Following a significant improvement in pricing leverage for borrowers over the last week, dealers fed demand for liquid instruments with the largest average tranche sizes of the month, LCD data show. While today’s slate of deals followed strong issuance totals last Tuesday and Thursday, those three sessions represent the only significant daily issuance volume in 10 sessions.
Total issuance of just over $7 billion on the session was nearly $2 billion less than volume snapped up by investors on Thursday, when dealers placed the most new supply since May 24. But the average tranche size for today’s slate rose to more than $780 million, or nearly $100 million more than for deals placed on Thursday and $200 million above the second-quarter average, according to LCD.
For reference, tranche sizes in the second quarter have plunged more than 30% since they swelled to a three-year high of roughly $850 million in the first quarter.
New issues placed today included tranches of $1 billion or more for Comcast and Metropolitan Life, and deals that were upsized during the course of marketing for AIG, Experian, and LVHM.
In a rare offering of dollar-denominated notes, Paris-based LVMH Moet Hennessy Louis Vuitton placed $850 million of five-year notes at T+95, while U.K.-based Experian Finance placed $600 million of 2.375% notes due 2017 at T+175 in its first offering in dollars.
Barclays noted last week that Yankee issuance is up 39% this year versus the same 2011 period as borrowers avoid European-led volatility while also taking advantage of relatively low funding on the basis swap as U.S. rates hold near historic lows. Last week, British Telecom placed its first dollar deal in four years.
Meanwhile, high-profile U.S. names took advantage of improved marketing conditions as they locked in long-term funds, with the 3.28% yield for the Barclays high-grade index within a few basis points of the all-time low entering the session.
Comcast, in its first parent-level offering since acquiring a majority stake in NBCUniversal from GE early last year, placed $1 billion of 3.125% notes due 2022 at T+150 and $1.25 billion of 4.65% bonds due 2042 at T+195, representing coupons 200 bps and 175 bps below coupons for similar tenors in its last offering in early 2010, while also placing the deal at spreads several basis points through that relatively stale outstanding curve, trade data show.
John Deere Capital completed a three-part, $1.6 billion deal, its ninth deal since last June (not including a $2.25 billion, two-part deal for parent Deere & Co. earlier this month). The deal included 0.95% notes due 2015 and 2.8% notes due 2023 placed at coupons and reoffers just 5-7 bps above levels for similar tenors placed this year that represented all-time low funding costs for the frequent issuer. – John Atkins
