Browsing articles in "Recent Deals"
MSFT Leads USD 23.4bil Blockbuster Bond Issuance Day; Mischler Comment
August 2016      Debt Market Commentary, Recent Deals, Recent Deals   

Quigley’s Corner 08.01.16 Blockbuster Corporate Bond Issuance Day; MSFT Sets Standard for Diversity & Inclusion

 

Investment Grade New Issue Re-Cap –Blockbuster Bond Day; $23.4bil  via 7 IG Issuers; 14 Tranches

IG Corporate Primary Market :Microsoft (NASDAQ:MSFT); Synchrony Financial (NYSE:SYF)

Global Market Recap

IG Primary Talking Points

New Issues Priced

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

Well, at 7:25pm this evening, my second job started.  You know the one where I extoll the virtues of investment grade corporate bond issuance, a Company’s D&I mandate, the famous “QC” shout-outs and the all-important relative studies of today’s new issues that Mischler Financial participated in.  But first what else is there say I mean – “what a whale of a day!”  IG Corporate primary markets were on FIYA-AHHHHH today!  Literally En Fuego!  7 IG issues priced a total of 14 transactions totaling $23.40b.  Now let’s put that into the proper perspective.  You all read last Friday’s “Best and Brightest” edition. In it THE top syndicate desks offered their thoughts on this week’s IG Corporate new issue volume as well as their forecasts for supply total for all of August.  Before any new month begins I always walk you into a section titled “Knowing the Past for the Future” in which I look at historical IG Corporate and SSA issuance over a decade for any given new month.  Here’s what the numbers look like for August:

Across the past ten years, all-in dollar-denominated IG Corporate plus SSA August new bond issuance averaged $63.53b.

 

  • Over the past five years, all-in IG August new issuance averaged $61.17b.
  • Over the past three years, all-in IG August issuance has averaged $60.79b.
  • The past three years of August saw IG Corporate only issuance average $49.46b.
  • August SSA issuance has averaged $11.33b across the last three years.

 

……..and here’s the August chart I put together:

August
(Year)
All-in IG Issuance (bn) IG Corps
only (bn)
SSA
only (bn)
2015 59.80 49.75 10.05
2014 55.47 46.55 8.92
2013 67.09 52.07 15.02
2012 63.76 57.46 6.30
2011 59.74 47.06 12.68
2010 84.84 69.82 15.02
2009 59.61 50.25 9.36
2008 36.63 23.65 12.98
2007 90.36 71.56 18.80
2006 57.97 51.72 6.25

 

It’s helpful and what’s more, we’re a numbers loving society. We like knowing “the best of this” and “the best of that” and “the top 10 of anything” for that matter. Today the $23.40b in new IG Corporate-only supply that priced represents 47.31% of the past 3-year average for August…………and it’s only August 1st!

This week the syndicate midpoint average forecast for IG Corporate issuance is $26.22b.  We priced 89% of that today alone.  What’s more, the estimate for overall August new IG supply is $61.13b!  We priced over 38% of THAT today! Mischler was there again this time featured in active roles for both Microsoft’s mega $19.75b 7-part 3s/5s/7s/10s/20s/30s and 40-year new issue as well as for Synchrony Financial’s new $500mm 10-year.

 

Some talking points first:

  • Today’s $23.40b volume makes it the 5th busiest day of the year.
  • Microsoft’s $19.75b 7-part ranks as the 5th largest U.S. issue of all-time.
  • Today’s MSFT new issue represents 2.37% of all 2016 YTD issuance!
  • The session’s $23.40b ranks just outside of the top 10 busiest days of all-time.


Okay ready or not, let’s get to it:

msft-corporate-debt-mischlerMicrosoft Corp. (NASDAQ:MSFT) takes great pride in its own products, and advances to improve the quality of people’s lives through innovative products and it does all it can to help foster a workplace and corporate culture reflective of the world’s changing demographics.  It’s called Diversity and Inclusion at MSFT and it starts from the top down from inside the office of Microsoft’s Indian-born American CEO, Satya Nadella.  Today the internal D&I mandate at the world’s third largest company by market capitalization at $434b. was passed over to the Treasury/Funding team at Microsoft.  Our liaison guided us through an important deal for our Debt Capital Markets.  You see, it wasn’t only about the immense size and multi-tranches of today’s new issue rather it reflected Microsoft’s commitment to our diverse world.  There were a total of 13 diversity firms on today’s transactions.  Along with Mischler Financial, the nation’s oldest Service Disabled Veteran broker dealer were a dozen other diverse financial services companies whose certifications ranged from, African-American, Hispanic-American, Woman-owned and Veteran-owned firms. It may just be one of the most diverse landmark investment grade rated corporate deals ever executed.

But that should come as no surprise. It reflects Microsoft’s work with myriad diverse employee networks rooted in its 100,000 employee workforce.  Here is a list of 42 diverse Microsoft networks that the Company features among its unique socially responsible corporate family:
Africans, Arabs, Attention Deficit Disorder Network, Bangladeshi, Blacks, Boomers, Brazilians, Chinese, Dads, Egyptians, Ex-Yugoslavians, Filipinos, French, Friends of Japanese, Hellenes, Hong Kong Employees, Deaf and Hard of Hearing Employees, Indians, Israelis, Koreans, Malaysians, Microsoft Adoption, Asian Professional Society, Microsoft Nepali, Military Reservists, Moms at Microsoft, Native Americans, New Zealanders, Pakistanis, Persians, Portuguese, Romanians, Russian-speaking employees, Singaporeans, Taiwanese, Thais, Turks, Ukrainians, U.S. Military Veterans, Vietnamese, Visually Impaired Persons and Working Parents at Microsoft.

Are you getting this?  In the financial services industry “deal day” means distribution, banking, coverage, relative value, oversubscription rates, book builds, etcetera, but it means so much more when diversity firms such as Mischler can prove to be a meaningful part of diversity at work.  Just witness our account base that introduced over 140 new orders and  over $500mil book to Microsoft.

Diversity and inclusion are critical underpinnings to the evolving culture at Microsoft and powerful bridges to the marketplace. They can be determining factors in whether or not talented people go to work for them and whether people buy their products.  Microsoft works to increase the pipeline of diverse talent, increase retention and match talent to job opportunities – and it is in its industry’s interest to be transparent about the current state and get on with the solutions. Along with its corporate peers, MSFT continues working together to land thoughtful, enduring and practical diversity and inclusion initiatives that transform its workforce, its suppliers and its vendors for the benefit of the industry, its employees and its customers.

As Microsoft transforms its business and culture, the value proposition for diversity and inclusion within Microsoft is increasingly clear — diversity and inclusion will yield better products and solutions for our customers, and better experiences for its employees.  Diversity gains will not be sustained unless everyone does their part to encourage new and different perspectives, solutions and innovative ideas to surface.  Being inclusive is not something that is simply done, rather it stands for who we are and what a Company is. It’s about transforming culture.

To that end, this past fiscal year, Microsoft put more focus and thought into advancing its diversity and inclusion agenda within the company. Microsoft developed and rolled out key priorities, which have now been woven into the Global Diversity & Inclusion Strategy and approved by its Board of Directors. The new strategy has four specific areas of focus:

  • Transform the Culture
  • Empower Our People
  • Expand our Talent Pipeline
  • Delight our Customers

 

Microsoft’s Deal Mechanics

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing of today’s mega deal.  The five tranches posted a cumulative average contraction of 20 bps from start to finish.

Here’s a look at how it all evolved:

 

MSFT Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr +55a +40a (+/-5) +35 +35 <20> bps <4> 33/31 <2>
5yr +70a +55a (+/-5) +50 +50 <20> bps <4> 49/47 <1>
7yr +90a +75a (+/-5) +70 +70 <20> bps +3 69/67 <1>
10yr +110a +95a (+/-5) +90 +90 <20> bps +5 88/86 <2>
20yr +140a +125a (+/-5) +120 +120 <20> bps +1.5 119/117 <1>
30yr +165a +150a (+/-5) +145 +145 <20> bps +3 143/141 <2>
40yr +200a +185a (+/-5) +180 +180 <20> bps +5 179/177 <2>

 

………and here’s a look at final book sizes and oversubscription rates:

 

AAPL Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr 2,500 5,200b 2.08
5yr 2,750 6,700b 2.44x
7yr 1,500 4,860b 3.24x
10yr 4,000 11,060b 2.76
20yr 2,250 5,960b 2.65x
30yr 4,500 11,000b 2.44x
40yr 2,250 6,140b 2.73x
Total Book 19.75 50.92b 2.58x

 

Microsoft (Aaa/AAA) and LinkedIn Corp. (BB+/NR) announced on June 13th that they entered into a definitive agreement in which MSFT will purchase LKND for $196 per share for a total transaction valued at $26.2b.  Today’s deal will use proceeds for the LinkedIn acquisition and for general corporate purposes.

 

  • In terms of relative value leads pointed to the outstanding MSFT 4.00% due 2/12/2055 that was T+175 pegging 40-year NIC as 5 bps against today’s new 40-year T+180 pricing.
  • The 30-year comparable was the MSFT 4.45% due 11/03/2045 that was T+142 versus today’s new 30-year final pricing at T+145 or 3 bps concession.
  • Fair value for today’s new 20-year that printed at T+120 was the MSFT 4.20% due 11/03/2035 carrying a T+104 bid this morning but also featuring a more dramatic 20s/30s curve conveyed as between 15-20 bps let’s split the difference and call it 17.5 bps so, T+121.5 fair value for a 1.5 bps NIC vs T+120 pricing.
  • For a 10-year study there was the outstanding MSFT 3.125% due 11/03/2025 seen G+85 bid pre-announcement nailing concession as a nickel or 5 bps against the T+90 final print.
  • New MSFT 7s turned to the 2.65% of 11/03/2022 G+67 for a 3 bps NIC vs. T+70.
  • 5-year MSFT comped between the MSFT 2.375% due 2/12/2022 (G+64) and the MSFT 2.00% due 11/03/2020 that was G+44.  The average between the two is G+54 pointing to a negative 4 bps NIC on the new 5-year final T+50 spread level.
  • 3yr. NIC was also negative 4 bps.

 

Microsoft Final Pricing

MSFT $2.5bn 1.10% due 8/8/19 @ $99.897 to yield 1.135% or T+35 MW+7.5

MSFT $2.75bn 1.55% due 8/8/21 @ $99.895 to yield 1.572% or T+50. MW+10

MSFT $1.5bn 2.00% due 8/8/23 @ $99.701 to yield 2.046% or T+70. MW+12.5

MSFT $4bn 2.40% due 8/8/26 @ $99.814 to yield 2.421% or T+90. MW+15

MSFT $2.25bn 3.45% due 8/8/36 @ $99.613 to yield 3.477% or T+120. MW+20

MSFT $4.5bn 3.70% due 8/8/46 @ $99.515 to yield 3.727% or T+145. MW+25

MSFT $2.25bn 3.95% due 8/8/56 @ $97.505 to yield 4.077% or T+180. MW+30

 

Who to thank?

Thank you to Microsoft Corp. Treasury/Funding and particularly Joel Combs for maximizing the business impact of global diversity and inclusion to empower people, and to transform culture and business. You are the recipient of this evening’s Mischler five-star salute.  We all thank you.

