Barrage Of Corporate Issuers Tap US Markets Monday
January 09 2012 - 1:03PM
Dow Jones News
Week Two of 2012 has started off with a barrage of
investment-grade issuance as at least seven corporate borrowers are
selling bonds Monday.
The biggest deal being marketed is a $2 billion, two-part bond
deal from Energy Transfer Partners LP (ETP), which is raising funds
in connection with its 50% acquisition of Citrus Corp., owner of
the Florida Gas Transmission pipeline system.
The $2 billion issue features 10- and 30-year unsecured notes
with expected ratings of Baa3 from Moody's Investors Service and
BBB-minus from Standard & Poor's Ratings Services and Fitch
Ratings.
"The rate environment for issuers is terribly advantageous,"
said a portfolio manager in New York. "Demand for credit is
actually outstripping supply, so even in a more cautious mode
things are pricing appropriately."
Virginia Electric & Power Co. is marketing $450 million of
10-year notes with a yield of 105 basis points over Treasurys,
according to a person familiar with the issue. The anticipated
ratings on the senior unsecured bonds are A3 from Moody's and
A-minus from Standard & Poor's and Fitch.
New York Life Global Funding, a subsidiary of New York Life
Insurance Co., intends to issue $300 million of three-year notes in
the Rule 144a private-placement market. The deal is expected to
boast AAA ratings from Moody's and Fitch, and AA-plus ratings from
Standard & Poor's.
Allstate Corp. (ALL) is also in the market to sell $500 million
of 30-year bonds, expected to be rated A3 from Moody's, A-minus
from Standard & Poor's and BBB-plus from Fitch.
The sizes of three other benchmark-size offerings have yet to be
released. Target Corp. (TGT) is selling 10-year debt, France
Telecom SA (FTE, FTE.FR) is marketing 30-year bonds, and the
financing arm of Toyota Motors Corp. (TM, 7203.TO) is selling five-
and 30-year bonds. A benchmark-size typically means at least $500
million.
The France Telecom deal is particularly intriguing given the
headline risk from Europe, including the potential for France to be
downgraded. Early price talk suggest the 30-year deal is being
marketed at 245 basis points above the Treasury rate.
Traders in the secondary market are being cautious with a view
to some key events later this week, including the start of the U.S.
fourth-quarter earnings season after Monday's closing bell, as well
as European debt auctions and new macroeconomic data later this
week, the portfolio manager said.
"A lot is on the horizon," he added. "We're coming off a pretty
positive U.S. jobs number but economic data from Europe may confirm
or not confirm any kind of recessionary trend there, while U.S.
earnings should give us a better idea of what trajectory we're
on."
A benchmark gauge of the U.S. corporate-bond market, Markit's
CDX North America Investment-Grade Index, has improved 0.1% on the
day, despite the heavy volume.
MarketAxess data shows there has been $4.2 billion of secondary
trading as of noon EST. Seventeen of the top 20 most actively-trade
bonds are financial names, MarketAxess shows.
Estimates of this week's investment-grade issuance were around
$20 billion at the start of the session. That would follow $22.6
billion of issuance last week -- the biggest week for issuance
since mid-September, according to Dealogic.
Ryan Newth, director of corporate syndicate at SunTrust Robinson
Humphrey, noted that all but $2.5 billion of last week's issuance
came from financial institutions or Yankee borrowers.
"The hope is to see a better mix of domestic corporate issuance
ahead of earnings blackouts," he said of this week, adding that the
amount of financial issuance from foreign and domestic borrowers
will determine how the week churns out.
A syndicate desk manager in New York expected the week's
issuance to be driven by non-financial companies -- the opposite
dynamic of last week, when banks jumped into the market amid calm
conditions.
Newth said events out of Greece and broader euro-zone rhetoric
will be a large driver of near-term issuance, along with Federal
Reserve commentary and U.S. economic data, U.S. Treasury supply and
new earnings results.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382;
patrick.mcgee@dowjones.com
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