Hershey, Santander, Macquarie, CCL, BNG tap primary; Yara in deal pipeline; thin supply ahead

By Cristal Cody

Tupelo, Miss., May 27 – High-grade supply thinned on Wednesday to just over $6 billion with issuance expected to decline substantially in the second half of the year.

Hershey Co. brought $1 billion of senior notes in three tranches to the primary market.

Santander Holdings USA, Inc. sold $1 billion of five-year senior notes.

Macquarie Bank Ltd. priced $750 million of 10-year subordinated notes.

CCL Industries Inc. placed $600 million of 10-year senior notes following fixed income investor calls in the previous session.

Also, a couple of issuers priced preferred stock.

Truist Financial Corp. sold $1 billion of 4.95% fixed-rate reset non-cumulative perpetual preferreds (Baa2/BBB-/BBB) tighter than talk in the 5.25% area.

Huntington Bancshares Inc. priced $500 million of 5.625% perpetual preferred stock (Baa3/BB+/BB+) better than initial talk in the 6% area.

In the sovereign, supranational and agency space, BNG Bank NV priced a $1.25 billion Rule 144A and Regulation S offering of 10-year senior notes.

In other activity on Wednesday, Yara International ASA (Baa2/BBB/) held fixed income investor calls for a dollar-denominated offering of senior notes.

Several companies are holding fixed income investor calls this week for possible bond offerings, including Health Care Service Corp., Ferguson Finance plc and Element Fleet Management Corp., sources said.

Investment-grade deal volume totals more than $24 billion from issuance over the past two sessions. The bond markets were closed on Monday for the Memorial Day holiday.

Supply is expected to total in the $25 billion to $30 billion area over the holiday-shortened week.

Volume so far this week has been led by Wells Fargo & Co.’s $6 billion two-part offering of notes that priced Tuesday.

After the deluge of issuance posted over the past three months, high-grade supply is expected to quiet over the remainder of the year, BNP Paribas analysts said in a note released Wednesday.

“The U.S. IG market will become smaller,” the analysts said. “U.S. IG investors are about to face an extended period of bond scarcity not seen since 2008.”

BNP Paribas predicts just net volume of $10 billion of net issuance for non-financials, corresponding to $233 billion of gross issuance for the rest of the year.

Year to date investment-grade bond volume totals $999 billion with $687 billion for non-financials and $312 billion for financials, the analysts said.

“New issuance records have been beaten one after the other,” the analysts note. “The largest week was [March 30], largest month was April 2020 and the largest quarter in Q1 2020. U.S. IG issuers have now been able to hoard enough cash to reach comfortable levels of liquidity. Issuance should slow down now that liquidity is high enough. This is what happened in 2009.”

In 2009, bond supply fell by 54% in the six months after the peak following the financial crisis, according to the report.

High-grade bond volume also is slowing as companies turn toward equity and convertible bond issuance to increase cash on their balance sheets.

“Companies are doing this to avoid too much senior unsecured debt as it could impact their ratings even though issuing equity is more costly than issuing senior unsecured debt,” the analysts said.

High-grade credit spreads have tightened about 8 basis points so far this week.

The Markit CDX North American Investment Grade 33 index improved about 3 bps on Wednesday to a spread of 79.23 bps.

Hershey prices $1 billion

Hershey sold $1 billion of senior notes (A1/A/) in three tranches in Wednesday’s offering, according to a market source and an FWP filing with the Securities and Exchange Commission.

A $300 million tranche of 0.9% five-year notes priced at 99.815 to yield 0.938%, or a spread of 60 bps over Treasuries.

Initial price talk was in the 110 bps spread area.

Hershey sold $350 million of 1.7% 10-year notes at 99.771 to yield 1.725% and a Treasuries plus 105 bps spread.

The notes were talked to price at the 140 bps over Treasuries area.

A $350 million tranche of 2.65% 30-year notes priced at 99.671 to yield 2.666%. The notes came at a spread of 125 bps over Treasuries, compared to talk in the 160 bps spread area.

BofA Securities, Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC, RBC Capital Markets, LLC and PNC Capital Markets LLC were the bookrunners.

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

Santander sells $1 billion

Santander Holdings USA sold $1 billion of 3.45% five-year senior notes (Baa3/BBB+/BBB+) at a spread of 315 bps over Treasuries, according to a market source.

Initial price talk was in the Treasuries plus 350 bps area. Guidance was firmed to the 320 bps area, plus or minus 5 bps.

Citigroup, Credit Suisse Securities (USA) LLC, RBC Capital Markets and Santander Investment Securities Inc. were the bookrunners.

Boston-based Santander Holdings USA is a wholly owned subsidiary of Madrid-based Banco Santander, SA.

Macquarie brings deal

Macquarie Bank priced $750 million of 3.624% 10-year subordinated notes (Baa3/BBB/BBB+) at a spread of 295 bps over Treasuries, according to a market source.

Initial price talk was in the Treasuries plus 350 bps area with talk revised to the 325 bps spread area.

BofA Securities, Citigroup, Goldman Sachs & Co. LLC, HSBC Securities (USA) Inc., J.P. Morgan and Macquarie Capital were the bookrunners.

Macquarie Bank is part of Sydney, Australia-based financial services company Macquarie Group Ltd.

CCL Industries prints

CCL Industries priced a $600 million Rule 144A and Regulation S offering of 3.05% 10-year senior notes (Baa2/BBB/) at a spread of Treasuries plus 240 bps, according to a market source and a news release.

Initial price talk was in the Treasuries plus 265 bps area with guidance tightened to the 245 bps area, plus or minus 5 bps.

BofA Securities, BMO Capital Markets Corp., MUFG and Scotia Capital (USA) Inc. were the bookrunners.

The specialty label and packaging company is based in Toronto.

BNG prices $1.25 billion

BNG Bank (Aaa/AAA/AA+) sold a $1.25 billion Rule 144A and Regulation S offering of 1% 10-year senior notes at 99.244 to yield 1.08%, or mid-swaps plus 41 bps, according to market sources.

Initial price talk was in the mid-swaps plus 43 bps area.

Book size was more than $1.85 billion.

BNP Paribas Securities Corp., Citigroup, Morgan Stanley & Co. LLC and RBC Capital Markets were the bookrunners.

The banking services company is based in The Hague, Netherlands.

Yara to price notes

Meanwhile, Yara International (Baa2/BBB/) held fixed income investor calls during the session for a Rule 144A and Regulation S dollar-denominated offering of senior notes, according to a market source.

Barclays, BNP Paribas, J.P. Morgan and SMBC Nikko Securities America, Inc. are the lead managers.

The Norwegian chemical company is based in Oslo.

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