High-grade supply ramps up; Intel, Coca-Cola, Moody’s price; spreads at highest since 2009

By Cristal Cody

Tupelo, Miss., March 20 – Despite the turmoil in the financial markers and American life with states going into lockdown due to the coronavirus, several issuers priced high-grade bonds on Friday and pushed the week’s volume to more than $60 billion.

Intel Corp. priced an $8 billion six-tranche offering of senior notes.

Coca-Cola Co. brought $5 billion of senior notes in five tranches.

Charles Schwab Corp. sold $1.1 billion of senior notes in two parts.

Moody's Corp. tapped the primary market with a $700 million offering of five-year senior notes.

Cleaning and sanitizing company Ecolab Inc. priced $500 million of 10-year senior notes.

In addition, EOG Resources, Inc. offered three tranches of fixed-rate senior notes and Appalachian Power Co. marketed fixed-rate senior notes.

Also, Landeskreditbank Baden-Wurttemberg-LBank Corp. announced plans to price notes due March 30, 2022. The notes are guaranteed by the German Federal State of Baden-Wuerttemberg.

Friday’s session was the third session this week to post investment-grade issuance.

Issuers priced more than $18 billion of bonds on Thursday and over $27 billion of bonds on Tuesday.

Stocks traded better over the morning but plunged following additional strict government measures to curb the spread of coronavirus on Friday.

California residents are ordered to shelter in place, while New York issued orders for all workers in non-essential businesses to stay home.

President Donald Trump closed the U.S. border with Mexico to all non-essential travel on Friday.

The Dow Jones industrial average was up 0.99% early Friday before finishing down 913.21 points, or 4.55%, at 19,173.98.

The Nasdaq was up 1.87% by mid-morning but declined 3.79% by the end of the session.

The S&P 500 ended 4.34% weaker.

Treasuries rallied, sending the benchmark 10-year note yield back below 1%. The 10-year note yield fell 18.1 basis points to 0.938%.

Credit spreads softened.

The Markit CDX North American Investment Grade 33 index headed out on Friday wider at a 146.12 bps spread from 138.51 bps on Thursday.

High-grade spreads have moved past the wides seen in 2015 and 2016, one source said on Friday.

“Lots of anxiety going on out there right now,” the source said. “Everybody’s just trying to get a feel for what the endgame is on this. These are the highest spreads we’ve had since the crisis in ’08, ’09. I haven’t seen these spread levels since the summer of ’09.”

Meanwhile, yields of 3% to 4.25% on cheap short high-grade paper due in 2020 and 2021 is “creating an opportunity for investors to pick up some good yields on that front-end paper,” the source said.

A number of companies are drawing down credit lines to boost cash with $42 billion of credit line drawdowns announced over the past two weeks, according to a BofA Securities, Inc. research note released Friday.

“So in IG we are seeing a perfect storm of record outflows, heavy issuance on days the macro is stable and an economic recession,” the BofA analysts said.

In the secondary market, bonds were mixed, sources report.

Charter Communications, Inc.’s 4.8% reopened senior secured notes due March 1, 2050 (Ba1/BBB-/BBB-) firmed more than 10 bps on Friday but remain soft at the 419 bps interpolated area and a price bid of 86.63.

On Wednesday, the notes were quoted at 87.75 and a 388 bps interpolated area.

The notes traded in January with a 107 handle and at the 227 bps bid area.

Charter priced a $1.3 billion add-on to the issue on Dec. 2 at 101.964 to yield 4.677% and a spread of Treasuries plus 240 bps.

The notes first priced in a $1.5 billion offering on Oct. 15, 2019 at 99.436 to yield 4.836% and a spread of Treasuries plus 260 bps. The total outstanding is $2.8 billion.

The notes were issued through subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp.

New issues priced on Thursday were modestly improved in secondary trading, a source said.

Financial paper priced from JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. all firmed about 3 bps.

JPMorgan Chase priced $2.5 billion of 4.493% fixed-to-floating rate senior notes due March 24, 2031 (A2/A-/AA-) at a spread of Treasuries plus 340 bps.

Initial price talk was in the Treasuries plus 350 bps area with guidance firmed to the 345 bps area, plus or minus 5 bps.