Genesis of the Five-Point Star
Yesteryear’s “bond Gods” Seth Waugh and Jimmy Quigley introduced the concept of our financial services first ever “mini-me” full service broker-dealer  back in 1993 with the advent of African-American-owned Utendahl Capital Partners L.P.  From that one firm in the early 1990s, we have witnessed a mushrooming of diversity firms who have subsequently learned through the school of hard knocks how to build into more formidable and sustainable broker dealers with a firm eye on maintaining and growing firm capital, leveraging their opportunities to make a concerted effort to create a value-added distribution proposition with formidable capital markets coverage from senior seasoned talent.  Add to that the diversity overlay with lasting certifications and give-back components and wrap it all up with great back office synergies that don’t fail the customer or the client after the deal is priced.  That is the five-point star we embrace here at Team Mischler.  Seth Waugh is back in our industry as of April 25th earlier this year as a non-executive chairman of Alex, Brown, a division of Raymond James, once it closes the acquisition of the U.S. Private Client Services unit of Deutsche Bank Wealth management expected sometime next month.  Seth was formerly CEO of Deutsche Bank Americas.  As for the other Mr. Quigley, he travels the world spreading the good news of BAML to the world outside the U.S. as that bank’s most senior international relationship manager and Executive Vice Chairman.  Together those two characters personified all that was good about Wall Street PRIOR to the financial crisis and those black box products that no one ever understood and that wound up blowing up the world resulting in the new restrictive regulatory environment.  It wasn’t on their watch though.  They were two revolutionary thinkers who changed the face of Wall Street by imagining, creating and promoting diversity in the financial services industry.  Think about that and those 12 diversity firms on today’s Microsoft deal.  It’s a mandate for the way our inextricably global-linked world economy works.  It did have a beginning folks and those two guys were front and center at its genesis.

Today that spirit continues to shine and was personified by joint lead and B&D Bank of America/Merrill Lynch Origination and Syndicate.  Again from the top down from the offices of Andrew Karp, Managing Director and Head of Americas Investment Grade Capital Markets to Dan Mead,  M.D. and Head of IG Debt Syndicate and the team of Maureen O’Connor, Kevin Barthelmes, Greg Baker and Andrew Kurz.  We appreciate the access, the two-way info and data exchanges, and for rewarding our distribution network with paper today. By holding us to your high standards, you challenge us to live up to our promise of formidable middle market placement opportunities, for the issuers we serve.  That kind of example and reward for our performance motivates us to deliver as we did today – an order book of over $500mm across 140 total individual orders.

See that folks!  I had to start back to Seth and Jimmy because that’s where this space all began.  It began with two forward thinking well-liked good guys and their call to social responsibility.  It is on us today to constantly improve upon this wonderful mandate; to give back as we were given and to continue the long American legacy of diversity.  Thank you BAML Syndicate!

 

Staying in Sync with Synchrony Financial

Mischler was also a 2% active Co-Manager on today’s new 10-year for Synchrony Financial.  “SYF” contracted a nickel or 5 bps from IPTs in the +230 “area” before launching and pricing at +225.  The final order book today was $870mm or 1.74-times oversubscribed.  Paper was issue bid or T+225 at the end of the day.  For comps we looked to the outstanding SYF 4.50% due 7/23/2025 that was T+212 (G+218) pegging concession as 7 bps versus on today’s 10-year Senior Notes new issue that priced at T+225.

Thank you to Chris Coffey, Director of Long-Term Funding, Corporate Treasury at Synchrony Financial.  Chris as many of you know is also one of the legends who helped steer the DCM’s most prolific D&I mandate for years at GECC.  Ahhh, all the legends in this evening’s “QC.”  Thanks Chris!   

BAML served as joint lead and B&D of SYF so, I have most of the same group of people in Syndicate and Origination to thank.  Andrew Karp, Dan Mead, Greg Baker and Andrew Kurz but this time I also add  “The Dragon” himself Mr. Rob Kasel who gets a special shout-out as he ran the book at the big house!  Thanks everyone. 

Synchrony Final Pricing 

SYF $500mm 3.70% due 8/04/2026 @ $99.619 to yield 3.746% or T+225 MW+35

               

Global Market Recap

 

o   U.S. Treasuries – Down day for USTs, JGB’s, Gilts & Bunds.

o   3mth Libor was unchanged at highest yield since May 2009 (0.75910%).

o   Stocks – U.S. mixed, Europe down, Nikkei higher & China red.

o   Economic – U.S. data was a touch weaker than expected.

o   Overseas Economic – Global data mixed tilted to down side.

o   Currencies – USD outperformed all of the Big 5.

o   Commodities – Bad day for commodities as crude oil enters a bear market.

o   CDX IG: +3.16 to 75.19

o   CDX HY: +16.33 to 411.04

o   CDX EM: +3.74 to 263.41

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 14 IG Corporate new issues only was 15.84 bps.

 

Syndicate IG Corporate-only Volume Estimates for This Week and July

 

IG Corporate New Issuance This Week
8/01-8/05
vs. Current
WTD – $23.40b
August 2016 vs. Current
MTD – $23.40b
Low-End Avg. $25.13b 93.12% $60.48b 38.69%
Midpoint Avg. $26.22b 89.24% $61.13b 38.28%
High-End Avg. $27.30b 85.71% $61.78b 37.88%
The Low $15b 156.00% $45b 52.00%
The High $45b 52.00% $75b 31.20%

 

It’s 12:25a.m.  I’ll be back at the Corner later this morning!

 

Have a great evening!
Ron

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

NICs, Bid-to-Covers, Tenors and Sizes

 

…..and here’s another look at last week’s day-by-day re-cap of key primary market driver averages for IG Corporates only followed by the prior four week’s averages:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
7/25
TUES.
7/26
WED.
7/27
TH.
7/28
FRI.
7/29
AVERAGES
WEEK 7/25
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
AVERAGES
WEEK 7/04
New Issue Concessions 2.89 bps 0.90 bps <0.4> bps 0.5 bps N/A 1.23 bps 3.95 bps 0.82 bps 0.73 bps
Oversubscription Rates 3.57x 2.61x 4.464x 3.70x N/A 3.63x 3.42x 4.73x 3.82x
Tenors 10.90 yrs 24.67 yrs 10.20 yrs 11.40 yrs N/A 13.45 yrs 7.95 yrs 9.58 yrs 9.72 yrs
Tranche Sizes $710mm $850mm $1,230mm $963mm N/A $875mm $1,482mm $887mm $770mm

 

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

For ratings I use the better two of Moody’s, S&P or Fitch.

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Consumer’s Energy Co. A1/A+ 3.25% 8/15/2046 450 +120a +110a (+/-5) +105 +105 BAML/CITI/MIZ/MUFG/SCOT
+3 (p)
Microsoft Corp. Aaa/AAA 1.10% 8/08/2019 2,500 +55a +40a (+/-5) +35 +35 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 1.55% 8/08/2021 2,750 +70a +55a (+/-5) +50 +50 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 2.00% 8/08/2023 1,500 +90a +75a (+/-5) +70 +70 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 2.40% 8/08/2026 4,000 +110a +95a (+/-5) +90 +90 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 3.45% 8/08/2036 2,250 +140a +125a (+/-5) +120 +120 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 3.70% 8/08/2046 4,500 +165a +150a (+/-5) +145 +145 BAML/JPM/WFS (a) +4 (p)
Microsoft Corp. Aaa/AAA 3.95% 8/08/2056 2,250 +200a +185a (+/-5) +180 +180 BAML/JPM/WFS (a) +4 (p)
Northern Trust Corporation Baa1/BBB+ 4.60% PerpNC10 500 4.75%a N/A 4.60% $100.00 BAML/BARC/GS/MS
Santander UK Group Hldgs. Baa1/A 2.875% 8/05/2021 1,500 very low 200s
(+206.25)
+190a (+/-5) +185 +185 BNPP/BARC/GS/MS/SANT
Synchrony Financial BBB-/BBB- 3.70% 8/04/2026 500 +230a +225a (+/-5) +225 +225 BAML/MIZ/MUFG
Tanger Properties Baa1/BBB+ 3.125% 9/01/2026 250 +187.5a +170a (+/-2) +168 +168 BAML/WFS
Union Pacific Corporation A3/A 3.35% 8/15/2046 300 +120-125 +112a (+/-2) +112 +112 BAML/BARC/JPM
Union Pacific Corporation
(tap) New total: $650mm
A3/A 2.75% 3/01/2026 150 +75-80 +77a (+/-2) +77 +77 BAML/BARC/JPM

 

Lipper Report/Fund Flows – Week ending July 27th     

 

  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • Over the same period, Lipper reported a net outflow of $15.422m from Loan Participation Funds (2016 YTD net outflow of $5.389b).
  • Emerging Market debt funds reported a net inflow of $1.382b (2016 YTD inflow of $3.717b).

IG Secondary Trading Lab

 

o   BAML’s IG Master Index widened 1 bp to +150 versus +149.  +106 represents the post-Crisis low dating back to July 2007.

o   Standard & Poor’s Global Fixed Income Research widened 6 bps to +202 versus +196.  The +140 reached on July 30th 2014 represents the post-Crisis low.

o   Investment grade corporate bond trading posted a final Trace count of $13.9b on Friday versus $14.5b Thursday and $11.5b the previous Friday.

 

New Issue Volume

 

Index Open Current Change
IG26 72.025 75.231 3.206
HV26 200.50 202.90 2.40
VIX 11.87 12.44 0.57
S&P 2,173 2,170 <3>
DOW 18,432 18,404 <28>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $23.40 bn DAY: $23.40 bn
WTD: $23.40 bn WTD: $23.40 bn
MTD: $23.40 bn MTD: $23.40 bn
YTD: $834.591 bn YTD: $1,068.127 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
Markit US Manufacturing PMI July 52.9 52.9 52.9 —-
Construction Spending MoM June 0.5% <0.6%> <0.8%> <0.1%>
ISM Manufacturing July 53.0 52.6 53.2 —-
ISM Prices Paid July 61.0 55.0 60.5 —-
ISM New Orders July —- 56.9 57.0 —-

 

Rates Trading Lab

 

It was a relatively static Treasury session.  Tomorrow’s another day.

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 100-046 100-24 100-02+ 102-01+ 107-22
RESISTANCE LEVEL 100-032 100-209 99-29 101-26 107-01
RESISTANCE LEVEL 100-00 100-26+ 99-24+ 101-19+ 106-09+
         
SUPPORT LEVEL 99-282 100-09 99-10 100-31+ 105-09+
SUPPORT LEVEL 99-26+ 100-07 99-05 100-25 104-13+
SUPPORT LEVEL 99-246 100-042 98-30 100-15 104-06

 

Tomorrow’s Calendar

 

o   China Data: Nothing Scheduled

o   Japan Data: Monetary Base, Consumer Confidence Index

o   Australia: Trade Balance, Building Approvals MoM

o   EU Data: EU-Jun PPI, U.K.-Jul Const PMI

o   U.S. Data: Jun PI/PS/PCE, Jul NY ISM, Aug IBD-TIPP, Jul Vehicles

o   Supply: U.K. 6y (£2.5bn)

o   Events: ECB 7d, RBA, U.K. ILTR

o   Speeches: Kaplan (more…)

AAPL 7bil Debt Deal Sweetened By Diversity; Mischler Comment
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07.28.16 – An AAPL A Day…

 

Investment Grade New Issue Re-Cap

Apple Inc. Inks $7b 5-part

Tim Cook Talks About Commitment to D&I
Global Market Recap

IG Primary Market Talking Points

Lipper Report/Fund Flows

IG Secondary Trading Lab

Economic Data Releases

Rates Trading Lab-All Eyes on Tokyo

Investment Grade Credit Spreads (by Rating/Industry)

New Issue Pipeline

M&A Pipeline

 

It was an active day that finally put to rest all the rumors and chatter of an Apple multi-tranche new issue.  The Cupertino, California-based multinational technology company (NASDAQ:AAPL) priced a $7b 5-part that anchored today’s total of 6 IG Corporate issuers, 10 tranches and $9.625b in new supply.  As a result, the WTD IG Corporate-only volume of $28.00b eclipsed the syndicate midpoint average estimate of $20.48b by 37%.  SSA added one $1b deal bringing the all-in IG day totals to 7 issuers, 11 tranches and $10.625b.  The July MTD all-in IG Corporate only issuance total officially surpassed syndicate estimates for this month by 6% or $96.75b vs. $91.17b.

