Takeda offers dollar notes; thin supply forecast; bonds widen; PG&E, Volkswagen decline

By Cristal Cody

Tupelo, Miss., Nov. 16 – Takeda Pharmaceutical Co., Ltd. marketed senior notes in seven tranches in a Rule 144A and Regulation S offering on Friday with high-grade action otherwise mostly quiet.

Takeda is expected to price about $5 billion of notes.

The Osaka, Japan pharmaceutical company sold €7.5 billion of euro-denominated notes on Thursday after a European roadshow. The proceeds from the deals will be used to fund the company’s acquisition of Shire plc.

Investment-grade issuers priced more than $18 billion of bonds in the week, short of the $25 billion to $30 billion of supply expected as the market tone soured and kept several issuers at bay, according to syndicate sources.

With the Thanksgiving Day holiday ahead, issuance is expected to be front-loaded and only reach about $5 billion to $10 billion, sources said.

New issues have struggled in the secondary market as high-grade credit spreads softened this week.

The Markit CDX North American Investment Grade 31 index headed out 2 basis points weaker on the day and more than 5 bps wider on the week at a spread of 75 bps.

DowDuPont Inc.’s jumbo $12.7 billion eight-part offering of senior notes that priced on Wednesday was mixed in the secondary market.

Marriott International Inc.’s $1.2 billion of senior notes (Baa2/BBB) that priced in three tranches on Tuesday traded about 2 bps to 10 bps wider than issuance on Friday.

Utilities also have widened.

Pacific Gas & Electric Co.’s senior notes that priced in August have been volatile over the week and are much weaker than issuance. The company’s notes were downgraded on Friday by Fitch Ratings and on Thursday by Moody’s Investors Service and S&P Global Ratings based on exposure to liabilities from the deadly wildfires in California.

Southwestern Electric Power Co.’s 4.1% senior notes due Sept. 15, 2028 that priced in September are trading more than 10 bps wider than issuance.

In other secondary trading, Volkswagen Group of America Finance LLC’s 4.75% notes due Nov. 13, 2028 that priced as part of an $8 billion seven-part deal on Nov. 7 continued to weaken on Friday. The issue is trading nearly 50 bps wider than issuance.

Meanwhile, bond flows turned negative this past week with a $2.26 billion outflow, following a large $5.69 billion inflow in the prior week, according to a BofA Merrill Lynch research report released on Friday.

The high-grade space, which includes corporates, Treasuries, agencies and mortgages, reported a $500 million outflow following a $1.59 billion inflow in the prior week, according to the note.

Inflows to short-term high grade declined to $1.89 billion from $2.65 billion, while outflows excluding short-term increased to $2.39 billion from $1.07 billion.

Outflows from funds continued, at $830 million this past week and $620 million in the prior week, while inflows to high-grade ETFs dropped to $330 million from a $2.21 billion inflow a week earlier, according to the report.

Takeda in pipeline

Takeda Pharmaceutical (A2/A-) is expected to price about $5 billion of senior notes in seven tranches in a Rule 144A and Regulation S offering in the week ahead, according to market sources on Friday.

The dollar offering includes a floating-rate and a fixed-rate tranche due in 2020, one floating-rate and one fixed-rate tranche due in 2021, a fixed-rate and floating-rate tranche due in 2023 and a fixed-rate tranche due in 2028.

J.P. Morgan Securities LLC, SMBC Nikko Securities America, Inc., Morgan Stanley & Co. LLC, Barclays, BNP Paribas Securities Corp. and HSBC Bank plc are the active bookrunners.

The dollar offering was expected to total less than $10 billion since the company also brought a euro-denominated multiple-tranche deal on Thursday.

Takeda announced the planned dollar offering on Friday along with details of its €7.5 billion of Rule 144A and Regulation S senior notes that priced in the previous session.

DowDuPont mixed

DowDuPont’s 4.205% notes due Nov. 15, 2023 softened in the secondary market and traded on Friday at 129 bps bid, 124 bps offered, according to a market source.

The $2.5 billion tranche priced on Wednesday at a Treasuries plus 125 bps spread.

DowDuPont’s 4.725% notes due Nov. 15, 2028 were wrapped around issuance at 160 bps bid, 154 bps offered.

The company sold $2.25 billion of the 10-year notes in Wednesday’s offering at a spread of 160 bps over Treasuries.

Wilmington, Del.-based DowDuPont is expected to become a stand-alone company focused on specialty products following the spinoffs of its agriculture and materials science businesses.

Marriott softens

Marriott International’s 4.15% notes due Dec. 1, 2028 traded wider on Friday at 165 bps bid, 160 bps offered, a market source said.

Marriott priced $300 million of the notes on Tuesday at a Treasuries plus 155 bps spread.

The lodging company is based in Bethesda, Md.

PG&E volatile

Pacific Gas & Electric’s 4.25% notes due Aug. 6, 2023 were quoted better at 94.25 on Friday from the 89.00 area on Thursday, a market source said.

The notes have weakened since trading at the 99.51 area on Nov. 6.

The company (Baa2/BBB-/BBB-) sold $500 million of the five-year notes on Aug. 2 at 99.76 to yield 4.3% and a spread of 145 bps over Treasuries.

PG&E’s 4.65% notes due Aug. 6, 2028 were flat at 358 bps bid on Friday. In price, the notes improved on the day to 91.00. The issue plunged to 84.00 on Wednesday from 89.55 in the prior session before recovering to the 90.00 area on Thursday.

PG&E priced $300 million of the 10-year notes in the August offering at 99.72 to yield 4.69% and a Treasuries plus 170 bps spread.

The electric and natural gas utility is based in San Francisco.

Southwestern Electric soft

Southwestern Electric Power’s 4.1% senior notes due Sept. 15, 2028 were quoted on Friday at 123 bps bid in secondary trading, according to a market source.

The company sold $575 million of the 10-year notes (Baa2/A-) on Sept. 11 at par to yield a spread of 112.5 bps over Treasuries.

Southwestern Electric Power is a Columbus, Ohio-based electric power company.

Volkswagen widens

Volkswagen Group of America Finance’s 4.75% notes due Nov. 13, 2028 widened on Friday to 214 bps bid, according to a market source.

The notes were quoted on Thursday at 198 bps bid.

The company (A3/BBB+) sold $1.25 billion of the 10-year notes on Nov. 7 at a spread of 165 bps over Treasuries.

Volkswagen Group of America is a Herndon, Va.-based financing arm and subsidiary of Volkswagen Group of America, Inc.

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