Morgan Stanley (A3/BBB+/A) priced $2 billion of 5.597% global medium-term fixed-to-floating-rate senior notes due March 24, 2051 at par to yield a spread of 375 bps over Treasuries.

Initial price talk was in the Treasuries plus 375 bps area.

Citigroup priced $1.3 billion of 5.316% fixed-to-floating-rate senior notes due March 26, 2041 (A3/BBB+/A) on Thursday at a spread of Treasuries plus 350 bps.

The notes priced on top of talk in the Treasuries plus 350 bps area.

Intel prices $8 billion

Intel priced $8 billion of senior notes (A1/A+/A+) in six tranches on Friday, according to an FWP filing with the Securities and Exchange Commission.

The company priced $1.5 billion of 3.4% five-year notes at 99.845 to yield 3.434% and a Treasuries plus 290 bps spread.

Intel sold $1 billion of 3.75% seven-year notes at 99.805 to yield 3.782%. The notes priced with a 295 bps over Treasuries spread.

A $1.5 billion tranche of 3.9% 10-year notes printed at 99.795 to yield 3.925% and a Treasuries plus 295 bps spread.

Intel sold $750 million of 4.6% 20-year notes at a Treasuries plus 295 bps spread. The notes priced at 99.909 to yield 4.607%.

The company brought $2.25 billion of 4.75% 30-year notes at 99.889 to yield 4.757% and a Treasuries plus 310 bps spread.

Finally, $1 billion of 4.95% 40-year notes priced at 98.171 to yield 5.057% and a Treasuries plus 340 bps spread.

BofA Securities Inc., Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC were the bookrunners.

Intel is a semiconductor chip maker based in Santa Clara, Calif.

Coca-Cola prints $5 billion

Coca-Cola sold $5 billion of senior notes (A1/A+/) in five tranches on Friday, according to an FWP filing.

The company priced $1 billion of 2.95% five-year notes at 99.917 to yield 2.968% and a spread of 245 bps over Treasuries.

Coca-Cola sold $1 billion of 3.375% seven-year notes at 99.981 to yield 3.378% and a Treasuries plus 255 bps spread.

A $1.25 billion tranche of 3.45% 10-year notes priced at 99.665 to yield 3.49%, or Treasuries plus 255 bps.

The company sold $500 million of 4.125% 20-year notes at 99.824 to yield 4.138%. The notes priced with a spread of 250 bps over Treasuries.

A $1.25 billion tranche of 4.2% 30-year notes priced at 99.358 to yield 4.238%, or a 260 bps over Treasuries spread.

BofA Securities, Citigroup Global Markets Inc., J.P. Morgan and Wells Fargo Securities LLC were the bookrunners.

Coca-Cola is an Atlanta-based beverage company.

Charles Schwab prices $1.1 billion

Charles Schwab priced $1.1 billion of senior notes (A2/A/A) in two tranches on Friday, according to an FWP filing.

The $600 million of 4.2% five-year notes priced at 99.946 to yield 4.212% and a Treasuries plus 370 bps spread.

A $500 million tranche of 4.625% 10-year notes priced at 99.858 to yield 4.643%. The notes were sold with a spread 370 bps over Treasuries.

BofA Securities, Citigroup, Credit Suisse Securities (USA) LLC, Goldman Sachs and J.P. Morgan were the bookrunners.

Charles Schwab is a San Francisco-based company that provides wealth management, securities brokerage, banking, asset management, custody and financial advisory services.

Moody's sells 10-year notes

Moody's sold $700 million of 3.75% five-year senior notes (/BBB+/BBB+) on Friday at 99.887 to yield 3.775%, or a Treasuries plus 325 bps spread, according to an FWP filing.

BofA Securities, Citigroup and J.P. Morgan were the bookrunners.

New York-based Moody’s is the parent company of credit ratings agency Moody’s Investors Service.

Ecolab prices $500 million

Ecolab priced $500 million of 4.8% 10-year senior notes (Baa1/A-/A-) on Friday at a spread of 387.5 bps over Treasuries, according to an FWP filing.

The notes priced at 99.906 to yield 4.812%.

Credit Suisse Securities and J.P. Morgan were the lead managers.

The cleaning and sanitizing company is based in St. Paul, Minn.

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