As for the IC Corporate plus SSA MTD total, we’re at a strong $127.987b.

and now onward we go to THE Deal-of-the-Day!

 

Apple of My Eye – Apple Inks $7b 5-part

All issuers are important to us here at Mischler Financial, the nation’s oldest Service Disabled Veteran broker-dealer.  However, it is really an accomplishment to secure repeat business.  Additionally to secure repeat business from the world’s largest publicly-held company as measured by market capitalization means that much more.  Today Mischler, whose Capital Markets team is on a roll, was honored to have been selected as an active diversity Co-Manager on today’s Apple Inc. $7.00b 5-part 3-year FXD/FRN, 5s, 10s and 30-year Senior Notes new issuance.

Here’s a look at price compression from early morning initial price thoughts through guidance and the launch and final pricing.  The five tranches posted a cumulative average contraction of 18 bps from start to finish. Here’s a look at how it all evolved:

 

AAPL Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr FRN 3mL+equiv 3mL+equiv 3mL+14 3mL+14 <18> bps +1 N/A N/A
3yr FXD +50a +32-35 +32 +32 <18> bps +1 32/30 flat
5yr +70a +50-53 +50 +50 <20> bps <1> 50/49 flat
10yr +115a +100a (+/-2) +98 +98 <17> bps +3 98/96 flat
30yr +180a +165a (+/-2) +163 +163 <17> bps +2 162/160 <1>

 

………and here’s a look at final book sizes and oversubscription rates:

 

AAPL Issue Tranche Size Books Sizes
At-the-Top
Final Book
Size
Bid-to-Cover
Rate
3yr FRN $350mm $900mm $700mm 2x
3yr FXD $1.15b $2.9b $2.4b 2.09x
5yr $1.25b $4.6b $4.3b 3.44x
10yr $2.25b $6.8b $6.5b 2.89x
30yr $2.0b $7.6b $7.2b 3.6x

 

  • In terms of relative value leads looked at the outstanding AAPL 4.65% due2/23/2046 that was T+161 pegging concession as negative 2 bps on today’s new 30-year that priced at T+163.
  • For 10-year far value, the AAPL 3.25% due 2/23/2026 was T+92 (G+95) pre-announcement versus today’s final 10-year pricing at T+98 landing NIC at 3 bps.
  • The 5-year comps used was the AAPL 2.25% due 2/23/2021 seen T+45 bid or G+51 inferring a negative 1 bp NIC on today’s 5yr pricing at T+50.
  • Finally the 3-year looked at the AAPL 1.70% due 2/22/2019 that was T+27 (G+31) or a 1bp NIC versus today’s new T+32 3-year pricing.

 

Proceeds of today’s offering will be used for general corporate purposes, including repurchases of Apple Inc. common stock and payment of dividends under its program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions, and repayment of debt, according to regulatory filings.

 

Apple Inc. Final Pricing Details

 

AAPL $350m FRNs due 8/02/19 @ $100.00 or 3mL+14

AAPL $1.15bn 1.10% due 8/2/19 @ $99.90 to yield 1.134% or T+32 MW T+10

AAPL $1.25bn 1.55% due 8/4/21 @  $99.861 to yield 1.579% or T+50 MW T+10

AAPL $2.25bn 2.45% due 8/4/26 @ $99.727 to yield 2.481% or T+98 MW T+15

AAPL $2bn 3.85% due 8/4/46 @ $99.735 to yield 3.865% or T+163 MW T+25

 

From the Top Down – Apple Inc.’s Tim Cook Talks About the Company’s Commitment to D&I

With a market cap of $560 billion that’s just too steep even for the guy-in-the-corner to take on in telling the great Diversity and Inclusion story at the world’s most valuable company.  So, instead, I turn to the head chef himself, none other than Tim Cook, CEO of Apple Inc.  It cuts to the heart of what I mean when I consistently write here in the “QC” that “D&I starts from the top down!”  What better company to illustrate that in practice for all of Mischler’s issuer relationships to read than with the world’s largest company.  And “Yes” I own an iPhone and an iPad……my wife owns an iPhone……2 to be exact…….my daughter owns an iTouch and an iPad.  So, we are loyal customers and fans alike.  Stock?  Of course there is also Apple stock in the Quigley family portfolio.  Take it away Tim:

A message from Tim Cook…AAPL-debt-issuance-mischler

Apple has always been different; a different kind of company with a different view of the world. It’s a special place where we have the opportunity to create the best products on earth — products that change lives and help shape the future. It’s a privilege we hold dear.

Diversity is critical to innovation and it is essential to Apple’s future. We aspire to do more than just make our company as diverse as the talent available to hire. We must address the broad underlying challenges, offer new opportunities, and create a future generation of employees as diverse as the world around us. We also aspire to make a difference beyond Apple.

This means fostering diversity not just at Apple but throughout our entire ecosystem, from the customers we welcome in our stores to the suppliers and developers we work with. We are committed to fostering and advancing inclusion and diversity across Apple and all the communities we’re a part of. As one example, we’re proud that our spending on women- and minority-owned businesses exceeded $650 million last year.

We want every person who joins our team, every customer visiting our stores or calling for support to feel welcome. We believe in equality for everyone, regardless of race, age, gender, gender identity, ethnicity, religion, or sexual orientation. That applies throughout our company, around the world with no exceptions.

Last year we reported the demographics of our employees for the first time externally, although we have long prioritized diversity. We promised to improve those numbers and we’re happy to report that we have made progress. In the past year we hired over 11,000 women globally, which is 65 percent more than in the previous year. In the United States, we hired more than 2,200 Black employees — a 50 percent increase over last year — and 2,700 Hispanic employees, a 66 percent increase. In total, this represents the largest group of employees we’ve ever hired from underrepresented groups in a single year. Additionally, in the first 6 months of this year, nearly 50 percent of the people we’ve hired in the United States are women, Black, Hispanic, or Native American.

As you can see, we’re working hard to expand our recruiting efforts so we continue hiring talented people from groups that are currently underrepresented in our industry. We’re supporting education with programs like the Thurgood Marshall College Fund to help students at historically black colleges and universities find opportunities in technology. ConnectED is bringing our technology to some of the most economically disadvantaged schools and communities in the United States, so more people have the opportunity to pursue their dreams. We’re also hosting hundreds of students at our annual developer conference, and we’re setting up new programs to help students learn to code.

We are proud of the progress we’ve made, and our commitment to diversity is unwavering. But we know there is a lot more work to be done.

Some people will read this and see our progress. Others will recognize how much farther we have to go. We see both. And more important than these statistics, we see tens of thousands of Apple employees all over the world, speaking dozens of languages, working together. We celebrate their differences and the many benefits we and our customers enjoy as a result.

Tim Cook

CEO, Apple Inc.

Deals that Open Doors for Diverse Financial Firms

 

Included among Apple’s Diversity Network Associations is Apple Veterans Association.  Apple launched its Supplier Diversity Program in 1988, and it’s been growing and thriving ever since. Through the program, the Company works with a variety of organizations to identify new suppliers whose values match their own. And in just the last year, Apple spent over $3 billion with more than 6000 small and diverse suppliers.  Those suppliers extend to the financial services industry. What transpired on today’s new 5-part Apple transaction was an inflection point for Team Mischler, the nation’s oldest Service Disabled Veteran broker dealer.  We were able to introduce nearly three dozen new accounts to Apple’s investor profile.  We were rewarded with allocations that touched virtually every single account.  That, in turn, creates investor confidence as well as credibility for our broker-dealer.  We take what we do seriously and we strive to be the best with each opportunity that we are given.

Apple works with many of the world’s leading financial institutions, but Apple also wants strong ideas and points of view that can only come from small, diverse firms. The Company feels it lends a broader financial picture and makes the corporation more informed by relying on these firms for some of its most crucial transactions. Today, Mischler Financial Group, Inc. (Service Disabled Veteran-owned); Lebenthal & Co., LLC (woman-owned); and Loop Capital Markets LLC and The Williams Capital Group, L.P. (both African American–owned) were active co-managers on Apple’s $7 billion bond offering.

There are many people to thank for today’s stellar opportunity to serve Apple Inc. First and foremost is Team Apple Inc. Treasury/Funding and that means Mike, Matt and Eric.  As a result, Team Apple is the recipient of Mischler Financial’s Official 5-Star Salute!

As for the joint lead that was appointed by the issuer to liaise with today’s diversity banking group, it was déjà vu all over again folks.  Goldman Sachs once again handled the D&I component of today’s transaction.  Suffice it to say I will hold back on the “kudos”, “good work”, “plaudits”, “hats off” etc, lest someone at Goldman aggressively starts pursuing me to head all public relations for the House of Gold!!  (Haha!) Suffice it to say, congrats and thank you’s to Jonny Fine, Gaurav Mathur, Tony Shan, Dan Miree, Matt Jackson and Salina Lee who I worked with today, via e-mail, phone, Bloomberg and chats.  As the saying goes “Make new friends, but keep the old; those are silver but these are gold.” Thank you Team GS!

Global Market Recap

 

  • S. Treasuries – Mixed & little changed. JGB’s closed mixed & the long end in Europe bid.
  • 3mth Libor – Set at highest yield since May 2009 (0.75650%).
  • Stocks – U.S. stocks mixed. Europe led down by bank stocks. Nikkei struggled.
  • Economic – U.S. data a bit weaker but not a factor.
  • Overseas Economic – Europe data better with higher German CPI.
  • Economic Tomorrow – Big calendars in Japan, Europe & the U.S.
  • Currencies – USD mixed vs. the Big 5 with the DXY Index weaker.
  • Commodities – Crude down while natural gas, gold, silver & copper closed higher.
  • CDX IG: +0.36 to 73.81
  • CDX HY: +4.86 to 401.99
  • CDX EM: +5.44 to 266.42

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • Canadian National Railway Co. upsized its 30-year Senior Notes new issue today to $650mm vs. $500mm at the launch and at the tightest side of guidance.
  • Split-rated Eagle Materials Inc. increased today’s 10-year Senior Notes new issue to $350mm vs. $300mm at a tighter launch and after having skipped guidance.
  • For the week ended July 27th, Lipper U.S. Fund Flows reported an inflow of $1.475b into Corporate Investment Grade Funds (2016 YTD net inflow of $20.798b) and a net outflow of $175.430m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.696b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 9 IG Corporate new issues only was 20.06 bps.

