Outlook 2011: Past year's deals notable for record-low rates, not size

By Andrea Heisinger

New York, Dec. 31 - The size of the issue wasn't the biggest indicator of a notable deal in the investment-grade bond market during 2010, though there were large deals, sources said. Rather, it was smaller corporate offerings that set record-low coupons starting in August.

A syndicate source said that Louisville, Ky.-based Yum! Brands, Inc. may have started the coupon rally with its $350 million sale of 3.875% notes due 2020 sold on Aug. 24.

"[Yum!] stood out the most as one of the first to break coupon records," the source said. "It was the first BBB rated name [to set a record] in August, and I think it still holds the lowest [coupon].

"It showed that even in a low-rate environment, there's a flight to quality. It was a blowout."

Another source noted that Wal-Mart Stores, Inc. and Kraft Foods Inc. brought notable deals.

Wal-Mart priced $5 billion of paper on Oct. 18 with three-, five-, 10- and 30-year terms The three-year notes had a 0.75% coupon, while on the long end the 30-year bonds came with a 5% coupon.

Kraft Foods priced a whopping $9.5 billion of three-, six- and 10-year notes and 30-year bonds on Feb. 4, 2010. The three-year paper came with a 2.625% coupon, while the 30-year bonds priced with a 6.5% coupon.

"They were the big ones away from the banks and GE," he said.

Between August and November, record-low coupons were set left and right.

Johnson & Johnson, E.I. du Pont de Nemours & Co., International Business Machines Corp., Microsoft Corp., Wal-Mart and Coca-Cola Co. were those setting records for maturities ranging from three to 30 years.

"It was a good year for credit investors," said Jamie Guenther, managing director and head of institutional credit at Deutsche Bank.

Companies had to be ready to get in and refinance with the 3% to 4% rates that were seen, he said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.