Quigley’s Corner 08.06.18 American Water Works Taps Debt Market and Floats Deal with Diversity & Inclusion Faucet
Investment Grade Corporate Bonds New Issue Re-Cap
Syndicate IG Corporate-only Volume Estimates For This Week and August
American Water Deal Dashboard
American Water Works: Diversity and Inclusion Flows From the Top Down
New Issues Priced
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
Indexes and New Issue Volume
Global Market Recap
2018 Lipper Report/Fund Flows – Week ending July 25th
IIG Credit Spreads by Rating
IG Credit Spreads by Industry
New Issue Pipeline
M&A Pipeline
Economic Data Releases
Rates Trading Lab
Tomorrow’s Calendar
QC Geopolitical Risk Monitor
Below is the opening extract from Quigley’s Corner aka “QC” Monday, Aug 6, 2018 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC is one of three distinctive market comment pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our primary debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rquigley@mischlerfinancial.com or via phone 203.276.6646
Today the IG dollar DCM hosted 11 issuers across 19 tranches totaling $10.95b. The SSA space was quiet.
Here’s a look at the WTD and MTD IG Corporate new issue volume as measured against syndicate desk estimates:
- The IG Corporate WTD total is 50.53% of this week’s syndicate midpoint average forecast or $10.95b vs. $21.67b.
- MTD we’ve priced 30.86% of the syndicate forecast for July IG Corporate new issuance or $19.985b vs. $64.75b.
- There are now 16 issuers in the IG credit pipeline.
Today’s IG Primary & Secondary Market Talking Points
- Ventas Realty LP upsized today’s 10-year Senior Notes new issue to $750mm from $600mm at the launch and at the tightest side of guidance.
- The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 18 IG Corporate-only new issues was <18.53> bps.
- Including today’s Prudential $25 par Junior Subordinated Notes transaction spread compression across the 19 IG Corporate new issues was <17.88> bps.
- BAML’s IG Master Index tightened 1 bp to +115 vs. +116. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS was unchanged at 1.09. (1.24 represents the high on 6/04; 0.85 is the post-Crisis low set on 1/30).
- Standard & Poor’s Investment Grade Composite Spread tightened 1 bp to +149 vs. +150. (+125 represents its post-Crisis low set 2/02).
- Investment grade corporate bond trading posted a final Trace count of $11.9b on Friday versus $17b on Thursday and $13.4b the previous Friday.
- The 10-DMA stands at $17.9b.
Syndicate IG Corporate-only Volume Estimates For This Week and August
| IG Corporate New Issuance |
This Week
8/06-8/10 |
vs. Current
WTD – $10.95b |
August 2018 |
vs. Current
MTD – $19.985b |
| Low-End Avg. | $20.10b | 54.48% | $63.88b | 31.29% |
| Midpoint Avg. | $21.67b | 50.53% | $64.75b | 30.86% |
| High-End Avg. | $23.23b | 47.14% | $65.62b | 30.46% |
| The High | $25b | 43.80% | $50b | 39.97% |
| The Low | $15b | 73.00% | $76b | 26.30% |
American Water Deal Dashboard
Today Mischler was honored to serve as a passive Co-Manager on American Water’s $1.325b two-part 10- and 30-year Senior Notes transaction. For relative
AMERICAN WATER (A3/A)
AWK 2.95 09/27 +75 g76 $94
AWK 3.75 09/47 +107 $93
NSTAR ELECTRIC CO (A2/A+)
ES 3.20 05/27 +80 g81 $96
ES 4.40 03/44 +105 $104
CONSOLIDATED EDISON CO NY (A2/A-)
ED 3.80 05/28 +69 g69 $101
ED 3.875 06/47 +112 $95
INDIANA MICHIGAN POWER (A3/A-)
AEP 3.85 05/28 +85 g85 $100
AEP 3.75 07/47 +111 $93
VIRGINIA ELECTRIC & POWER CO (A2/BBB+)
D 3.80 04/28 +84 g84 $100
D 3.80 09/47 +109 $94
Use of proceeds from today’s transaction will be used to lend funds to American Water and its regulated operating subsidiaries; to repay $191.1mm principal amount of the issuer’s 5.62% Senior Notes due 2018 upon maturity on December 21, 2018; to redeem up to $200mm aggregate principal amount of the issuer’s outstanding long-term debt securities due in 2019 and 2022 and which have a weighted-average interest rate of 5.70%; to repay commercial paper obligations of the issuer, including commercial paper incurred to fund in part the acquisition of all of the capital stock of Pivotal Home Solutions Co., and for general corporate purposes.