 

Syndicate IG Corporate-only Volume Estimates for This Week and July

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $28.00b
July 2016 vs. Current
MTD – $96.75b
Low-End Avg. $19.39b 144.40% $90.09b 107.39%
Midpoint Avg. $20.48b 136.72% $91.17b 106.12%
High-End Avg. $21.57b 129.81% $92.26b 104.87%
The Low $10b 280.00% $60b 161.25%
The High $30b 93.33% $125b 77.40%

 

 

Have a great evening!
Ron

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM. (more…)

Better Matters For Verizon Corporate Debt Issuance; Mischler Commentary
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07.27.16-Better Matters (NYSE:VZ)

 

Investment Grade Corporate Debt New Issue Re-Cap

“Better Matters!”  New Lowest 6 “BBB”-Rated IG Corporate Coupon in History

Verizon Communications Inc’s. Commitment to D&I and Our Nation’s Veterans

Global Market Recap

New Issues Priced

Lipper Report/Fund Flows

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Market Trade Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 

I have been waiting a long time for an issuer, any issuer for that matter, to price a new issue the day of an FOMC Rate Decision.  The street has been unreasonably overcautious for no reason at all in avoiding treatment of FOMC Rate days as potential print days.  The Fed isn’t doing anything anytime soon and what’s more, when you take the highly dysfunctional Fed-speak out of the picture it’s a no brainer to “go” on those days.  Today’s Fed meeting has no press conference to follow it and no Q&A with Yellen.  So, congratulations to Verizon Communications Inc. Treasury/Funding and its leads for announcing and pricing today’s blockbuster 5-part 3yr FXD/FRN, 5s, 10s and 30-year new issue. That right there is an example of issuer and DCM confidence and leadership.

Today’s IG Corporate tally was 1 issuer, 5 tranches and a total of $6.15b.  SSA took advantage pricing 3 taps and a new $3b 3-year from the Kingdom of Belgium bringing the all-in IG day totals to 5 issuers, 9 tranches and $10.09b.  WTD, we’ve now priced 90% of this week’s IG Corporate syndicate midpoint average forecast or $18.375b vs. $20.48b.

Mischler was named an active Co-Manager on today’s Verizon transaction so without further ado let’s get to the deal drill down and diversity and inclusion piece:
“Better Matters!” – Verizon’s Smart and Daring Dip into the DCM on FOMC Rate Decision Day Pays Off Big Time!

 better-matters-verizon-mischler

Today’s lone IG Corporate new issue from Verizon Communications Inc. owned the proverbial leaderboard today announcing a $6.15b five-part 3yr FXD/FRN, 5s, 10s and 30-year Senior Note transaction.  Each tranche was defined as benchmark sized early on.  Looking at the below price evolution across the five issuances, the average spread compression from IPTs to the launch/final pricing was a strong 22.00 bps. Strong demand saw the final cumulative order books close at $29.4b or 4.78x oversubscribed.  Voracious investor appetite for better rated IG corporate credits for more yield and safety drove the spread compression today.

 

VZ Issue IPTs GUIDANCE LAUNCH PRICED Spread
Compression
NICs
(bps)
Trading at
the Break
+/-
3yr FRN 3mL+equiv 3mL+equiv 3mL+37 3mL+37 <20> bps <1> 3mL+36/35 <1>
3yr FXD +75a +60a (+/-5) +55 +55 <20> bps 0 54/53 <1>
5yr +95a +80a (+/-5) +75 +75 <20> bps 0 74/72 <1>
10yr +140a +120a (+/-5) +115 +115 <25> bps <2> 114/112 <1>
30yr +215a +195a (+/-5) +190 +190 <25> bps <2> 189/187 <1>

 

…..and here’s a look at final book sizes and oversubscription rates:

 

VZ Issue Tranche Size Final Book
Size
Bid-to-Cover
Rate
3yr FRN $400 $800mm 2x
3yr FXD $1,000 $4.1b 4.1x
5yr $1,000 $6b 6x
10yr $2,250 $9.5b 4.22x
30yr $1,500 $9b 6x

 

In terms of relative value I looked at the outstanding VZ 4.862% due 8/21/2046 that was T+192 pegging concession as negative 2 bps on today’s new 30-year that priced at T+190.
For the 10-year the VZ 3.50% due 11/01/2024 was T+97 pre-announcement or G+107.  Adding 10 bps for the 8s/10s curve gets you to T+117 versus today’s new 10-year pricing at T+115 comes to yet another negative 2 bp concession.
The 5-year comps I used were the VZ 3.45% due 2021 that was T+65 (G+69) and the VZ 3.00% due 11/01/2021 T+84 (G+81). Those two are 8 months apart, so taking an average of G+69 and G+81 is G+75 landing you at a July fair value.  Hence, the 5yr VZ priced flat or without a concession.
Lastly the three-year looked to the VZ 2.55% due 6/17/2019 T+54 bid (G+54) for a 1bp NIC versus today’s new T+55 3-year pricing.

Conclusion, Verizon’s finance and treasury teams should be very happy with how things went on this FOMC Rate Decision day.  Janet Yellen and Company, eat your heart out! The world doesn’t stand still anymore on Rate Day.

Proceeds from today’s transaction will be used for general corporate purposes, including to repay at maturity on September 15, 2016, $2.25 billion aggregate principal amount of its floating rate notes due 2016, plus accrued interest on the notes.

 

Verizon Final Pricing Details

VZ $400mm FRNs due 8/15/2019 @ $100.00 or 3mL+37
VZ $1,000b 1.375% due 8/15/2019 @ $99.991 to yield 1.378% or T+55 MW+10

VZ $1,000b 1.75% due 8/15/2021 @ $99.564 to yield 1.841% or T+75 MW+15

VZ $2,250b 2.625% due 8/15/2026 @$99.745 to yield 2.654% or T+115 MW+20

VZ $1,500b 4.125% due 8/15/2046 @$99.947 to yield 4.128% or T+190 MW+30

 

Verizon Communications Inc’s. Commitment to D&I and Our Nation’s Veterans

 

Verizon is committed to fostering an inclusive environment. They care about diversity in both its employees and its suppliers. Diversity and inclusion is how Verizon achieves success. By celebrating diversity across all spectrums, including but not limited to race, national origin, religion, gender, sexual orientation, gender identity, disability, veteran/military status, and age, Team Verizon is a stronger company and culture that takes pride in its talented and diverse team of people who focus on its customers, every day. Their combined intelligence, spirit and creativity make Verizon a great place to work, learn and grow. But Verizon’s commitment to our nation’s veterans – those who are prepared to make the ultimate sacrifice so that we can all do the things that we do – is something that sets Verizon apart with Team Mischler, the nation’s oldest Service Disabled Veteran broker-dealer.

 

Just let these facts speak for themselves:

  • Verizon employs nearly 13,000 veterans
  • The Military Times Best for Vets: Employers 2015 rankings voted Verizon as the Number 1 company in the United States for veterans.
  • Verizon is ranked as a top military spouse-friendly company by Military Spouse magazine
  • Verizon was named one of U.S. Veteran Magazine’s “Top Veteran-Friendly Companies.”

With a clear focus on and concerted effort toward a smooth transition for our veterans from the military to civilian life, Verizon offers career services to veterans and their spouses.  VZ provides mentoring programs, hosts career fairs and extends discounts to veterans and their families.  The Company also offers benefits like its Enhanced Military Leave program and flexibility during deployments and relocations. But Verizon does so much more.  It offers guidance on constructing a military background into a civilian resume on its website through helpful advice.  It includes a Q&A that helps match a veteran’s military role with corresponding civilian functions and offers counsel on how to convert a military experience into civilian responsibilities.
Verizon gets it!  They do not hire veterans because it’s the right thing to do rather they do it because veteran leadership and skill sets make it a better company.  Evan Guzman, Verizon’s head of military programs said “there is rarely a position within the military that we can’t find a place for within Verizon.  85% of military jobs have a direct civilian counterpart at Verizon.” Heck, Verizon’s military recruitment team boasts seven full-time dedicated employees!  I think you are beginning to get the picture that Verizon is yet another great story not only about making bold and wise leading funding decisions in our Debt Capital Markets like today but they are also leading a corporate charge in America to welcome our nation’s heroes when they come back home.  Yet another great story about Corporate America that should be told to Main Street.  The more people know, the more they’ll have confidence in the free market enterprise system.  Kudos to team Verizon!

It’s one thing to be on a Verizon transaction but quite another to extoll just how significantly their veteran give-back initiatives permeate their corporate DNA.  So, please indulge me as I’d like to call out those seven fully dedicated employees who work to give our veterans a firm footing upon homecoming:

 

  • Evan Guzman, Head of Military Programs & Veteran Affairs
  • Tommy Jones, Program Manager Veteran Recruitment & Operations
  • Rodney Greenwood, Military Recruiter – Central Region
  • Nick Relacion, Military Recruiter – Eastern Region
  • Joseph Rocha – Military Recruiter – Western Region
  • Brittney Becker – Team Coordinator
  • Monica Orecchio – Military Spouse Recruiter.

There you see that! Telling the story AND introducing the people.  It’s not just about subscribers and quality cable services rather it’s a corporate culture with a focus on social responsibility.
In conclusion, there’s no better way to end this piece than to employ Verizon’s corporate slogan – “Better Matters!”

 
New Lowest 6 “BBB”-Rated IG Corporate Coupon in History!

Verizon’s 10-year tranche set a new record as the all-time lowest 6 “BBB”-rated coupon in DCM history!  That’s right the 10-yr 2.625% coupon now sits atop the all-time lowest 10-year coupons in that category.  Formerly both the Republic of Colombia and Brazil were tied at 2.625% BUT they are both sovereign credits NOT IG Corporates.  Federal Express, Dr. Pepper, Ameren Corp. and PPG Industries were officially bounced down one notch in a four-way tie for second at 2.70%. It was our immense pleasure to relay that news to Verizon which couldn’t have happened with a request for a call.

Shout outs along with Mischler’s five-star salute go to each of Verizon Treasury team leaders. We appreciate that you selected Mischler Financial Group from among the diversity firms you have to choose from and to provide us the opportunity to prove our capabilities.
Thanks also to the “Golden Boys” at GS Syndicate who we liaised with on today’s 5-part book builds.  That begins with the maestro himself Mr. Jonny Fine. What else is there left to say about the guy who heads Syndicate, is a Managing Director and Goldman Partner as well as a voting member of Goldman’s all-important Finance Committee.  Oh, he also guides the diversity mandate at team Goldman.  Goldman’s mandate is piloted by Fine for execution and he consistently does that through his stellar team beginning with his newest hire, the polished pro, John Sales, who was brought on board the Golden crew from Barclays Syndicate.

 

And, a first time and very personal shout out from the guy-in-the-corner to our new veteran hire Jonathan Herrick.  He’s been with us now for two months and I have to say each and every day I am grateful to see how this military veteran seizes the opportunity to focus, learn and deliver each and every day.  He’s been a great addition to our special operations unit here as our desk analyst and take it from me folks, he knows what work ethic means.  After three tours fighting for us in the danger, dust and dirt of Afghanistan, Jon Herrick has wasted no time becoming a stalwart member of Mischler’s capital markets crew.

