Below is excerpted from July 27 edition of Quigley’s Corner, Mischler Financial Group’s daily debt market coverage and commentary distributed to Fortune 500 treasury teams, leading institutional investors, and the sell-side’s most recognized fixed income syndicate desks.
Today the IG Corporate dollar DCM hosted 5 issuers across 11 tranches totaling $16.20b. The SSA space was quiet. The session, however, was owned by AT&T Inc’s. $11b five-part Senior Unsecured Notes transaction thru joint leads Deutsche Bank, Goldman Sachs, J.P. Morgan, and Morgan Stanley.
What’s more Mischler Financial Group, Inc., our nation’s oldest Service-Disabled Veteran-Owned broker-dealer, was named an active Co-Manager on the financing. That makes today’s AT&T deal the Deal-of-the-Day!
AT&T Inc. $11b 5-Part Senior Unsecured Global Notes Deal Dashboard
AT&T, the world’s largest telecommunications company announced its second 5-part transaction of the year today. Mischler served as a value-added Active Co-Manager on both issuances. Earlier this year, on May 21st AT&T issued a $12.5b 5-part. Today, the company issued a total of $11b and was able to extend the same tenors as the May issuance (7s, 11s, 21s, 31, and 40s) by six months while issuing a 22.5-year tranche rather than last April’s 21-year tranche, so that extended by 1.5 years. More importantly, AT&T was able to ratchet in much-improved pricing that ranged from 5 to 30 bps tighter versus the funding levels they achieved in May. The issue was announced and sold into strong appetite from large tier 1 as well as higher quality middle markets accounts. I will continually keep the critical importance of elevated ESG mandates in our IG dollar DCM particularly the “S” for “Social.” Banks and specifically loan lending institutions, are being called to embrace and execute D&I mandates immediately and if they don’t there are plenty of other global banks that would relish all or a part of that lost loan lending business.
Today’s AT&T transaction included 14 “Social” or D&I broker-dealers. We affirm and co-sign AT&T’s meaningful internal procurement initiative that rewards value-added distribution propositions which IS the feature of the mandate that helps D&I firms – with a purpose – grow in a more meaningful and sustainable way while adding the value of introducing new high-quality investors to the issuing company’s profile.
Use of proceeds from today’s transaction will be used for general corporate purposes including funding the cash consideration for concurrent tender offers of certain debt securities.
Earlier today AT&T announced Tender Offers to purchase for cash (i) any and all of 18 series of outstanding notes and (ii) 3 other series of outstanding notes.
Today’s exercise took full advantage of the much lower rate environment enabling AT&T to swap out higher-yielding debt with today’s much cheaper long-term obligations. Some of the debt pieces retired through today’s tender carried interest rates of 7.85%. So, smart financing helped flatten AT&T’s curve which should make the Company and its customers very happy.
Thank you AT&T Treasury/Funding and Team Deutsche Bank Syndicate who worked with us on the 22.5-, 31.5- and 40.5-year order books, and thanks as well to Team Morgan Stanley Syndicate for working with us on the 7.5- and 11.5-year order books. It’s always a privilege having such access to the syndicate teams and we greatly appreciate your recognition and the issuer’s reward of our introduction of solid accounts into the big book.
“What has become clear over the past three months is that a host of ‘stakeholders’ including many investors, will expect a sea-change in their access to information and company practices. While there is no requirement to be the first mover on this, those that are laggards will face avoidable challenges and a rising threat to their ‘license to operate.” That is the last paragraph of a widely read article titled “Time to rethink the ‘S’ in ESG – COVID-10 prompts increased focus on a new ‘S’: the Stakeholder” as published by FTI Consulting Inc. published on May 29th, 2020. The article that marries very well with what I have been saying and writing about here in the “QC” these past few years especially regarding my forecast for DCM trends in late December of 2019 that called for more issuance under the “S”
………here’s a snap shot of today’s final AT&T Inc’s. book sizes and oversubscription rates – the measure of investor demand:
| T New Issue |
Tranche Size | Books at the Top | Final Order Books | Bid-to-Cover Rate |
| 7.5yr | 2,250 | $8.6b | $7.9b | 3.51x |
| 11.5yr | 2,500 | $6.75b | $5.5b | 2.20x |
| 22.5yr | 2,500 | $5.3b | $5b | 2.00x |
| 31.5yr | 2,250 | $6b | $5b | 2.22x |
| 40.5yr | 1,500 | $4.5b | $4b | 2.67x |
……and here’s a check of spread compression from IPTs thru the launch and final pricing as well as new issue concession or NIC.
| T New Issue |
Ratings | IPTs | GUIDANCE | LAUNCH | PRICED | SPREAD COMPRESSION |
NIC (bps) |
2ndy Trading |
+/- vs. Pricing |
| 7.5yr | Baa2/A- | +150a | +120 # | +120 | +120 | <30> bps | +5 | 115/ | <5> |
| 11.5yr | Baa2/A- | +185a | +165 # | +165 | +165 | <20> bps | +15 | 164/ | <1> |
| 22.5yr | Baa2/A- | +205a | +185 # | +185 | +185 | <20> bps | +15 | 183.5/ | <1.5> |
| 31.5yr | Baa2/A- | +225a | +205 # | +205 | +205 | <20> bps | +15 | 204/ | <1> |
| 40.5yr | Baa2/A- | +245a | +225 # | +225 | +225 | <20> bps | +15 | 225/ | 0/flat |
AT&T Inc. Final Pricing Details:
T $2.25bn 1.65% due 2/01/2028 @ $99.874 to yield 1.668% or T+120
T $2.5bn 2.25% due 2/01/2032 @ $99.819 to yield 2.268% or T+165
T $2.5bn 3.10% due 2/01/2043 @ $99.952 to yield 3.103% or T+185
T $2.25bn 3.30% due 2/01/2052 @ $99.942 to yield 3.303% or T+205
T $1.5bn 3.50% due 2/01/2061 @ $99.936 to yield 3.503% or T+225
Above is the opening extract from Quigley’s Corner aka “QC” 07-27-2020 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: 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.
