PepsiCo prices as tone continues to improve; Bank of Montreal preferred deal in focus

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 8 – The high-grade market saw another solid session on Thursday following a soft start to the week, with PepsiCo Inc. attracting strong demand for a new $3 billion offering of notes.

The four-part sale, which included two-year fixed- and floating-rate notes, along with five- and 30-year tranches, sold between 13 basis points and 25 bps tighter than initial spread thoughts.

The company headed to the primary following a solid third-quarter earnings announcement during the previous session, reporting that organic revenues were up 7.4% year over year.

The day’s two other deals, an upsized $400 million issue priced by Host Hotels & Resorts, LP and a $500 million offering from Invesco Ltd., also fared well on Thursday.

Even on the heels of the back-to-back positive sessions the investment-grade market has seen, one source opined that the market is not at a place to handle a significant amount of supply in the near-term.

“It’s day-to-day at this point,” the source added.

Bank of Montreal’s C$600 million offering of five-year preferred shares with a 5.85% annual dividend on Thursday caused a stir in the Canadian bond markets and sent bank subordinated bonds 10 bps to 15 bps wider by noon in the secondary market, a source said.

“It was notably large with a notably high yield,” the source said. “That upset our bond market for bank subordinated debt because that’s the closest comparison in the bond market to a preferred share.”

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