--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 patrick.mcgee@dowjones.com.