 

Global Market Recap

 

  • FOMC Statement: A little give & take but the bottom line is the FOMC is on hold.
  • S. Treasuries – Strong session for USTs led by the 5yr.
  • Overseas Bonds – Gilts, Bunds & JGB’s (not the 30yr) rallied.
  • 3mth Libor – Set at highest yield since May 2009 (0.75150%).
  • Stocks – NASDAQ rallied and the Dow and S&P were little changed.
  • Overseas Stocks – Europe & Japan rallied while Chinese stocks had a poor day.
  • Economic – U.S. data was slightly weaker but the focus was on the FOMC Statement.
  • Currencies – USD better vs. the Yen, CAC & AUD but lost ground vs. Euro & Pound.
  • USD – Closed mixed vs. the Big 5 but did lose ground after the FOMC Statement.
  • Commodities – CRB, crude oil (low since April) & copper down while gold & silver rallied.
  • CDX IG: -0.84 to 73.74
  • CDX HY: -1.55 to 400.00
  • CDX EM: -1.29 to 259.84

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • The average spread compression from IPTs thru the launch/final pricing of today’s 5 IG Corporate new issues only was 22.00 bps.

 

Syndicate IG Corporate-only Volume Estimates for This Week and July

 

IG Corporate New Issuance This Week
7/25-7/29
vs. Current
WTD – $18.375b
July 2016 vs. Current
MTD – $87.125b
Low-End Avg. $19.39b 94.77% $90.09b 96.71%
Midpoint Avg. $20.48b 89.72% $91.17b 95.56%
High-End Avg. $21.57b 85.19% $92.26b 94.43%
The Low $10b 183.75% $60b 145.21%
The High $30b 61.25% $125b 69.70%

 

 

Have a great evening!
Ron

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

NICs, Bid-to-Covers, Tenors and Sizes

 

Here’s a review of this week’s key primary market driver averages for IG Corporates only through Tuesday’s session followed by the averages over the prior four weeks:

KEY IG CORPORATE
NEW ISSUE DRIVERS
MON.
7/25
TUES.
7/26
AVERAGES
WEEK 7/18
AVERAGES
WEEK 7/11
AVERAGES
WEEK 7/04
AVERAGES
WEEK 6/27
New Issue Concessions 2.89 bps 0.90 bps 3.95 bps 0.82 bps 0.73 bps 10.67 bps
Oversubscription Rates 3.57x 2.61x 3.42x 4.73x 3.82x 4.05x
Tenors 10.90 yrs 24.67 yrs 7.95 yrs 9.58 yrs 9.72 yrs 10.87 yrs
Tranche Sizes $710mm $850mm $1,482mm $887mm $770mm $1,229mm

 

New Issues Priced

Today’s recap of visitors to our IG dollar Corporate and SSA DCM:

For ratings I use the better two of Moody’s, S&P or Fitch.

Please note that OM Asset Management plc tapped it’s 10-year for an additional $25mm yesterday, July 26th.  It is included below for informational purposes only.  The volume tables near page bottom have been updated to reflect it.  Thanks! -RQ

 

IG

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
Verizon Comm. Inc. Baa1/A- FRN 8/15/2019 400 3mL+equiv 3mL+equiv 3mL+37 3mL+37 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 1.375% 8/15/2019 1,000 +75a +60a (+/-5) +55 +55 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 1.75% 8/15/2021 1,000 +95a +80a (+/-5) +75 +75 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 2.625% 8/15/2026 2,250 +140a +120a (+/-5) +115 +115 BAML/DB/GS/MIZ(a) +2(p)
Verizon Comm. Inc. Baa1/A- 4.125% 8/15/2046 1,500 +215a +195a (+/-5) +190 +190 BAML/DB/GS/MIZ(a) +2(p)
OM Asset Management plc
(tap) on 7/26
New total: $275mm
Baa2/BBB- 4.80% 7/27/2026 25 N/A N/A N/A T+325 BAML/CITI/RBC/WFS

 

SSA

Issuer Ratings Coupon Maturity Size IPTs GUIDANCE LAUNCH PRICED LEADS
IFC (tap)
New total: $2,000mm
Aaa/AAA FRN 12/15/2020 190 3mL+13a N/A N/A 3mL+13 BARC/HSBC
NWB (tap)
New total: $1,250mm
Aaa/AAA 1.50% 4/16/2018 500 MS+10a MS+10a N/A +29.6 BAML/DB/TD
Rentenbank (tap)
New total: $850mm
Aaa/AAA FRN 1/12/2022 250 N/A N/A 3mL+27 3mL+27 NOM/RABO/RBC
The Kingdom of Belgium Aa3/AA 1.125% 8/03/2019 3,000 MS+16a MS+15a MS+15 33.8 BARC/CITI/SCOT

 

Lipper Report/Fund Flows – Week ending July 20th     

 

  • For the week ended July 20th, Lipper U.S. Fund Flows reported an inflow of $894.421m into Corporate Investment Grade Funds (2016 YTD net inflow of $19.323b) and a net inflow of $321.724m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.872b).
  • Over the same period, Lipper reported a net inflow of $68.984m from Loan Participation Funds (2016 YTD net outflow of $5.373b).
  • Emerging Market debt funds reported a net inflow of $918.406m (2016 YTD inflow of $2.335b).

 

IG Credit Spreads by Rating

The 10-day IG spread performance vs. the T10 across the ratings spectrum and how IG compared versus high yield:

Spreads across the four IG asset classes are an average 34.25 bps wider versus their post-Crisis lows!

 

ASSET CLASS 7/26 7/25 7/22 7/21 7/20 7/19 7/18 7/15 7/14 7/13 1-Day Change 10-Day Trend PC
low
IG Avg. 147 146 147 148 148 148 149 149 150 152 +1 <5> 106
“AAA” 80 79 80 80 79 80 79 79 80 80 +1 0 50
“AA” 85 85 84 85 85 86 86 86 86 88 0 <3> 63
“A” 115 115 115 116 116 117 117 117 118 120 0 <5> 81
“BBB” 193 192 193 194 194 195 196 196 197 200 +1 <7> 142
IG vs. HY 398 393 392 393 392 397 395 393 394 406 +5 <8> 228

 

IG Credit Spreads by Industry

…….and a snapshot of the major investment grade sector credit spreads for the past ten sessions:

Spreads across the major industry sectors are an average 43.79 bps wider versus their post-Crisis lows!

                                    

INDUSTRY 7/26 7/25 7/22 7/21 7/20 7/19 7/18 7/15 7/14 7/13 1-Day Change 10-Day Trend PC
low
Automotive 118 118 120 121 122 122 122 123 124 126 0 <8> 67
Banking 137 137 139 140 140 141 140 140 141 143 0 <6> 98
Basic Industry 196 195 195 196 197 198 198 199 202 204 +1 <8> 143
Cap Goods 107 107 107 107 107 108 108 109 109 111 0 <4> 84
Cons. Prod. 110 110 110 110 110 110 110 110 111 112 0 <2> 85
Energy 201 198 197 198 198 199 201 201 203 207 +3 <6> 133
Financials 172 174 176 177 177 178 179 180 181 184 <2> <12> 97
Healthcare 117 116 116 117 117 118 119 119 121 122 +1 <5> 83
Industrials 148 147 147 148 148 149 149 150 151 153 +1 <5> 109
Insurance 172 172 173 174 174 175 175 176 177 179 0 <7> 120
Leisure 152 153 153 154 153 154 154 155 155 156 <1> <4> 115
Media 171 170 170 172 173 173 173 174 174 176 +1 <5> 113
Real Estate 162 162 163 164 164 164 165 166 166 167 0 <5> 112
Retail 118 117 117 118 118 118 119 119 120 121 +1 <3> 92
Services 142 143 144 144 144 145 146 146 146 147 <1> <5> 120
Technology 131 131 131 131 131 132 131 131 132 134 0 <3> 76
Telecom 169 168 167 168 169 169 168 168 168 169 +1 0 122
Transportation 144 144 145 145 145 146 146 147 148 149 0 <5> 109
Utility 147 147 147 148 148 149 149 149 150 151 0 <4> 104

 

IG Secondary Trading Lab

 

  • BAML’s IG Master Index widened 1 bp to +147 versus +146.  +106 represents the post-Crisis low dating back to July 2007.
  • Standard & Poor’s Global Fixed Income Research widened 2 bps to +196 versus +194.  The +140 reached on July 30th 2014 represents the post-Crisis low.
  • Investment grade corporate bond trading posted a final Trace count of $16.8b on Tuesday versus $14.7b Monday and $18.0b the previous Tuesday.
  • The 10-DMA stands at $15.8b.
  • The top three most actively traded IG-rated issues were led by ABIBB 3.65% due 2/01/2026 with client sales twice that of purchases.
  • WFC 2.10% due 7/26/2021 finished second with client and affiliate flows representing 90% of the volume.
  • COF 3.75% due 7/28/2026 placed third with client sales four-times purchases.

 

New Issue Pipeline

Please note that for ratings I use the better two of Moody’s, S&P or Fitch.

 

  • Adani Transmission Limited (Baa3/BBB-) mandated Barclays, DBS Bank and Standard Chartered Bank as Joint Global Coordinators and those same three banks as well as Emirates NBD Capital, MUFG, Nomura and Societe Generale CIB as joint book runners and leads for its upcoming dollar-denominated 144a/REGS 10-year Senior Secured Notes new issue.
  • The Government of Trinidad & Tobago (Baa3/A-) mandated Deutsche Bank and First Citizens Bank to arrange fixed income investor meetings that kicked off Monday, July 25th in preparation for a dollar-denominated 144a/REGS offering that could soon follow their conclusion.  The meetings took place in L.A. and London on the 25th, New York and London on Tuesday the 26th and wrapped up in New York and Boston on the 27th.
  • Empresa Nacional de Petroleo or “ENAP” (Baa3/BBB-), the state-owned Chilean hydrocarbon company mandated Citigroup and J.P. Morgan to arrange fixed income investor meetings in the U.S., Chile and Europe that began on Monday, July 25th in preparation for a 10-year dollar-denominated 144a/REGS Senior Unsecured Notes new issue that could soon follow its conclusion.
  • The Export Bank of India (Baa3/BBB-) mandated Bank of America/Merrill Lynch, Barclays, Citigroup, J.P. Morgan and Standard Chartered Bank as joint leads and book runners to arrange fixed income investor meetings in the U.S., Asia and Europe that began on Thursday, July 21st in preparation for a 144a/REGS Senior Notes new issue that could soon follow its conclusion.
  • Woori Bank (A2/A-) hired Bank of America/Merrill Lynch, Citigroup, Commerzbank, Credit Agricole CIB, HSBC and Nomura to arrange fixed income investor meetings in the U.S., Europe and Asia that began on Monday, July 11th and continued thru Wednesday, July 20th.  Last May, Woori set up a $7b GMTN program.
  • National Grid plc (Baa1/A-) asked J.P. Morgan to arrange fixed income investor meetings that took place on Wednesday, June 1st making stops in Boston, New York and concluded on June 3rd in New Jersey and Philadelphia.  The Company’s Group and U.S. Treasurers were in attendance.

 

M&A Pipeline – $212.62 Billion in Cumulative Enterprise Value!

Please note that for ratings I use the better two of Moody’s, S&P or Fitch.

