High-grade primary pauses as market tone sours; Anglo American bonds weak; Dow Chemical firms

By Aleesia Forni and Cristal Cody

New York, Dec. 8 – The high-grade bond market was empty of new issuance on Tuesday, with another weak market backdrop keeping issuers on the sidelines.

The empty session follows a tumultuous day for high-grade bonds on Monday, despite a solid supply total of $7.6 billion from six issuers.

There was some chatter that the much-anticipated megadeal from Visa Inc. could price during the session, but a market source said the company decided to hold off due to lackluster market conditions.

The operator of a retail electronics payment network is planning to sell $15 billion to $16 billion of bonds to fund its acquisition of Visa Europe Ltd. and a share repurchase.

The source added that the deal may price either later this week or next prior to the Federal Reserve’s two-day policy meeting.

Following the all-important meeting, players are anticipating a light calendar heading into the end of the year, with “maybe a few” deals pricing at the tail end of December, a market source said.

In the secondary market on Tuesday, Anglo American Capital plc’s senior notes (Baa2/BBB-/) were trading weaker, though the bonds were not heavily active.

The company’s stock fell $45.35, or 12.29%, to $323.65 at the closing bell.

Anglo American plc said in a release on Tuesday that it plans a “radical portfolio restructuring and further material cost savings” based on the deterioration in commodity prices.

The restructuring includes cutting about 85,000 jobs, consolidating businesses and suspending the dividend for the second half of 2015 and for 2016.

In other market activity, Dow Chemical Co. (Baa2/BBB/BBB) and DuPont were reported to be in merger discussions.

Dow’s 8.55% notes due 2019 traded about 1 basis point better on the day.

The Markit CDX North American Investment Grade 25 index eased 3 bps to end at a spread of 86 bps.

Anglo American weak

Anglo American Capital’s 3.625% notes due 2020 were seen on Tuesday trading between 79.063 to yield 9.53% and 78.25 to yield 9.8%, a trader said.

The notes traded with a spread of 785 bps to 812 bps over the session.

Before Tuesday, the notes last traded before Thanksgiving between 83.50 to yield 8.09% and a spread of 640 bps and 84.00 to yield 7.94% and a spread of 626 bps, the trader said.

Anglo American Capital sold $850 million of the notes on May 7, 2015 at 99.778 to yield 3.674%, or a spread of Treasuries plus 212.5 bps.

The company’s 4.875% notes due 2025 were seen trading between 71.00 to yield 9.62% and a spread of 739 bps and 72.053 to yield 9.41% and a spread of 714 bps.

Before Tuesday, the notes were last seen with a buy on Friday at 73.50 to yield 9.12% and a spread of 682 bps, the trader said.

Anglo American Capital priced $650 million of the notes in the May 7, 2015 offering at 99.578 to yield 4.929%, or a spread of Treasuries plus 275 bps.

The financing arm of mining company Anglo American plc is based in London.

Dow firms

Dow’s 8.55% notes due 2019 firmed about 1 bp in secondary trading to 94 bps bid on Tuesday, according to a market source.

The bonds last traded at 119.25.

The company sold $3.25 billion of the bonds on May 7, 2009 at 99.794 to yield 8.581%, or a spread of Treasuries plus 525 bps.

The specialty chemicals company is based in Midland, Mich.

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