Today’s high-grade issuance totaled $8.7 billion from nine borrowers across 15 tranches, following roughly $16 billion of new supply placed yesterday – a remarkable two-day total that does not include substantial volume from split-rated, sovereign, supranational, and preferred-stock issuers this week. Using that criteria, issuance is on track for at least the highest total since a record $38.8 billion outburst in March, LCD data show.
As opposed to overwhelmingly opportunistic and refi-driven taps yesterday and last month, issuance today included a notable number of offerings specifically tied to M&A, capital spending, share repurchases, and other corporate purposes with direct leverage implications.
Health-benefits provider WellPoint launched a $3.25 billion, four-part public deal with maturities ranging from 3-30 years to back its roughly $5 billion acquisition of Amerigroup. Talk for the 10- and 30-year issues points to yields slightly higher than when the company last tapped those tenors, likely reflective of leverage implications inherent in the offering. Indeed, Fitch this morning cut WellPoint’s ratings to reflect the debt-financed M&A bid and other integration risks.
Elsewhere, homebuilder NVR ended a nearly decade-long hiatus from the debt markets to fund share buybacks and other GCP, with a $600 million offering of 3.95% notes due 2022 (upsized from $500 million). Hospitality company Marriott International also eyed share repurchases, as well as CP balances, with a $350 million offering of 3.25% notes due that was upsized from $300 million.
Futures-exchange operator CME Group passed a market-access test today with flying colors, placing $750 million of 3% notes due 2022 at T+145, or rates below where similarly rated GECC placed 10-year notes yesterday. The company fully prefunded a $750 million August 2013 debt maturity after increasing the 10-year issue from $500 million, addressing concerns over the company’s “liquidity buffer” after its ratings took a hit in the wake of the MF Global debacle.
But refinancing existing debt at dirt-cheap costs remains an overarching theme through the warm-weather months. Waste Management today funded a near-term debt maturity with a $500 million offering of 2.9% senior notes due 2022 at T+135, or a coupon rate 170 bps lower than the 4.6% notes due 2021 placed in February 2011. The BBB/Baa3 issuer established among the lowest 10-year coupons placed by a triple-B borrower (BBB/Baa1 FedEx placed 2.625% notes due 2022 at the end of July at T+125), not to mention funding long-dated notes at lower cost than for deals placed recently by many significantly higher-rated issuers, including CME, GECC, Rio Tinto, Thermo Fisher Scientific, and Burlington Northern Santa Fe.
Meanwhile, Berkshire Hathaway reopened three issues from May for $750 million at yields roughly 30-40 bps through the coupon rates, as the company fully funded imminent 2012 debt maturities for the third time this year at a propitious moment in the rate cycle.
And Principal Financial Group today targeted high-coupon debt with a $600 million offering, including 3.3% notes due 2022 and 4.625% bonds due 2042. While the insurer earmarked proceeds for an array of potential general corporate purposes – including acquisitions and the funding of organic growth initiatives – the company explicitly cited the repayment of $400 million of 7.875% notes due May 2014.
In a private placement, Nissan Motor Acceptance today reportedly garnered a 1.95% rate for 2017 notes priced at T+135, after previously placing five-year notes in January 2010 with a 4.5% coupon at T+220. – John Atkins