 

  • Zimmer Biomet (Baa3/BBB) completed its offer to purchase all outstanding shares of LDR stock on Wednesday, July 13th.  Zimmer announced on June 7th that it agreed to purchase medical device maker LDR Holding Corp. for $37 per share in cash for a total transaction value of $1b. Zimmer expects to maintain its IG rating and to issue $750mm in Senior Unsecured Notes in order to repay the credit facility. Goldman Sachs is acting as advisor to Zimmer Biomet.
  • ITC Holdings Corp. announced on Thursday, June 23rd that its shareholders approved the purchase by Fortis Inc. (A-/S&P). Fortis Inc. (A-/S&P) announced on Tuesday, February 9th that it would acquire ITC Holdings for $11.3b in a cash and stock transaction.  The terms stipulate that ITC shareholders will receive $22.57 in cash and .7520 Fortis shares per ITC share. Fortis will also assume approx. $4.4bn of consolidated ITC indebtedness. The cash portion of the deal will be financed through the issuance of about $2bn of Fortis debt and the sale of up to 19.9% of ITC to one or more infrastructure-focused minority investors. Fortis expects to maintain a solid IG credit rating. Fortis expects to raise $2bn of new debt to fund the deal that is expected to close sometime in late 2016.
  • This past February, Algonquin Power & Utilities Corp. (NR/BBB) announced it will acquire The Empire District Electric Company (N/A) in a $3.4b CAD or $2.4b USD equivalent all cash transaction and today, Thursday, June 16th, Empire’s shareholders overwhelmingly voted in support of the merger to the tune of 95%.  Regulatory approvals are the next step before finalizing the sale expected sometime in Q1 2017. The merger assumes $900mm in USD debt.
  • Microsoft (Aaa/AAA) and LinkedIn Corp. (BB+/NR) announced on June 13th that they have entered into a definitive agreement in which MSFT will purchase LKND for $196 per share for a total transaction valued at $26.2b.  The deal is expected to close sometime in 2016 and pending LinkedIn shareholder approval.
  • Symantec (Baa3/BBB-) announced on June 13th that it entered into an agreement to purchase Blue Coat (Caa2/CCC) for $4.56b in cash. The deal will close sometime in Q3 2016.  Both company boards approved the deal. The transaction will be funded with available cash and $2.8b of new debt. J.P. Morgan is the lead adviser to Symantec.  Bank of America/Merrill Lynch, Barclays and Wells Fargo are also advisers.
  • Shire PLC announced in January 2016 that it will acquire Baxalta Inc. (Baa2/BBB) for approximately $32.2 billion in cash and stock.  Shire secured an $18b bank facility to finance the cash portion and will refinance it in debt. The deal creates the single largest maker of rare disease drugs in the world. This deal could come at any time.
  • Air Liquide SA (NR/A+) announced it has completed the acquisition of Airgas Inc. (Baa2/BBB).  Air Liquide announced on November 17th that it would acquire Airgas Inc. (Baa2/BBB) for $13.4b in which Airgas will be a wholly-owned subsidiary of its new parent. The transaction will be financed bridge loans that are expected to be refinanced through equity, Euro cash and euro as well as dollar-denominated debt issuance.  The deal involves $12b of a bridge facility thru Barclays and BNP Paribas.  The bridge will be refinanced post-closing through a combination U.S. dollar-denominated and Euro bond issuances.
  • Exelon Corp. (Baa2/BBB-) debt financing plans remaining for 2016 include, $750 million at Baltimore Gas & Electric (A3/A-) ($300 million maturing on October 1) and $450 million at PECO Energy (Aa3/A-) ($300 million maturing on October 15).
  • On Friday, April 29th the Alere Inc. (Caa1/CCC+) Board of Directors rejected a request by Abbott Labs (A2/A+) to terminate their merger agreement in return for around $40mm for transaction expenses. Abbott cited concerns about various Alere representations in their merger agreement including a delayed 2015 Form 10-K filing as well as government investigations. Abbott Labs (A2/A+) had announced on Monday, February Baa1/BBB+1st, that it would acquire Alere Inc. (Caa1/CCC+) for $5.8b in which “ABT” would pay $56 per share of ”ALR.”  The deal was to be financed with debt.  ABT expects a strong IG rating despite the new debt. The deal is subject to “ALR” shareholder as well as regulatory approvals.
  • Abbott Labs (A2/A+) announced on Thursday, April 28th that it will buy St. Jude’s Medical Inc. (Baa2/A-) in a cash-stock deal valued at $25b to reinforce the medical devices maker’s stake in cardiovascular care. Abbott will fund the cash portion of the transaction with new medium- and long-term debt. Bank of America/Merrill Lynch and Evercore are acting as advisors to Abbott. The deal is expected to close by Q4 2016.
  • Sherwin Williams (A2/A-) announced on Monday, March 21st that it will purchase Valspar Corp. (Baa2/BBB) for $9.3b or $113 per share.  The acquisition will help Sherwin-Williams gain access to big-box retailers like Lowe’s where Velspar has access. It will also provide overseas expansion opportunities.  Sherwin Williams will finance the merger with available cash, existing credit facilities and new debt.  The deal should close sometime before the end of Q1 2017.
  • TE Connectivity (A-/A-) announced it will buy medical device maker Creganna Medical for $895mm in cash.  The deal will be funded with available cash and debt.
  • Dominion Resources Inc. “D” (Baa2/BBB+) announced on Monday, February 1st, that it will acquire Questar Corporation “STR” (A-/S&P) for $4.4b in cash.  “D” agreed to pay “STR” shareholders $25 per share and assume its debt. The deal will be funded with equity, convertibles and debt and is expected to close by the end of 2016. RBC and Mizuho are providing financing and acting as financial advisors to Dominion.  The deal is subject to shareholder and regulatory approvals.
  • This morning in Charlotte, shareholders of Piedmont Natural Gas (A2/A) voted to approve the Company’s acquisition by Duke Energy (A3/BBB+).  66.8% of voting shares supported the acquisition.  In late October Duke Energy, (A3/BBB+) the nation’s largest utility announced that it will buy Piedmont Natural Gas (A2/A) for $4.9b in cash.  Both companies are partners in the $5b Atlantic Coast Pipeline.  The purchase, pending regulatory approval, will add one million new rate payers to Duke Energy’s customer base.  The deal is expected to close as early as July.
  • UPS (Aa3/A+) announced in July 2015 that it entered into a definitive purchase agreement to acquire Coyote Logistics, a technology-driven, non-asset based truckload freight brokerage company for $1.8b from Warburg Pincus.  The transaction will be financed with available cash resources and through existing and new debt arrangements and is expected to close within 30 days.
  • Anthem Inc. (Baa2/A) in July 2015, proposed to purchase Cigna Corp. (Baa1/A) for $54b or $188 per share furthering the consolidation in the healthcare sector. The deal is expected to close sometime during the second half of 2016. The merger would involve 53mm members and will include $22b in new debt and loans.
  • Amphenol Corporation (Baa1/BBB+) announced on June 29th 2015 that it made a binding offer to acquire 100% of FCI Asia Pte. Ltd. for $1.275b. Funding will be made thru cash and debt and is expected to close by the end of 2015.

 

New Issue Volume

 

Index Open Current Change
IG26 74.577 73.45 <1.127>
HV26 192.545 194.975 2.43
VIX 13.05 12.83 <0.22>
S&P 2,169 2,166 <3>
DOW 18,473 18,472 <1>
 

USD

 

IG Corporates

 

USD

 

Total IG (+ SSA)

DAY: $6.15 bn DAY: $10.09 bn
WTD: $18.375 bn WTD: $23.315 bn
MTD: $87.125 bn MTD: $116.362 bn
YTD: $801.566 bn YTD: $1,034.102 bn

 

Economic Data Releases

 

TODAY’S ECONOMIC DATA PERIOD SURVEYED ESTIMATES ACTUAL NUMBER PRIOR NUMBER PRIOR REVISED
MBA Mortgage Applications July 22 —- <11.2%> <1.3%> —-
Durable Goods Orders June <1.4%> <4.0%> <2.3%> <2.8%>
Durables Ex Transportation June 0.3% <0.5%> <0.3%> <0.4%>
Cap Goods Orders Nondef Ex Air June 0.2% 0.2% <0.4%> <0.5%>
Cap Goods Ship Nondef Ex Air June 0.4% <0.4%> <0.5%> —-
Pending Home Sales MoM June 1.2% 0.2% <3.7%> —-
Pending Home Sales NSA YoY June 3.0% 0.3% 2.4% —-
FOMC Rate Decision (Upper Bound) July 27 0.50% 0.50% 0.50% —-
FOMC Rate Decision (Lower Bound) July 27 0.25% 0.25% 0.25% —-

 

Rates Trading Lab

 

Market’s tone was turned positive post-FOMC. Though the statement was interpreted with more of a hawkish bias, the fact remains that the Fed needs to see all ducks in a line before pulling the next trigger. Foreign markets were better bid all day and we were lagging, so bond bulls are in charge at the moment. Still some hurdles for them and the market, however. 7yr auction tomorrow will be at levels that are currently 8bp richer than the 5yr note that tailed. BOJ looms as well. Nevertheless, I think it will be hard to see higher yields so long as Bunds are bid as they are. Demand for fixed income remains voracious. Today’s $6.15bbn Verizon deal (Mischler was a co-manager) was announced with 3yr IPT of +75, 5yr +95, 10yr +140 and 30yr +215. It priced at 3yr+55, 5yr +75, 10yr+115 and 30yr +190 and was very well oversubscribed. 5y/30y found support at 110bp and I would trade the 110-120bp range we have seen over the past 2 weeks.

-Jim Levenson

 

UST Resistance/Support Table

 

CT3 CT5 CT7 CT10 CT30
RESISTANCE LEVEL 99-30+ 100-13+ 100-217 101-22+ 108-06+
RESISTANCE LEVEL 99-282 100-10 100-14+ 101-17 107-13
RESISTANCE LEVEL 99-26+ 100-07 100-10+ 101-07+ 106-20+
         
SUPPORT LEVEL 99-23+ 100-02 100-04 100-29 105-15+
SUPPORT LEVEL 99-216 99-296 99-30 100-23 104-16+
SUPPORT LEVEL 99-19+ 99-26+ 99-26+ 100-14 104-01+

 

Tomorrow’s Calendar

 

  • China Data: Nothing Scheduled
  • Japan Data: Japan Foreign Bond Buying
  • Australia: Import/Export
  • EU Data: EU-Jul BCI/Conf GE-Jul CPI/Unem
  • S. Data: Claims, Cons Comf.Jun Trade
  • Supply: Italy 5, 7,10y, U.S. 7y
  • Events: Nothing scheduled
  • Speeches: Couere

(more…)

A Day To Discover Discover Bank Debt Offering; Mischler Comments
July 2016      Debt Market Commentary, Recent Deals   

Quigley’s Corner 07-21-16  Discover Bank Debt Offering


Investment Grade Corporate Debt New Issue Re-Cap

Global Market Recap

IG Primary Market Talking Points

Uncovering Discover Bank’s 10yr Fair Value  

New Issues Priced

Lipper Report/Fund Flows

Investment Grade Credit Spreads (by Rating/Industry)

IG Secondary Trading Lab

New Issue Pipeline

M&A Pipeline

Economic Data Releases

Rates Trading Lab

 


It was a relatively quiet day in the IG primary market place with only 2 issuers pricing 3 tranches between them totaling $2b and with no all-in volume assist from the SSA space. With tomorrow’s being a Friday session, it looks as if we might fall about 12% short of this week’s syndicate midpoint average volume forecast. As of today, we’ve priced $30.40b vs. $34.70b.  This evening, stay tuned for Mischler’s deal-of-the day –  the story of Discover Bank’s new 10-year.

