-Fourteen companies on path to sell a combined $19 billion of
high-grade bonds
-Issuers rushing to sell bonds ahead of unpredictable events
later this week
-Walgreens leads market with five-part, $4 billion deal
By Patrick McGee
It's calmest in the eye of the storm.
With last week's market-moving turbulence behind them-and more
possibly in store later this week-corporations took advantage of
the peace and quiet Monday to borrow more cash in a single day than
they have in two years.
Drugstore chain Walgreen Co. led the way as 14 companies from
around the world were on a path to sell nearly $19 billion worth of
debt in the U.S. corporate bond market. That would mark the biggest
day for investment-grade bond issuance since Sept. 8, 2010, and the
third-busiest day in records dating back to 1995, according to data
tracker Dealogic.
The prior record this year was 13 deals and $16.9 billion, both
set March 5.
A wave of deals also hit the European bond market, making it the
busiest day there since early 2009.
Low yields are luring companies to refinance debts, enabling
them to fortify their balance sheets and place them in a better
position should economic growth remain lackluster.
"Everyone should be coming to market right now," said Ken Naehu,
head of fixed income at Bel Air Investment Advisors. "It's a
classic move to shore up your finances even further."
High-grade borrowers sold $29 billion in four days last week,
the most in a week since early March. The activity was concentrated
early in the week as companies sought to borrow before Thursday's
market-moving actions on sovereign debt from the European Central
Bank and Friday's closely watched jobs data in the U.S.
Companies have much the same plan this week-complete bond sales
ahead of any event that could rattle the calm markets.
Issuance is expected to be heaviest Monday and Tuesday, so
borrowers can avoid any market swings that may follow the Federal
Reserve's two-day monetary-policy meeting, which concludes
Thursday. In Europe, Germany's Constitutional Court is expected to
rule Wednesday on the legality of the European Stability Mechanism
bailout fund for debt-strapped nations. A euro-zone finance
ministers meeting Friday could also weigh on markets.
"There's definitely an open window, so everyone wants to rush in
now and check it off while they can," said Jody Lurie, corporate
credit analyst at Janney Capital Markets.
Walgreen led the session in a five-part, $4 billion deal with a
range of maturities, including fixed-rate coupon payments from 1%
on notes due in 2015 to 4.40% on bonds due in 2042. The company
intends to use $3 billion of the proceeds to repay loans, with
other proceeds directed at general corporate purposes, according to
a pricing term sheet.
The Commonwealth Bank of Australia was issuing $3.25 billion in
a three-part deal, alongside a $2.5 billion deal from
pharmaceutical giant Merck & Co., a $1.3 billion issue from
natural-gas provider Oneok Inc., and many others.
Last week, details of the ECB's distressed euro-nation
bond-buying program lifted 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
0.05 percentage point last week to 1.67 points, a 13-month low,
according to the Barclays U.S. investment-grade index.
Among the large companies taking advantage of tight spreads were
oil and gas well driller Transocean Ltd., Russian state
majority-owned Gazprom OAO, food packager ConAgra Foods Inc. and
electricity provider Dominion Resources Inc.
Smaller deals include bonds from valves manufacturer Tyco Flow
Control, a unit of Tyco International Ltd., cleaning products
company Clorox Co., electronic measurement designer Agilent
Technologies Inc., energy provider Public Service Enterprise Group
Inc., Exelon Corp. natural gas unit Peco Energy, and South Korea's
Nonghyup Bank.
Write to Patrick McGee at patrick.mcgee@dowjones.com
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