Brown-Forman, Mississippi Power price; credit spreads soften; AT&T, Time Warner mixed

By Cristal Cody

Tupelo, Miss., March 22 – Deal action on Thursday included two corporate issuers in the high-grade bond market.

Brown-Forman Corp. priced $600 million of notes in two tranches.

Mississippi Power Co. also tapped the primary market in a $600 million two-part note sale.

Credit spreads softened during the session.

The Markit CDX North American Investment Grade 30 index widened about 4 basis points to a spread of 66 bps.

Supply was light in the previous session with one corporate investment-grade bond deal priced.

The Federal Reserve raised the Federal Funds rate by 25 bps to a 1.5% to 1.75% range on Wednesday.

More than $23 billion of high-grade bonds have priced week to date, coming in just above the $20 billion of supply market sources had forecasted.

Syndicate sources are reporting supply may thin over the remainder of the month due in part to spring break vacations and earnings blackout periods.

Bonds from AT&T Inc. and Time Warner Inc. headed out flat to about 5 bps weaker in secondary trading on Thursday as opening arguments began in the Justice Department’s antitrust suit, a source said. The $85.4 billion cash and stock acquisition of Time Warner had been scheduled to close in 2017.

AT&T’s 3.9% notes due Aug. 14, 2027 (Baa1/BBB+/A-) softened 4 bps to 155 bps bid.

The Dallas-based telecommunications company sold $5 billion of the notes on July 27, 2017 at a spread of 160 bps over Treasuries.

Time Warner’s 2.95% notes due July 15, 2026 (Baa2/BBB/BBB+) eased 5 bps to 145 bps bid, according to the market source.

The New York-based media and entertainment company sold $800 million of the notes on May 5, 2016 at a spread of Treasuries plus 135 bps.

Mississippi Power sells notes

Mississippi Power priced $600 million of series 2018A floating-rate senior notes and series 2018B fixed-rate senior notes (Ba1/A-/BBB+) on Thursday, according to FWP filings with the Securities and Exchange Commission.

The company priced $300 million of two-year floating-rate notes at par to yield Libor plus 65 bps.

Mississippi Power sold $300 million of 3.95% 10-year notes at 99.721 to yield 3.984%, or a spread of Treasuries plus 115 bps.

Barclays, J.P. Morgan Securities LLC, BofA Merrill Lynch and Mizuho Securities USA Inc. were the bookrunners.

Proceeds will be used to prepay a portion of the company's $900 million unsecured term loan due March 30, 2018.

Gulfport, Miss.-based Mississippi Power distributes and sells electricity.

Brown-Forman prices

Brown-Forman also priced a $600 million two-part offering of fixed-rate notes (A1/A-/A) on Thursday, according to an FWP filing with the SEC.

The company sold $300 million of 3.5% seven-year notes at 99.553 to yield 3.572%. The notes priced with a spread of 80 bps over Treasuries.

Brown-Forman priced $300 million of 4% 20-year notes at 98.855 to yield 4.084%, or a Treasuries plus 100 bps spread.

Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., BofA Merrill Lynch, U.S. Bancorp Investments Inc., JPMorgan, PNC Capital Markets LLC and Wells Fargo Securities, LLC were the bookrunners.

Proceeds will be used for general corporate purposes, including dividends, stock repurchases, repaying, redeeming or repurchasing debt, including commercial paper, working capital, capital expenditures, acquisitions and funding pension plan obligations.

Brown-Forman is a Louisville, Ky.-based producer of alcoholic beverages.

Funds add $3.48 billion

Investment-grade corporate funds saw a substantial $3.484 billion inflow for the week to March 21, up from the $2.316 billion inflow of the previous week, according to sources familiar with the fund-flow statistics generated by AMG Data Services Inc.

The earlier inflow had in turn more than reversed the $740 million net outflow figure that preceded it, as reported by the Arcata, Calif.-based unit of Thomson Reuters Corp’ s Lipper analytics division.

That outflow was the second seen in the last six weeks by the corporate funds, a relative rarity.

The previous week the funds gained $1.37 billion and they saw a $1.57 billion inflow during the Feb. 21 week, which had followed a $790 million cash loss during the Feb. 14 week. That outflow had been the first downturn after 21 straight weeks of gains dating back to mid-September, according to a Prospect News analysis of the data.

This week’s funds gain raises the year-to-date net inflow figure for the IG corporates to $26.10 billion from last week’s $22.62 billion, setting a new peak level for the year so far.

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