs 3.75% 11/2043. MWC+20bp.

NIC: 8bp

COMPS:

MIT 5.6% 7/2111 $122.5 T+100

Tufts 5.017% 2112s T+173bp

SHINHAN BANK

Shinhan Bank (A1/A/A) has launched a USD500m 3-year (April 8, 2017) FRN at 3-month dollar Libor+65bp, the tight end of final guidance and 15bp inside initial price thoughts. The 144a/Reg S senior unsecured floating rate note will price later today. Settlement is April 8. Joint books: Bank of America, BNP Paribas, Credit Agricole, Citigroup, JP Morgan, Standard Chartered. Joint-lead managers: Mizuho, Shinhan Asia, Shinhan Investment Corp

PRICE GUIDANCE: 3mL+70bp area (+/- 5bp)

LAUNCH: USD500m at 3mL+65bp

PRICED: USD500m 3-year (4/08/2017) FRN. At 100, 3mL+65bp

BOOK: USD2.7bn

SAUDI ELECTRICITY

Saudi Electricity Company (SEC), A1/AA-/AA-, is readying a USD benchmark 2-tranche deal via Deutsche Bank, HSBC and JP Morgan

IPTs: 4.25 - 4.375%, 5.625 - 5.75%

PRICE GUIDANCE: 4.125%, plus or minus 12.5bp, on the 10-year and 5.5%-5.625% on the 30yr

LAUNCH: USD2.5bn 2-tranche total. USD1.5bn 10yr at 4%, USD1bn 30yr at 5.5

PRICED: $2.5bn 2-tranche total.

-$1.5bn 4.00% 10-year (4/08/14) at 100. T+124.3bp MS+ 112.5bp

-$1bn 5.5% 30-year (4/08/44) at 100.T+190.1bp. MS+191bp

BOOKS: USD13bn total

NIC: Flat on 10yr, neg 1bp on 30yr (neg 6bp on 30yr if adjusted for low $ price of comp)

COMP:

3.47% 2023 G+125

5.06% 2043 T+192 at USD93.00 (Reporting by Danielle Robinson; Editing by Marc Carnegie)

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