High-Grade Borrowers Take Advantage Of US Credit Conditions
December 05 2011 - 01:45PM
Dow Jones News
With the U.S. credit market continuing to improve, at least six
corporate issuers are taking their chances to meet investors Monday
and beat the holiday period, including at least four deals of more
than $1 billion each.
The diverse range of issuers includes Wells Fargo & Co.
(WFC), Ford Motor Co.'s (F) Ford Motor Credit Co., Senior Housing
Properties Trust (SNH), Noble Energy Inc. (NBL), and Abu Dhabi
National Energy Co. (TAQA.AD).
Janney Capital Markets noted that investment-grade and
high-yield credit spreads improved by 12 basis points and 36 basis
points last week, respectively, and with spreads expected to keep
improving--unless volatility from Europe resurfaces--the primary
market should be active all week.
"Anybody who has been ready to go has been given the all-clear
signal so they are jumping in," said a syndicate source in New
York. "I don't know if it's a huge pipeline and I don't know how
long it will last--it might be a one-week or a two-week kind of
thing--but the deals that got through last week really gave guys
confidence to come to the market."
A benchmark index of the U.S. corporate-bond market, Markit's
CDX North America Investment-Grade Index, was recently up 4% on the
day.
Among the larger issues, Wells Fargo is marketing $1.5 billion
in five-year notes featuring a spread of 175 basis points to
comparable Treasurys, a person familiar with the deal said.
Abu Dhabi National Energy, also known as TAQA, is marketing $1.5
billion in a two-part deal evenly split with five-year notes
offering a spread of 330 basis points to Treasurys and 10-year
notes offering a spread of 390 basis points.
Duke Energy Carolinas, a regulated utility subsidiary of Duke
Energy Corp. (DUK), is marketing $1 billion of bonds--$350 million
of five-year bonds with a spread to Treasurys of 85 basis points
and $650 million of 30-year bonds with a spread of 125 basis
points.
Additionally, Houston-based Noble Energy is marketing $1 billion
of 10-year notes with a spread of 210 basis points to
Treasurys.
"Should conditions improve from here, we wouldn't be surprised
to see $45 [billion] to $50 billion in December supply, in line
with historical averages," said Ryan Newth, director of syndicate
at SunTrust Robinson Humphrey. "However, if we see a pullback from
risk, some of the pipeline will be pushed into 2012 and, in that
scenario, December could see an underwhelming $25 [billion] to $30
billion, which would be the lightest in 10 years."
The investment-grade corporate-bond market digested nearly $16
billion of new supply last week, Newth added.
-By Patrick McGee, Dow Jones Newswires; 212-416-2382;
patrick.mcgee@dowjones.com
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