(Updates throughout with launch details)
By John Balassi
NEW YORK, June 26 (IFR) - Agriculture giant Monsanto amassed a whopping US$15bn in orders Thursday for a new US$4.5 seven-part investment-grade bond due to price later in the day, investors told IFR.
The company, rated A3/BBB+/A-, was able to launch the trade at levels about 15bp to 20bp tighter than initial price thoughts, thanks in part to the size of the book.
“With all this demand the deal should do well,” said Rajeev Sharma, portfolio manager at First Investors Management Co.
“This is a good-sized deal in a sector that doesn’t see a lot of new issuance.”
The deal launched as a US$500m three-year at Treasuries plus 30bp; US$500m five-year (+50bp); US$500m seven-year (+65bp); US$750m 10-year (+85bp); US$500m 20-year (+90bp); US$1bn 30-year (+110bp); and a US$750m 50-year at 140bp.
At these levels, the 10-year and 30-year bonds seemed to carry no new issue concession compared with Monsanto’s outstanding 2.2% July 2022 at a G-spread of 85bp and 4.65% November 2043s at T+110bp.
Assuming a 30s/50s curve of about 30bp, the 50-year bonds also looked to price at fair value, bankers said.
It is its first foray into the market since November 2013. Citi and JP Morgan are active books with BAML, Goldman Sachs and Morgan Stanley as passive books along with Barclays and RBS.
The company is expected to use proceeds to fund a US$10bn share repurchase programme over the next two years, including an accelerated buyback target of US$6bn within the next year, according to Morningstar.
“Although operating performance has remained strong, we think the proposed increase in debt will raise company leverage to a level that no longer supports the current A+ rating level,” it said.
“We would expect these balance-sheet adjustments to result in lowering our rating by one or two notches.” (Reporting by John Balassi and Shankar Ramakrishnan; Editing by Marc Carnegie)