Global Market Recap

 

  • ECB Meeting & Draghi were the featured story today (below).
  • S. Treasuries – Big time comeback for USTs from the morning low prints.
  • 3mth Libor – Set at highest yield (0.71450%) since 5/20/09.
  • Stocks – Down day for the U.S. Europe closed mixed. Asia closed higher.
  • Economic  U.S. had more good data than bad. U.K. retail sales were weaker.
  • Currencies – Yen rallied 1 handle vs. the USD. USD tiny gains vs. the Euro & Pound.
  • Commodities – Poor day for crude oil and an up day for gold & silver.
  • CDX IG: +0.35 to 70.56
  • CDX HY: +2.22 to 389.87
  • CDX EM: -1.30 to 254.36

Swap Spreads: Had a very difficult day for a host of reasons (below)

*CDX levels are as of the 3PM ET UST close.

-Tony Farren

 

IG Primary Market Talking Points

 

  • For the week ended July 20th, Lipper U.S. Fund Flows reported an inflow of $894.421m into Corporate Investment Grade Funds (2016 YTD net inflow of $19.323b) and a net inflow of $321.724m into High Yield Funds – the second highest ever – (2016 YTD net inflow of $9.872b).
  • The average spread compression from IPTs thru the launch/final pricing of today’s 3 IG Corporate new issues only was 22.50 bps.

 

Discovering the Uncovering of Discover Bank’s 10yr Fair Value  
Discover Bank is the nation’s third largest credit card brand with approximately 50 million cardholders.  This past Tuesday, July 19th Discover Bank’s parent company, Discover Financial (NYSE: DFS beat Q2 2016 earnings delivering $1.47 EPS or $0.05 more than consensus estimates of $1.42.  Discover’s $2.2b in revenues was $400mm more than $1.8b forecasts. That’s a great start to pricing a new issue for a market defined by ravenous investor appetite.

 

Discover Bank wasted no time capitalizing on its strong earnings by hitting the market this morning for the first time since it’s $1b 3-year Global Notes that priced on August 10th of 2015.  The relatively infrequent issuer rated Baa3/BBB/BBB+ and “stable” on all counts, announced and priced a new $1b 10-year 3(a)(2) Senior Bank Notes new issue due July 27, 2026 through joint leads Bank of America/Merrill Lynch, Citigroup (who served as B&D), Deutsche Bank and Royal Bank of Canada.  Rule 3(a)(2) makes the issue exempt from SEC registration.  Proceeds were earmarked for general corporate purposes.  But if it’s in the “QC” it’s because the issuer gave us a role today and that role was a very nice one – Mischler Financial served as an active 2.00% Co-Manager and so without further ado, let’s get to the deal drill-down.

Initial price thoughts were released in the +215-220 range before guidance tightened to +195a with “area” defined as (+/-5 bps) after which it launched and priced at the tightest side of guidance or T+190. That’s a resounding <27.5> bps of spread compression from IPTs to the launch.

 

The comp for today’s relative value study looked to the outstanding DFS 4.25% due 3/13/2026 that was T+198 bid pre-announcement this morning or G+199. That $400mm deal originally priced on March 10th, 2014.  That pegged fair value on today’s new 10-year that priced at T+190 at negative< 9 bps>! Still another way to approach fair value was to look at the DFS 3.75% due 3/04/2025 (Holdco) that was T+205 (G+214).  One can make a case that the Opco/Holdco differential is worth 15 bps so fair value would again get you to around +199 and again nailing NIC thru this approach as negative <9> bps.  Translation……..”Congratulations to Discover Treasury Funding and the group of joints leads BAML, CITI, DB and RBC!”
Today’s order book finished at $4.4b or 4.4x-times oversubscribed.

At the break, paper was framed in a 188/186 market or 2 bps tighter on the bid.

 

Discover Bank Final Pricing
DFS $1bn 3.45% due 7/27/2016 @ $99..891 to yield 3.463% or T+190
Thank yous as well as Mischler’s five-star salute go out to Team Discover’s Tim Schmidt, who it seems I’ve been working with for all my years in the diversity space, Al Agra, Krsitopher Mclachlan and Kevin Sweeney.  To no one’s surprise, a hats off to Team Citigroup Syndicate’s Peter Aherne, Jim Hennessy who ran the book and Alisha Mingo.  Additionally a kind nod to an all-around good guy at RBC Syndicate – Paul Lynch.  Thanks to each of you for the data exchanges, relative value discussions and Citigroup for working with me on orders once again today.

Syndicate IG Corporate-only Volume Estimates for This Week and July

 

IG Corporate New Issuance This Week
7/18-7/22
vs. Current
WTD – $30.40b
July 2016 vs. Current
MTD – $69.50b
Low-End Avg. $33.68b 90.26% $90.09b 77.15%
Midpoint Avg. $34.70b 87.61% $91.17b 76.23%
High-End Avg. $35.73b 85.08% $92.26b 75.33%
The Low $25b 121.60% $60b 115.83%
The High $41b 74.15% $125b 55.60%

 

Have a great evening!
Ron

Below please find my synopsis of everything Syndicate and Secondary from today’s debt capital markets, including the investment grade corporate bond data drill down as seen from my seat here in Syndicate, Sales and DCM.

NICs, Bid-to-Covers, Tenors and Sizes (more…)

PEPCO Lights Up Bond Market; Debt Deal Underwritten With Diversity Inclusion; Mischler Debt Market Comments
March 2014      Debt Market Commentary, Recent Deals   

Quigley’s Corner 03.11.2014-PEPCO Lights Up Bond Market; Debt Deal Underwritten With Diversity Inclusion

Investment Grade New Issue Re-Cap

We’ve seen a proverbial avalanche of consistent issuance lately.  Last Friday’s strong NFP report pushed the “weather factor” on the back burners and helped underscore a continually improving domestic economy.  Better rated utilities all fared very well despite the most recent additions to global tumult – namely Ukraine, Russia and Crimea.  Utility paper is in strong demand and there are no signs of investor indigestion from the sector or for that matter from the incredible amounts of new supply that’s been put away.  In fact, according to Bank of America/Merrill Lynch, “regulated electrics generated 14 bps of positive excess returns which is 9 bps better that BAML’s high grade bond index.  Investors, both large and small have found utilities a good place to put their money to gain portfolio diversification across both corporate and capital structures.”  Investors have been clamoring for better rated corporate credits and utilities have been prominent and prolific as well bringing no less than 12 deals in the last six business days.  Well, 13 happens to be my lucky number and as it were, the 13th utility announced this morning in the form of Potomac Electric Power which lights up the nation’s capital among others.

 What’s more, Mischler Financial Group, Inc., the nation’s oldest and largest Service Disabled Veteran broker-dealer was named a Co-Manager and is thereby the session’s “Deal-of-the-Day.”

Potomac Electric (A2/A-) announced a $400 million 10-year First Mortgage Bond carrying IPTs in the +90 “area” before launching and pricing at the tightest side of +85-90 guidance.  Active joint leads were J.P. Morgan, RBS and Wells Fargo as well as passive leads Citigroup and Goldman Sachs.  Relative value was fairly straight-line on this as we looked to the outstanding Delmarva Power & Light (A2/A) 3.50% due 11/15/2023 and like Pepco, also a wholly owned-subsidiary of Pepco Holdings, Inc. Those FMB Notes were T+75 bid pre-announcement this morning (G+79.5) inferring a 5.5 bps NIC on today’s T+85 final pricing.  In addition, I took a look at the POM 4.15% due 3/15/2043 that were T+80 bid this morning before today’s deal hit the tapes.  The reason I mention this is that it points to a flat 10s/30s curve for the utility which is always good to know.  The Company will use net proceeds from today’s new print to repay in full at maturity $175 million in aggregate principal amount of its 4.65% senior notes due April 15, 2014 plus accrued interest and unpaid interest. The remaining net proceeds will be used to repay outstanding commercial paper of which there was $196.5 million outstanding as of last Friday March 7th as well as for general purposes.

Final pricing was as follows: (more…)

Don’t Cry For Me, Crimea; Duke Energy Deal: Powered by Diversity; Mischler Comments
March 2014      Debt Market Commentary, Recent Deals   

Quigley’s Corner 03.03.2014 –Don’t Cry For Me, Crimea; Duke Energy Deal: Powered by Diversity

My wife and I had dinner at a great Croatian Restaurant in New Rochelle on Saturday evening called Dubrovnik Restaurant.  It is the first authentic Croatian Restaurant in Westchester.   Conversation was intriguing, compelling and informative in light of events in Ukraine and Crimea and the fact that the couple with us were a Croatian woman and her Russian husband.  The grilled calamari and roasted lamb as well as exceptional white wine made in Croatia helped me to keep my mouth shut and my one good ear open as conversation turned to events in Ukraine, Crimea and the former Union of Soviet Socialist Republics.  It helped make the discussion that much more meaningful knowing one had survived the Croatian War of Independence while the other was born into the Brezhnev era and is amazed at the changes that have taken place in his homeland. As Ivan said, “to understand the Russian POV one has to understand Russia.”  He continued, “The Balkan states have all been boiling over with independence for decades.” He said, “Russians feel they are at a political phase in which an orderly transition to independence is governed and dictated by law.  Once that is upheld negotiations can take place.  However, most Russians feel this is not what happened in Ukraine” according to Ivan.  He went on to say that once an orderly political protocol was broken it antagonized anti-Ukrainian sentiment within Russia and Putin now has his reason to move troops along the borders in the event of civil war…….we are always suspect power hungry leaders masquerading under a veil of democratic independence.”  Ivan does think civil war could “likely come” knowing the psyche of his people and that it “could get very ugly”……to say the least.  It’s unfortunate to have to say it but it’s true, –  there will be a continued significant flight to quality of safe havens which means the U.S. of A.  Europe’s recovery is currently at the point we were at a couple of years ago so investors aren’t exactly sending cash into French or German banks.  The money flows into Switzerland and the U.S.  folks.

Another one of my friends/accounts is actually traveling overseas this week and is currently in the Ukraine.  Not only did I have a nice order from him but today on our Duke Energy deal but I asked him if he could find the time to scribe some impressions for me of his time in the world’s newest “hot spot.” Here’s what he wrote:  “Life here in Ukraine is “normal”. People go to their jobs, students attend their classes and people are not panicking. My wife and I arrived yesterday March 2nd  to Kiev Borispol Airport at 12pm, then we drove 30 minutes to eat in a local restaurant. People are friendly here and they don’t seem worried about the situation. After lunch in Kiev we drove to Romny, which is 3 hours to the North East side of Kiev. It was a great ride, we enjoyed the beautiful landscape and we didn’t see any signs of military at all. Here in Romny, people believe that what’s happening in Crimea is a full blown occupation, and they all also believe that Russia is trying to antagonize Ukraine into a war. All, however, believe in a peaceful resolution to the current crisis.”  This is all about Vlad folks.  He’ll antagonize….poke and prod in what is a highly sensitive situation.  It’s about secession and or civil war. Should Ukraine turn West with the EU it will automatically move the NATO alliance BMD’s along its eastern border and that much closer to Russia.  Ivan agrees 100% that Russians believe the West would never attack unprovoked BUT Vlad knows something more powerful – the waft of nearby democracy will drift deeper and deeper into the Motherland.  That’s what he doesn’t want.      

