Lockheed Martin Corp. (NYSE:LMT) Issues $1.15bn in 2-Part Senior Notes Transaction. Mischler Financial Serves as Active Co-Manager. Hence, Your Mission is Our Mission!
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
Quigley’s Corner 05-15-2020 Today the IG Corporate dollar DCM hosted 3 issuers across 5 tranches totaling $3.25b. The SSA space was inactive. But just think about that headline. It seemed just three short months ago that $34b in IG Corporate weekly volume was a very robust week. Now here we are calling it a reprieve. I have a nice Friday edition for this evening. Of course if it’s Friday, that means The Best and Brightest have unanimously coalesced once again to help me bring to YOU the single best table setter in the financial services industry for the week ahead.
Yesterday saw a PPG Industries 30-year drop at a re-launch after skipping guidance, and a bit of fatigue seemed to settle in. Nothing overly dramatic outside of healthy credit cycle reactions to the Gi-normous perpetual avalanche of new issues we’re gotten used to. SIFMA as many of you may be aware, called for an early 2:00pm close next Friday, May 22nd ahead of Memorial Day – a week from Monday. So next Friday will be a no print Friday and next Thursday looks to be light-to-empty. So, a front-loaded week is in store for us.
However, today was active with those 3 aforementioned deals and guess what else – I have a featured Deal-of-the-Day ……AGAIN! That’s right, Mischler Financial served as a Co-Manager on today’s $1.15b two-part 10- and 30-year transaction from Lockheed Martin. But as always, let me first take you through the recaps and then it’s onto a very nice deal drill down on the Lockheed Martin new issue followed by the Best & Brightest and all you need and want to know about next week’s IG Corporate supply. A lot on the plate this evening!
Thank you for tuning in.
IG Corporate Primary & Secondary Market Talking Points – Lipper’s Big Inflows for IG ($5.2b) and HY ($4.4b); BofA Issues First COVID-19 Bond
- CMS Energy Corp. upsized today’s 30NC10 fixed-to-floating reset Junior Subordinated Notes transaction to $500mm from $350mm at the launch and after skipping guidance.
- For the week ended May 13th, Refinitiv Lipper U.S. Fund Flows reported an inflow of $5.245b into Corporate Investment Grade Funds (2020 net outflow of $44.504b) and inflows of $4.485b into High Yield Funds (2020 net inflow of $9.535b).
- The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 5 IG Corporate-only new issue was <41.00> bps.
- ICE BAML’s IG Index was unchanged at +221. (It’s post-Crisis low is +90 set on 2/01).
- Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 2.12 vs. +211. (1.57 represents the high on 1/03/2019; 0.85 is the post-Crisis low set on 2/01/2018).
- Standard & Poor’s Investment Grade Composite Spread was unchanged at +263. (+125 represents its post-Crisis low set 2/02).
- Investment grade corporate bond trading posted a final Trace count of $28.2b on Thursday versus $26.7b on Wednesday and $25.7b the previous Thursday.
- The 10-DMA stands at $25.4b.
- For the week ended May 6th, Refinitiv Lipper U.S. Fund Flows reported an inflow of $6.626b into Corporate Investment Grade Funds (2020 net outflow of $49.749b) and inflows of $3.535b into High Yield Funds (2020 net inflow of $5.05b).
Lockheed Martin Corp. $1.15bn 2-part 10yr & 30yr Senior Notes New Issue
- Lockheed Martin Corp. “LMT” (A3/A-/A-) (s/s/s) today issued a two-part SEC-registered 10-year due 6/15/2025 and 30-year due 6/15/2025 Senior Notes transaction. The new issue was joint led by Mizuho and Morgan Stanley with the former serving B&D duties on the 10-year and MS as B&D on the 30-year tranche. The book build was something to behold. Mischler Financial Group, Inc., our nation’s oldest Service Disabled Veteran broker dealer was most honored to have been named an Active Co-Manager on the transaction. The call came after 10:00am after which it was not clear if Co-Managers would play an active or passive role. By the time that decision was made with all hands on deck, the big book was already at $5b. It would grow exponentially from there. So, history was made as our internal book represented the fastest order book build I have ever been involved in. Our internal book was opened at 10:25am and closed at 10:43am. A total of 18 minutes. We had to best manage allocation expectations in light of the incredible appetite for the credit. By the time our book closed the cumulative total was over $10bn. The issuer and leads skipped over guidance tightening both tranches 40 bps each at the 2-part $1.15b launch. At the top, book splits were (10yr-$5.7b) and (30yr-$7.4b) for a cumulative $13.1b for a whopping 11.39-times oversubscription rate. Final books settled at $5.3b and $6.7b respectively for a notional amount of $12b or 10.43-times covered.
Team Mischler extends its thanks along with a five-star salute to the Treasury/Funding staff at Lockheed Martin Corp. Your company motto is “Your Mission is Ours” and today our proud SDVBE broker dealer felt your unwavering commitment to help your customers and partners succeed. It is that sense of purpose and opportunity to make a difference in the world that not only drives you but it also drove us as well today.
Proceeds from today’s transaction will earmark approximately $400mm to redeem a portion of the outstanding $900mm in aggregate principal amount of LMT’s 2021 notes at their redemption price and will use the balance of the net proceeds to repay a portion of the outstanding $1,250 million in aggregate principal amount of LMT’s 2020 notes at or prior to maturity on November 23, 2020.
………and here’s a snap shot of today’s final Lockheed Martin Corp. book size and oversubscription rate – the measure of investor demand:
| LMT New Issue |
Tranche Size | Book At-the-Top |
Final Book | Bid-to-Cover Rate |
| LMT | $400mm | $5.7b | $5.3b | 13.25x |
| LMT | $750mm | $7.4b | $6.7b | 8.93 |
……and here’s a check of spread compression from IPTs thru the launch and final pricing, NIC and where the paper is currently trading.
| LMT New Issue |
Ratings | IPTs | GUIDANCE | LAUNCH | PRICED | SPREAD COMPRESSION |
NIC (bps) |
TRADING at the BREAK |
+/- (bps) |
| LMT | A3/A- | +165a | N/A | +125 | +125 | <40> bps | <5> | 111/ | <14> |
| LMT | A3/A- | +195 | N/A | +155 | +155 | <40> bps | <5> | 137/ | <18> |
Lockheed Martin Final Pricing Details:
LMT $400mm 1.85% due 6/15/30 @ $99.780 to yield 1.874% or T+125 MW T+20
LMT $750mm 2.80% due 6/15/50 @ $99.133 to yield 2.843% or T+155 MW T+25
Lockheed Martin is, without question, one of America’s greatest corporations whose mission is to keep our country safe and a company that is equally dedicated to supporting our nation’s military veterans and their families. Hooah!
Above is the opening extract from Quigley’s Corner aka “QC” 05-15-2020 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: [email protected] 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.
