--Fourteen companies on path to sell a combined $13.6bln of
high-grade bonds
--Issuers rushing to sell bonds ahead of unpredictable events
later this week
--Walgreens leads market with five-part, multi-billion dollar
deal
The corporate-bond market is making a run at the busiest session
of the year, with 14 companies planning to sell at least $13.6
billion of high-grade debt Monday.
The 2012 volume record for a single day is $16.9 billion, set
March 5, according to data provider Dealogic. The record number of
deals is 13, also from March 5.
Drugstore chain Walgreen Co. (WAG) is leading the session in a
five-part deal with a range of maturities, from 18-month notes to
30-year bonds. An early term sheet indicates the company intends to
use $3 billion of the proceeds to repay loans, with other proceeds
directed at general corporate purposes.
Pharmaceutical giant Merck & Co. (MRK), food packager
ConAgra Foods Inc. (CAG), and electricity provider Dominion
Resources Inc. (D) are each issuing three-part deals.
How large the deals will be is still being determined as banks
market the bonds to investors. A strong response could drive the
volume toward the year's record or beyond.
For issuers, the aim is to complete bond sales ahead of any
event that could rattle the calm markets. Toward that end, this
week's issuance is expected to be heaviest Monday and Tuesday, so
borrowers can avoid any disappointment that may follow the Federal
Reserve's two-day monetary policy meeting, which begins
Wednesday.
In Europe, an expected ruling Wednesday by Germany's
Constitutional Court on the legality of the European Stability
Mechanism bailout fund for debt-strapped nations, could also weigh
on markets.
The market is already facing some headwinds Monday. Markit's CDX
North America Investment Grade Index, a proxy for investor
confidence based on the cost of protecting against default, has
weakened 1% in early afternoon trading. This indicates the cost of
insurance against default has risen, albeit slightly.
Jody Lurie, corporate credit analyst at Janney Capital Markets,
said the modestly negative tone might be convincing some borrowers
to place their bonds now instead of waiting, just in case markets
turn and the opportunity fades.
"There's definitely an open window, so everyone wants to rush in
now and check it off while they can," Ms. Lurie said.
Last week, details of the European Central Bank's distressed
euro-nation bond-buying program boosted confidence for investors
looking to boost returns by purchasing lower-rated fixed-income
assets. That enabled the risk premium on corporate bonds, expressed
through the interest paid by lenders over comparable U.S.
Treasurys, to decline.
According to the Barclays U.S. investment-grade index, the extra
yield, or spread, on the average high-grade corporate bond fell
0.05 percentage point last week, to 1.67 points, a new 13-month
low.
Among the large companies taking advantage of tight spreads to
issue $1 billion or more are oil and gas well driller Transocean
Ltd. (RIG), Russian state majority-owned Gazprom OAO (OGZPY,
GAZP.RS), natural-gas provider Oneok Inc. (ONE), and the
Commonwealth Bank of Australia (CBAUY, CBA.AU).
Smaller deals include bonds from valves manufacturer Tyco Flow
Control, a unit of Tyco International Ltd. (TYC), cleaning products
company Clorox Co. (CLX), electronic measurement designer Agilent
Technologies Inc. (A), energy provider Public Service Enterprise
Group Inc. (PEG), Exelon Corp. (EXC) natural gas unit Peco Energy,
and South Korea's Nonghyup Bank.
Write to Patrick McGee at patrick.mcgee@dowjones.com
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