Here’s a look at price evolution throughout today’s
| AWK Issue | RATING | IPTs | GUIDANCE | LAUNCH | PRICED |
Spread
Compression |
NIC
(bps) |
Trading at
the Break |
+/-
(bps) |
| 10yr | A3/A | +95-100/+97.5a | +85a (+/-3) | +82 | +82 | <15.50> bps | 2 | 81/78 | <1> |
| 30yr | A3/A | +125-130/+127.5a | +115a (+/-3) | +112 | +112 | <15.50> bps | 2 | 111/108 | <1> |
American Water’s two-part cumulative order book total finished at $3.80b making the $1.325b transaction 2.87-times oversubscribed.
Here’s a look at the
| AWK Issue | Tranche Size |
Book
at-the-Top |
Final Book
Size |
Bid-to-Cover
Rate |
| 10yr | $625mm | $1.8b | $1.8b | 2.88x |
| 30yr | $700mm | $2.3b | $2.0b | 2.86x |
That’s a very successful outcome!
Final Pricing – American Water
AWK $625mm 3.75% due 9/01/2028 @$99.981 to yield 3.752% or T+82 MWC +15
AWK $700mm 4.20% due 9/01/2048 @$99.946 to yield 4.203% or T+112 MWC +20
American Water Works : Diversity and Inclusion
With a history dating back to 1886, American Water Works Company Inc. (NYSE: AWK) is the largest and most geographically diverse U.S. publicly traded water and wastewater utility company. The company employs more than 6,900 dedicated professionals who provide regulated and market-based drinking water, wastewater
American Water’s workforce reflects the diversity of customers it serves nationwide.
American Water encourages, honors and celebrates differences in its employees, including race, gender, spiritual practice, ethnicity, age, nationality, military/veteran status, sexual orientation, physical capabilities, education
American Water wants to foster an environment where its people can work safely, generate great ideas, provide the best customer service, and make a difference in the communities it serves. By cultivating a diverse and inclusive work environment guided by its core values, American Water enables any one person or group to develop the next big idea, delight their customers, grow the company and create a future of success.
There are a host of certifications that fall under the category of diversity aka minority broker-dealers. This once “cottage industry” among our financial services experienced growing pains over the last three decades as each company attempted to become more of a
Mischler sends its five-star salute to American Water’s Treasury/Funding Team today’s honored position to serve on your transaction. Shout outs, however, aren’t only reserved for the Treasury/Funding teams who embrace and apply their internal corporate D&I mandates by including minority-certified
In alphabetical order they are:
Blaylock Van, LLC, C.L. King & Associates, Loop Capital Markets
NICs, Bid-to-Covers, Tenors, Sizes and Average Spread Compression from IPTs thru Launches
| Issuer | Ratings | Coupon | Maturity | Size | IPTs | GUIDANCE | LAUNCH | PRICED | LEADS |
| American Water Capital Corp. | A3/A | 3.75% | 9/01/2028 | 625 | +95-100/+97.5a | +85a (+/-3) | +82 | +82 |
MIZ/MUFG/RBC/TD (a) BAML/PNC (p) |
| American Water Capital Corp. | A3/A | 4.20% | 9/01/2048 | 700 | +125-130/+127.5a | +115a (+/-3) | +112 | +112 |
MIZ/MUFG/RBC/TD (a) BAML/PNC (p) |
| Associated Bank NA | Baa1/BBB- | 3.50% | 8/13/2021 | 300 | +100a | +90a (+/-2.5) | +87.5 | +87.5 | CITI/RBC |
| Bank of New York Mellon | A/AA- | 3.45% | 8/11/2023 | 750 | +80a | +68a (+/-3) | +65 | +65 | BAML/BNY/BARC/HSBC/WFS |
|
Bank of New York Mellon
(tap) New Total $900mm |
A/AA- | 3.85% | 4/28/2028 | 400 | +90a | +78a (+/-3) | +75 | +75 | BAML/BNY/BARC/HSBC/WFS |
| Discover Bank | BBB-/BBB | 4.682% | 8/09/2028 | 500 | +210a | +190a (+/-2.5) | +187.5 | +187.5 | BARC/CITI/RBC |
| Duke Energy Progress LLC | Aa3/A | 3.375% | 9/01/2023 | 300 | +75a | +60a (+/-3) | +57 | +57 | JPM/MIZ/SCOT/STRH |