Investment Grade New Issue Re-Cap

DEFENSE! DEFENSE! DEFENSE!

Some feedback I heard from accounts today was that with expectations for more issuance ahead, they did not want to take risks with many senior participants out to day in New York due to the snowstorm that impacted some living in New Jersey.  Connecticans, however, escaped unscathed as did those on Long Isalnd and living in Manhattan!  It was also noted in the same breadth that with those seniors out, the delicate situation in the Ukraine/Crimea is too fluid to take chances and they pointed to this morning’s stock market that opened down triple digits.  They had no interest in having to mark down a position in their portfolios and thereby decided to sideline themselves for the day. What with the newest global headache, it’s no wonder we saw three utilities print four tranches today.  That’s called D-E-F-E-N-S-E and those companies timed their deals impeccably.   However, there is a considerable flight to quality taking place that I wrote about last week that is further compressing spread product.  So, it was no wonder, from my standpoint, why we saw utilities front and center in today’s session.  The end result – 6 IG Corporate issuers printed 10 tranches totaling $5.20 billion to start off March issuance. 

Word out is that tomorrow will be B-U-S-Y!!!!

Utilities “Duke” it out to light up the leaderboards

Con Edison hit the tapes first followed by Public Service Colorado but it was the two-part for Duke Energy Progress Inc. that is my featured “Deal-of-the-Day!”  Why?  Simply because my CEO and I were in Charlotte on Friday to visit with Duke Energy and lo and behold Mischler Financial Group, Inc., the nation’s largest and oldest Service Disabled Veteran broker-dealer was featured as a Co-Manager.  It’s our inaugural transaction with Duke.  That’ll earn the rights each every time!  In advance of today’s drill-down, it goes without saying that Duke Energy Progress Inc’s Treasury/Funding team is the recipient of today’s Mischler five-star salute for giving us the chance to prove ourselves.

Now to the r/v study… (more…)

Mischler Baristas Help Starbucks ($SBUX) Serve Up $750mil Debt Market Offering
December 2013      Debt Market Commentary, Recent Deals   

Quigley’s Corner: Dec 2, 2013

Investment Grade New Issue Re-Cap

December kicked off today with yet another avalanche of IG new issuance that featured 4 issuers across 13 tranches and a total of $9.50billion. In fact, it hit for a rather unique cycle today in that we saw a single tranche, a two-part, four-part and six-part!!  Today’s offerings emphasize the diverse menu of bonds we’re seeing served up to investors.  Issuer diversity ranged from restaurants to pharmas; from a retail staple to banking.  The aftermarket performance of today’s new issues tightened anywhere from 2 bps to as much as 8 bps in the case of CVS’ new 30-year tranche.  CVS garnered a 19 billion book (4.75x).

Deal-of-the-day: Starbucks

Now, sit back, relax, kick up your feet and get a nice hot cup of Starbucks coffee because it was for the Seattle–based American global coffee company and coffeehouse chain that is our highlighted transaction.  Mischler Financial Group, Inc. is proud to announce it had its first taste of Starbucks today, figuratively speaking of course, having been offered an active Co-Manager role on its two-part 3- and 5-year transaction.  Starbucks Corp. (Baa1/A-) hit the tapes as a $750 million “will not grow” Senior Unsecured Global transaction and with the caveat that each tranche would be index eligible inferring at least a $250 million size.  IPTs were in the +50 “area” on the 3s and +75-80 on the 5s before tightening substantially to the +40 and +65 “area respectively.  At that point “area” was defined as +/- 2 bps.  Both tranches reeled into the tightest side of those launch levels at +43 and +63 where they each priced.  The 3-year was $400 million with the 5-year at $350 million. 

Mischler Baristas (l-r) Leslie Graves, Ron Quigley, CEO Dean Chamberlain, Rob Karr

Mischler Baristas (l-r) Leslie Graves, Ron Quigley, CEO Dean Chamberlain, Rob Karr

The most recent Starbucks deals to price were three months ago in September but prior to that you’d have to look back six years to their 2007 issues.  Relative value, as such, simply pointed to those prints.  For the five-year we looked at the 6.25% due 8/15/2017 was T+23 bid pre-announcement or G+78 or negative 15 bps versus today’s +63 pricing level.  The 3s/5s curve is about 25 bps taking you to today’s T+38 final pricing level and therein pointing to another negative 15 bps concession.

With 20,891 stores in 62 countries, and 13,279 of them in the U.S., Starbucks is the largest coffee company in the world.  Given the broad range of its customer base and geographical locations, diversity and inclusion is not only a smart business decision for Starbucks but it’s at the core of its business plan. Just ask CFO-CAO Troy Alstead who will tell you that Supplier Diversity is a smart business decision.  It helps the Company identify and deliver high quality products and services across all business channels.  Its customer base, is as diverse as is its supplier mix.  It begins the moment you walk into any Starbucks store in which its employees embrace diversity.  It’s an essential component of who they and extends to its store locations in local neighborhoods.  Think about that readers.  Where is your local Starbucks? You see what I mean?  It’s part of every community!  It’s all inclusive.

Starbucks Most Diverse Print Ever!

Not only did Starbucks include several loan lending institutions as Co-Managers on today’s prints but it worked to mirror its customers by selecting its single most diverse fixed income print ever:  Along with Mischler Financial Group, Inc., – the nation’s oldest and largest Service Disabled Veteran broker-dealer – Starbucks selected minority boutique investment banks that are known as “best-in-class” within each minority category.  Lebenthal (woman-owned); Ramirez (Hispanic American) and Williams Capital (African American).  It may be hard to believe – given the excellent product we all look forward to in the morning – but I’ll bet your Starbucks coffee will taste that much better knowing the people at the top of Starbucks have embraced a policy reflective of all of us.

Congrats to Starbucks management and Treasury/Funding for today’s piping hot print that just happens to have tightened 3 bps on the bid side of both the 3- and 5-year tranche.  Final order books were heard to be $2.2 billion on the 3-year (5.5x bid-to-cover) and $2.4 billion on the 5-year (6.86x covered).  Investors clamored for bonds and Mischler was happy to have been able to help introduce a total of 16 new investors to Starbucks’ investor profile.  How’s THAT for diversity?

Thank you to Starbucks for today’s opportunity and a nice shout out to the Morgan Stanley syndicate desk for working so well and so efficiently with us today!  MS was there the moment info was available and I’m happy to say it was a seamless and smooth experience!!   As for all our investors, especially those that have helped build the foundation on which our premier distribution network has been built……well…..you all know how I feel – you’re the best!  Thanks to all of you! –RQ

……..enjoy your vento mocha frappucino with soy mocha drizzle, matcha powder, protein powder, caramel brulee topping, strawberries and frappuccino chips!!! (more…)

Why Corporate Treasurers Embrace Diversity BDs..Mischler Fixed Income Commentary 05-31-13

Market Comment:

Greetings to special rare Sunday edition of the Syndicate Closing Commentary.  I know we’re supposed to rest on Sunday but with lots of things going on this weekend and the AFSA conference last week, playing wearing five hats and playing catch-up on a Monday is never a good idea.  Besides, after all the positive feedback I received on this commentary from all the movers and shakers in Treasury/Funding, diversity leaders, origination and syndicate folk as well as accounts that I encountered at last week’s 23rd Annual AFSA Credit Summit in Boston, I have been moved and inspired by all you and your respective organizations to go the extra mile and deliver what you said you enjoy. So without further ado, let’s get to it.

AFSA’s 23rd Annual Credit Summit Features Diversity & Inclusion Luncheon Panel:

Of the many offerings at this year’s AFSA conference, one was especially close to the team at Mischler Financial Group.  On Wednesday, May 29th, AFSA featured a showcase luncheon panel on “Diversity and Inclusion.”  It was a comprehensive discussion that explored the impact of diversity in problem solving and innovation; how to leverage its benefits in creating new financial products and a review of the details of recent diversity bond issuance and trends.  This year’s Summit Chairman was Steve Howard, Global Head of Capital Markets & Derivatives, Toyota Financial Services who did a wonderful job while serving our industry well in his role.  The panel was moderated by Suni Harford, Managing Director Regional Head of Markets, North America at Citigroup Inc.  In 2012, Ms. Harford ranked 16th among the most powerful women in banking by American Banker Magazine.  Featured panelists were Zeeshan Naqvi, Director of Global Long-Term Funding, GE Corporate Treasury; Kaishi Riaz, Global Capital Markets, BlackRock, Dean Chamberlain, Principal and CEO, Mischler Financial Group, Inc., Chris Williams, Chairman and CEO, The Williams Capital Group, L.P. and Alexandra Lebenthal, Lresident and CEO, Lebenthal & Company. 

Suffice to say this was the single highest attended panel at the conference and represented a lot of hard work across on behalf of all the participating organization to break thru the “glass ceiling” of diversity.  There is more work to do and we never get “there” wherever “there” is, but the cumulative efforts of these participants and their respective Company’s have never and will never give up in providing value-added propositions and a shared ethos motivated and driven by meritocracy.  Minority boutique banks are NOT “check-the-box” mandates.  The competitive nature of our financial services industry has motivated meaningful boutique investment bank and full service broker-dealer build-outs in pursuit of “sustainable” platforms.  Sustainability means a value-added proposition and vice versa.  Not to get corny or anything but if I could express it another way, the minority space has broken out much like that glass “Wonkavator” did in the final scene of the 1971 version of Wille Wonka & the Chocolate Factory.  If you don’t get it, place the DVD in a tray and watch from the last few minutes of the film beginning in Willy Wonka’s office in which everything is cut in half until the final credits. (more…)

Mischler In Driver’s Seat: Mandate to Co-Manage Ford and GM New Debt Deals; Mischler Fixed Income Market Commentary 05-06-13
May 2013      Debt Market Commentary, Recent Deals   

Market Comment:

Honoring Vets on Memorial Day: Mischler Financial Pledges May Profits to Fisher House:

Readers of  my daily missives are well-aware that Mischler Financial Group is the nation’s oldest and largest Service Disabled Veteran.  What you might not realize is that our business philosophy is different than all but a few “Wall Street” firms.  Unbeknownst to but a few, much of our profits—which come from capital markets underwriting fees and trade execution commissions—are redistributed throughout the year to U.S. military veteran-related support and advocacy groups; in particular, those groups focused on supporting service-disabled veterans and their respective families.

Since the firm’s founding in 1994, Mischler Financial has directly donated hundreds of thousands of dollars and has led fund-raising programs that have delivered exponentially more money to critically important veteran-focused causes and initiatives. I’m therefore honored to report that, in honor of Memorial Day 2013, Mischler Financial Group will be contributing 10% of the firm’s May profits to Fisher House.  Fisher House provides a “home away from home” for military families to be close to a loved one during hospitalization for an illness, disease or injury.

To learn more about this critically important foundation, and/or to ‘bid on’ in our effort to support this fantastic organization, please click here.   

Now to the day’s new issue pricing–including a look at both the new Ford and GM ‘models’, a peak at the pipeline and IG Corporate Bond trading stats. (more…)

Pages:«12