Verizon prices notes; General Dynamics, Mid-America Apartments hold calls; Hershey firms

By Cristal Cody

Tupelo, Miss., May 4 – Heavy investment-grade supply is expected in the week ahead, including possibly more financial paper, according to market sources on Friday.

About $30 billion to $35 billion of new bond issuance is forecast by syndicate sources for the upcoming week.

The potential for deals related to mergers and acquisitions also is strong in May, sources report.

General Dynamics Corp. (A2/A+/) will hold fixed-income investor calls on Monday, a market source said. BofA Merrill Lynch, RBC Capital Markets, LLC and Wells Fargo Securities LLC are the arrangers.

General Dynamics announced in April that it completed its acquisition of government IT business CSRA Inc. in a transaction valued at $9.7 billion, including the assumption of $2.8 billion in CSRA debt.

About $85 billion of large high-grade bond deals related to mergers and acquisitions “could come over the next couple of months, including in May,” BofA Merrill Lynch analysts said in a research note.

In deal activity on Friday, Verizon Communications Inc. priced $730 million of notes.

Also, Mid-America Apartments, LP (Baa1/BBB+/BBB+) held fixed-income investor calls during the session for a possible deal, a source said.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities are the arrangers.

In other action on Friday, Amcor Ltd. wrapped a two-day round of fixed-income investor calls for an expected 10-year senior note offering.

Looking at secondary trading, Hershey Co.’s $1.2 billion of senior notes (A1/A/) priced in three tranches on Thursday traded 3 basis points to 4 bps tighter.

Mondelez International, Inc.’s $2.5 billion four-tranche offering of notes (Baa1/BBB/) also priced in the previous session were mixed with the long end softer.

The Markit CDX North American Investment Grade 30 index firmed about 1 bp to close the day at a spread of 61.5 bps.

Verizon prices $730 million

Verizon Communications (Baa1/BBB+/A-) priced $730 million of notes due May 2, 2053 at par to yield 5.32% on Friday, according to an FWP filed with the Securities and Exchange Commission.

BNP Paribas, Taipei Branch and Deutsche Bank AG, Taipei Branch were the bookrunners.

Verizon is a New York City-based telecommunications company.

Hope in deal pipeline

Coming up in new issuance, the City of Hope (A1/A+/AA-) of California plans to price a bullet bond due Aug. 15, 2048, according to a market source.

J.P. Morgan Securities is the bookrunner.

The deal is expected to price on Wednesday.

Hershey tightens

In the secondary market on Friday, Hershey’s 3.10% notes due May 15, 2021 tightened to 42 bps bid, 39 bps offered, a source said.

Hershey sold $350 million of the notes on Thursday at a Treasuries plus 50 bps spread.

The maker of chocolate and confectionery products is based in Hershey, Pa.

Mondelez mixed

Mondelez International’s 3.625% notes due May 7, 2023 traded flat at 90 bps bid, 87 bps offered on Friday, a source said.

The $750 million tranche priced at a Treasuries plus 90 bps spread.

Mondelez International’s $700 million tranche of 4.125% notes due May 7, 2028 eased to 132 bps bid, 129 bps offered in secondary trading.

The notes were priced with Treasuries plus 130 bps spread.

Mondelez is an East Hanover, N.J.-based manufacturer of biscuits, chocolate, gum, candy and other products.

High-grade inflows decline

In other market activity, inflows to U.S. high-grade funds and ETFS totaled $1.63 billion for the week ended May 2, down from $3.33 billion in the prior week but up from an $860 million inflow two weeks ago, according to a BofA Merrill Lynch note released on Friday.

“This illustrates that inflows to high grade remain choppy and are running at a notably slower average pace compared to last year,” BofA Merrill Lynch analyst Yuri Seliger said in the note.

Most of the decline in high grade inflows was outside of short-term, where inflows fell to $640 million from $2.17 billion, according to the note, which cited data from EPFR Global and BofA Merrill Lynch Global Research. BofA Merrill Lynch said it defines its high-grade flows metric as a combination of bonds, corporate bonds and total return funds and ETFS. High-grade bonds includes corporate bonds, mortgages, agencies and Treasuries.

Inflows to short-term high grade fell to $990 million for the week from $1.16 billion.

Meanwhile, inflows to high grade funds increased this past week to $1.49 billion from $850 million, while inflows to high grade ETFs declined to $140 million from $2.48 billion, Seliger said.

For the week ended May 2, Lipper US Fund Flows reported inflows of $997 million for corporate investment-grade funds, down from reported inflows of $2.01 billion in the previous week.

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