“Quigley’s Corner” 11.21.19

Investment Grade New Issue Re-Cap – Centene Prices $7b 3-Part; Mischler Named Co-Manager on Duke Florida and Deutsche Bank AG/NY

 Below is excerpted from today’s edition of Quigley’s Corner, authored and published by Ron Quigley, Mischler Financial Group Managing Director & Head of Fixed Income Syndicate

Today the IG Corporate dollar DCM hosted 6 issuers across 9 tranches totaling $10.85b. The SSA space was quiet.

As I mentioned yesterday, Centene Corp. wrapped up its roadshow in L.A. and announced its $7b M&A related financing to complete its acquisition of WellCare. That volume-boosting deal today pushed us right thru the WTD and MTD estimates. I am counting Centene in the IG corporate volume tables despite that it was priced off high yield syndicate desks because it is investment-grade rated by one of the big three ratings agencies – Moody’s, S&P or Fitch. So, to preserve continuity in my own database, I am counting it as IG volume thanks to its Ba1/BBB-/BB+ rating. Centene had been road showing the 3-part 144a/RegS Senior Notes transaction through joint leads Bank of America Securities, Barclays, J.P. Morgan, SunTrust Robinson Humphrey and Wells Fargo since kicking off meetings on Monday, November 18th in New York. It’s been in the IG-credit pipeline as of Friday, November 15th. The M&A motivated financing will use proceeds to partially fund the WellCare acquisition announced last March and for general corporate purposes.

I am very happy to report that Mischler Financial was named as an active Co-Manager on two debt issuance transactions today for Duke Energy Florida LLC and Deutsche Bank AG/NY Branch.  If you scroll down below you’ll find drill-downs on both of those great transactions. But first, let’s run through the session re-caps!

Duke Energy Florida LLC $700mm Inaugural 10-year FMB New Issue

Duke Energy capitalized on its strong name and credit as well as this week’s earlier S&P outlook revision to “stable” from “negative” as it announced two separate offerings today. Mischler Financial, our great nation’s oldest Service Disabled Veteran broker dealer, was honored to serve as an Active Co-Manager on today’s $700mm inaugural 10-year Green FMB transaction.  Duke Treasury/Funding could not have timed today’s offering any better. The S&P “stable” outlook helped. In addition, however, it was just a couple of weeks ago that Duke Energy Corp. reported 3Q19 adjusted EPS of $1.79 which was $0.11 higher than the $1.68 consensus and up $0.14 YoY. Duke also narrowed 2019 EPS guidance to $4.95 to $5.15 from $4.80 to $5.20 which also bumped up the mid-point average by $0.05. Duke’s plans to issue $2.5b in equity helped maintain their strong credit metrics and was credit positive. One would think it also helped S&P’s “stable” decision from outlook “negative.” ‘Stable” helped by those credit metrics and earnings beats are the big kahuna!

Net, net collectively these details created a prime opportunity for Duke Energy Florida LLC (A1/A) to price its inaugural 10-year Green First Mortgage Bonds due 12/01/2029. Green, Environmental, ESG, Socially Responsible, call them what you will, is issuance that we expect will continue to become more and more prevalent in our IG dollar debt capital markets. It is an honor to be associated with this first such transaction for Duke’s Florida entity.

Proceeds will be used to pay or reimburse the payment of new Eligible Green Expenditures (“EGEs”) in the U.S. EGEs are associated with solar energy and battery storage investments, including monies related to the development construction, acquisition and operation of solar energy and utility-scale battery storage projects.

Deutsche Bank AG/NY Branch 6NC% Fixed-to-Floating Senior Non-Preferred Deal Dashboard

Relative value can be sliced and diced myriad ways on any transaction. Ask ten people for fair value and you’ll get ten different answers. Ask for curve adjustments and there’s wiggle room. Ask for the premium or discounts of one entity (NY vs. London) and well….. you get the picture. If you’re the banker covering the issuer like I was today I’d advise you to ask Team DB what they are reporting to their Treasury/Funding team because that IS precisely where the rubber meets the road. No wiggle room there folks. So, NIC on today’s DB NY print was 5 bps.

As for the measure of demand, final book size was not divulged and so, ladies and gentlemen “mum” IS the word on that and I respect that. The deal tightened 2 bps as of this writing and so, demand was likely robust. Thank you to Team DB AG/NY Treasury/Funding. Likewise, I thank our distribution network for being there today.

IG Corporate Primary & Secondary Market Talking Points

Above is the opening extract from Quigley’s Corner aka “QC” Thursday, November 21, 2019  edition distributed via email to institutional investment managers, lead underwriter syndicate desks and Fortune Treasury clients of Mischler Financial Group, the investment industry’s oldest diversity-certified broker-dealer owned and operated by Service-Disabled Veterans. 

The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of Mischler’s primary debt capital markets desk. Commentary 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 deal 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, ITC Markets, Market News International, Prospect News, Stone & McCarthy Research, Refinitiv, 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.