MasterCard, San Diego Gas, Southwest Gas among issuers; Unibail-Rodamco-Westfield eyes deal

By Cristal Cody

Tupelo, Miss., May 28 – Four high-grade issuers tapped the primary market on Tuesday following the long Memorial Day holiday weekend.

MasterCard Inc. priced $2 billion of fixed-rate notes in two tranches.

San Diego Gas & Electric Co. sold $400 million of 30-year first mortgage bonds.

Southwest Gas Corp. sold $300 million of 30-year senior notes.

Pennsylvania Electric Co. sold $300 million of 10-year senior notes.

In other action on Tuesday, Unibail-Rodamco-Westfield SE held fixed income investor calls for an upcoming dollar-denominated Rule 144A and Regulation S offering of senior notes.

About $10 billion to $15 billion of deal volume is expected this week, according to syndicate sources.

Year to date, investment-grade issuance of $546 billion is down 10% over last year’s pace due to lower mergers-and-acquisitions-related funding, according to a BofA Merrill Lynch report released on Tuesday.

“The key driver of this decline is M&A-financing,” BofA Merrill Lynch analysts said in the note.

M&A-related supply year to date stands at $91 billion, down from the $130 billion of bonds priced to fund mergers in the same period last year.

M&A-related issuance “is likely to remain relatively weak as the pipeline value of pending deals with IG funding implications at $251 [billion] currently is the lowest level since we began tracking it four years ago,” according to the report.

“Moreover, several factors, including elevated macro uncertainties imply a relatively slow pace of new M&A announcements going forward,” the analysts said. “Intuitively then, our outlook for only a 4% decline in supply for the full year 2019 is at risk. However, mitigating that, last year's issuance was frontloaded more than usual into 1H (59%), which implies a weak 2H18 comp for 2H19.”

So far in 2019, the year’s two biggest bond deals priced in back-to-back sessions at the start of May to help fund acquisitions.

International Business Machines Corp. priced a $20 billion eight-tranche offering of notes (A1/A/A) on May 8 to help finance its takeover of Red Hat, Inc.

Bristol-Myers Squibb Co. priced a $19 billion nine-tranche Rule 144A and Regulation S offering of senior notes (A2/A+/) on May 7 to fund a portion of its acquisition of Celgene Corp.

The main M&A-related deal in the near-term pipeline is from T-Mobile U.S. Inc., which held a roadshow April 30 through May 8 for an expected high-grade secured bond offering in the mid-$30 billion range to fund its acquisition of Sprint Corp.

The all-stock acquisition values Sprint at about $59 billion and is expected to close in June.

The Markit CDX North American Investment Grade 32 index closed on Tuesday more than 1 basis point weaker at a spread of 66 bps.

In the secondary market, bonds from International Business Machines and Bristol-Myers Squibb were mixed on Tuesday.

MasterCard prices $2 billion

MasterCard priced $2 billion of notes (A1/A+/) in two tranches on top of guidance on Tuesday, according to a market source and an FWP filing with the Securities and Exchange Commission.

The company sold $1 billion of 2.95% 10-year notes at 99.862 to yield 2.966% and a spread of 70 bps plus Treasuries. Initial talk was in the Treasuries plus 90 bps area.

MasterCard priced $1 billion of 3.65% 30-year notes at 99.855 to yield 3.658%, or a Treasuries plus 95 bps spread. The notes were initially talked to price in the Treasuries plus 115 bps area with guidance later tightened to 95 bps.

Bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, MUFG, Santander Investment Securities Inc., U.S. Bancorp Investments Inc., BofA Securities, Inc., Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, HSBC Securities (USA) Inc. and SG Americas Securities, LLC.

MasterCard is a Purchase, N.Y.-based global payment solutions company.

San Diego Gas sells notes

San Diego Gas & Electric sold $400 million of 4.1% 30-year first mortgage bonds at 99.895 to yield 4.106% on Tuesday, according to a market source and an FWP filing with the SEC.

The bonds (A2/A/A) priced with a spread of 140 bps over Treasuries, on the tight side of guidance in the 145 bps area spread.

Bookrunners were BNP Paribas Securities Corp., Citigroup Global Markets, Deutsche Bank Securities, Mizuho Securities USA Inc. and CastleOak Securities LP.

The San Diego-based gas and electric utility is a subsidiary of Sempra Energy.

Southwest Gas in primary

Southwest Gas sold $300 million of 4.15% 30-year senior notes on Tuesday at a spread of 145 bps over Treasuries, according to an FWP filing with the SEC.

The notes (A3/BBB+/A) priced at 99.949 to yield 4.153%.

BNY Mellon Capital Markets LLC, BofA Securities, J.P. Morgan Securities and Wells Fargo Securities LLC were the bookrunners.

The natural gas distributor is based in Las Vegas.

Pennsylvania Electric prints

Pennsylvania Electric sold $300 million of 3.6% 10-year senior notes (Baa1/BBB/BBB+) at a spread of 135 bps over Treasuries on Tuesday, according to a market source.

Initial talk was in the Treasuries plus 155 bps area.

The bookrunners were Barclays, MUFG, PNC Capital Markets LLC and U.S. Bancorp Investments.

Pennsylvania Electric is an electric utility company based in Akron, Ohio and a subsidiary of FirstEnergy Corp.

Unibail-Rodamco in pipeline

Unibail-Rodamco-Westfield (A2/A/A) plans to price a dollar-denominated Rule 144A and Regulation S offering of senior notes, according to a market source.

The company held fixed income investor calls on Tuesday for the transaction.

BofA Securities, Citigroup Global Markets, J.P. Morgan Securities, Mizuho Securities, RBC Capital Markets, LLC and SG Americas Securities are the arrangers.

Unibail-Rodamco-Westfield is a Paris-based commercial real estate investment company.

IBM notes mostly flat

International Business Machines’ 3.5% notes due May 15, 2029 were quoted about 0.5 bp tighter at 118 bps bid area but remain weaker than issuance, a market source said.

IBM sold $3.25 billion of the 10-year notes (A1/A/A) as part of a $20 billion eight-tranche offering on May 8 at a spread of 105 bps over Treasuries.

The company is an information technology and computer company based in Armonk, N.Y.

Bristol-Myers eases

Bristol-Myers Squibb’s 3.4% senior notes due July 26, 2029 traded about 4 bps wider from where the notes went out on Friday at 103 bps bid on Tuesday, according to a market source.

Bristol-Myers sold $4 billion of the 10-year notes (A2/A+/) on May 7 at a Treasuries plus 105 bps spread as part of a $19 billion nine-tranche offering.

The biopharmaceutical company is based in New York.

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