--Time Warner sells two-part, $1 billion bond deal
--Household-name benefits as sole issuer Friday
--Broader sentiment improves in late-trading
(Adds orderbook size in 2nd paragraph, underwriter comment in 4th and 6th paragraphs, Markit data in 8th paragraph, and weekly estimate in 9th paragraph, and list of syndicate banks in final paragraph.)
By Patrick McGee
Time Warner Inc. (TWX) hit the market with a $1 billion bond deal, a rarity for a Friday and a sign that the corporate scramble to borrow isn't letting up.
The sale was split evenly between 10-year and 30-year triple-B rated bonds. Demand far exceeded, with eight times the needed orders, according to a person familiar with the deal.
The 10-year bonds offered a 3.417% yield, or 1.80 percentage points over Treasurys, while the 30-year bond yielded 4.969%, or 2.25 percentage points over the comparable Treasury rate.
"Our market tends not to do much on Fridays, particularly in the summers because attendance isn't great, but in an environment where there is a lot of appetite for high-grade bonds, the old rules don't necessarily apply," said Andrew Karp, head of investment-grade debt syndicate at Bank of America Merrill Lynch, one of the lead managers on the deal.
The last time a billion-dollar deal priced on a Friday was April 27, when Indonesian government-owned PT Pertaminas sold $2.5 billion, Dealogic shows.
Time Warner also has the advantage of being a household name that most bond investors are familiar with. Investors wanting to participate could simply check the price, name a size, and check off a box; they didn't need to do new research before investing, Karp added.
The deal benefited from being the sole issuer in the market, whereas nine companies competed for investor attention Thursday as the market rallied.
Sentiment was weaker in early morning--Markit's CDX Investment Grade Index deteriorated 0.6%--but it was actually a better day to borrow because Treasury yields had fallen some 10 basis points, another banker said. And by late trading, the CDX actually improved 0.5%. Meantime, spreads--the extra-yield corporate bonds offer over Treasurys--were fairly stable.
This marks Time Warner's first deal of 2012. Last October, it sold $1 billion of 10-year and 30-year bonds bearing coupons of 4% and 5.375%, respectively, according to Dealogic. In a $2 billion deal priced in March 2011, coupon rates were 4.75% and 6.25% for the same maturities.
The Time Warner deal followed a flurry of issues placed Thursday, including jumbo-size sales from Ford Motor Credit Co., American Express Co. (AXP) and General Electric Capital Corp. This brought weekly issuance to at least $15.4 billion, according to Dealogic, surpassing forecasts of $10 billion.
New deals have been performing well in secondary trading, helping to encourage investors and issuers to participate in the primary market.
Deere & Co. (DE), for instance, sold 10-year bonds at 105 basis points over Treasurys on Tuesday; they tightened 3 basis points Friday to a spread of 93 basis points, according to MarketAxess.
Time Warner intends to use the proceeds for general corporate purposes, according to a term sheet. The deal was led by Bank of America Merrill Lynch, Barclays, BNP Paribas, and Citigroup.
Write to Patrick McGee at [email protected]