| Duke Energy Progress LLC | Aa3/A | 3.70% | 9/01/2028 | 500 | +95a | +80a (+/-3) | +77 | +77 | JPM/MIZ/SCOT/STRH |
| Ford Motor Credit Co. LLC | Baa2/BBB | FRN | 10/12/2021 | 500 | 3mL+equiv | 3mL+equiv | 3mL+88 | 3mL+88 | CS/CACIB/GS/HSBC (a) + 3 (p) |
| Ford Motor Credit Co. LLC | Baa2/BBB | 3.813% | 10/12/2021 | 1,150 | +130a | +110a (+/-2) | +108 | +108 | CS/CACIB/GS/HSBC (a) + 3 (p) |
| Ford Motor Credit Co. LLC | Baa2/BBB | 4.687% | 6/09/2025 | 600 | +200a | +185a (+/-5) | +180 | +180 | CS/CACIB/GS/HSBC (a) + 3 (p) |
| Indiana Michigan Power Co. | A2/A- | 4.25% | 8/15/2048 | 475 | +135a | +125a (+/-5) | +120 | +120 | BNY/CACIB/CS/PNC |
| Intercontinental Exchange | A2/A | 3.45% | 9/21/2023 | 400 | +85a | +70a (+/-5) | +65 | +65 | BAML/MUFG/WFS |
| Intercontinental Exchange | A2/A | 3.75% | 9/21/2028 | 600 | +115a | +95a (+/-5) | +90 | +90 | BAML/MUFG/WFS |
| Intercontinental Exchange | A2/A | 4.25% | 9/21/2048 | 1,250 | +145a | +125a (+/-5) | +120 | +120 | BAML/MUFG/WFS |
| PACCAR Financial Corp. | A1/A+ | 3.15% | 8/09/2021 | 350 | +60a | +45a (+/-2) | +43 | +43 | CITI/LLOYD/RBC/USB |
| PACCAR Financial Corp. | A1/A+ | 3.40% | 8/09/2023 | 300 | +75a | +62a (+/-2) | +60 | +60 | CITI/LLOYD/RBC/USB |
| Prudential Financial, Inc. | Baa2/BBB+ | 5.625% |
40NC5 8/15/2058 |
500 |
5.625-5.75% 5.6875%a |
5.625 the # | 5.625% |
$25 par Jr. Subs. |
BAML/MS/UBS/WFS |
| Ventas Realty | Baa1/BBB+ | 4.40% | 1/15/2029 | 750 | +165-170/+167.5a | +150a (+/-3) | +147 | +147 | MIZ/MS/TD/WFS |
…..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 six week’s averages:
|
KEY IG CORPORATE
NEW ISSUE DRIVERS |
MON.
7/30 |
TUES.
7/31 |
WED.
8/01 |
TH.
8/02 |
FRI.
8/03 |
AVERAGES
WEEK 7/30 |
AVERAGES
WEEK 7/23 |
AVERAGES
WEEK 7/16 |
AVERAGES
WEEK 7/09 |
AVERAGES
WEEK 7/02 |
AVERAGES
WEEK 6/25 |
| New Issue Concessions | <4.63> bps | 2.00 bps | 0.00 bps/flat | 4.67 bps | N/A | <1.06> bps | 1.50 bps | 3.90 bps | 3.45 bps | No Issuance | 9.87 bps |
| Oversubscription Rates | 6.02x | 1.91x | 3.18x | 3.55x | N/A | 4.29x | 3.40x | 2.33x | 2.31x | No Issuance | 2.03x |
| Tenors | 24.63 yrs | 6.67 yrs | 3.00 yrs | 7.13 yrs | N/A | 13.33 yrs | 9.00 yrs | 7.73 yrs | 9.24 yrs | No Issuance | 8.99 yrs |
| Tranche Sizes | $369mm | $950mm | $450mm | $1,017mm | N/A | $706mm | $601mm | $1,031mm | $693mm | No Issuance | $504mm |
|
Avg. Spd. Compression
IPTs to Launch |
<21.25> bps | <18.33> bps | <12.50> bps | <15.72> bps | N/A | <17.89> bps | <16.89> bps | <13.79> bps | <13.39> bps | No Issuance | <6.58> bps |
New Issues Priced
Above is the opening extract from Quigley’s Corner aka “QC” Monday, Aug 6, 2018 edition distributed via email to institutional investment managers and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest minority broker-dealer owned and operated by Service-Disabled Veterans.
Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC is one of three distinctive market comment pieces produced by Mischler Financial Group. The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our primary debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline.
To receive Quigley’s Corner, please email: rquigley@mischlerfinancial.com or via phone 203.276.6646
*Sources: Bank of America/Merrill Lynch, Bloomberg, Bond Radar, Dow Jones Newswire, IFR, Informa Global Markets, Internal Mischler, LCDNews, Market News International, Prospect News, Standard & Poor’s Ratings Services, Stone & McCarthy Research, Thomson Reuters and of course, a career of sources, contacts, movers and shakers from syndicate desks to accounts; from issuers to originators; from academicians to heads of research, and a host of financial journalists, et al.
