High-grade book demand strong; Lowe’s deal heavily oversubscribed; new supply eyed

By Cristal Cody

Tupelo, Miss., March 25 – Investor appetite revved up in the investment-grade primary market over the week as issuers priced more than $37 billion of bonds.

Volume outpaced market expectations of about $30 billion to $35 billion of new supply.

Rumblings of heavy primary activity for the week ahead emerged on Friday.

About $25 billion to $30 billion of new issuance is likely but could top out at $40 billion plus with half potentially anticipated from a large merger-and-acquisitions-related offering from Oracle Corp., sources reported.

Oracle in December announced a $28.3 billion acquisition of Cerner Corp. that is expected to close in 2022.

While the merger is a cash transaction, a debt piece is expected, according to a market source.

Lowe’s, HSBC

In this week’s new issues, demand was strong and bonds priced tighter than talk.

Haleon plc, via GSK Consumer Healthcare Capital US LLC, brought an $8.75 billion seven-tranche offering of senior notes (Baa1/BBB) that priced 20 basis points to over 30 bps better than initial guidance.

ING Groep NV also came by Monday with a $4 billion four-part senior note (Baa1/A-/A+) offering that priced 20 bps to 25 bps tighter than initial talk.

New issues from Lowe’s Inc. and HSBC Holdings plc attracted heavy order books in Tuesday’s session.

Lowe’s upsized its four-part offering of senior notes (Baa1/BBB+) to $5 billion from $3.5 billion to $3.75 billion after book orders soared, a source said.

The offering saw cumulative final orders of $27.5 billion, putting the deal at 5.5 times oversubscribed.

Lowe’s tranches priced over 30 bps better than initial talk.

HSBC also upsized its offering of 4.762% subordinated notes due March 29, 2033 (Baa1/BBB/A-) to $2 billion from initial estimates of $1 billion to $1.5 billion after final book demand hit more than $8 billion, a market source said.

HSBC’s notes priced 35 bps tighter than initial guidance.

Supply thinned on Wednesday but demand was strong for Ford Motor Credit Co. LLC’s $1.5 billion junk-rated tranche of 4.95% senior notes due May 28, 2027 that priced off the investment-grade syndicate desk, a source said.

The offering of notes (Ba2/BB+/BB+) was upsized from $1 billion after reaching a final book size of $4.5 billion.

Ford’s issue came tighter than initial talk in the 5.25% area. The spread also priced tighter at Treasuries plus 261.7 bps from initial guidance in the 287.5 bps area.

Several high-grade issuers upsized their deals over the week, including TruStage Financial Group, Inc., Owl Rock Core Income Corp., Extra Space Storage LP and Guardian Life Global Funding, according to market sources.

Home Depot Inc. also found good timing with its $4 billion four-tranche offering of notes (A2/A/A) on Thursday that priced 30 bps to 35 bps tighter than initial talk, a source said.

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