UPDATE: High-Grade Cos Keep Selling Bonds In Record Quarter
March 23 2009 - 2:53PM
Dow Jones News
Highly rated companies are set to raise more than $7 billion in
the U.S. corporate bond market Monday as investors flock to safe
assets with attractive yields.
Indeed, the supply of such bonds these first three months of the
year is the highest for any quarter since records began in 1995,
according to data provider Dealogic. The tally for
U.S.-dollar-denominated high-grade bonds stands at $310 billion. Of
that amount, $85.6 billion of bonds were backed by the Federal
Deposit Insurance Corp.'s guarantee program for banks and finance
companies.
Most of the new bonds were sold by firms considered resistant to
the recession or those that rarely issue debt. One of largest deals
Monday was likely from Time Warner Cable Inc. (TWC), which was
raising the funds to repay the borrowings under its $1.932 billion
loan facility and other corporate purposes. Time Warner launched $1
billion in five-year notes at a risk premium, or spread, of 595
basis points over Treasurys, according to a person familiar with
the deal. The $2 billion 10-year was launched at a spread of 570
basis points over Treasurys.
"In general, issuance from higher quality/infrequent
non-financial issuers continues to be met with good demand," said
Jon Duensing, principal at Smith Breeden Associates in Boulder,
Colo.
Other companies selling deals Monday included Bacardi Ltd.,
Illinois Tool Works Inc. (ITW) and Lloyds TSB Bank PLC (LYG).
Investors are looking to move away from money market funds for
more yield, said William Larkin, portfolio manager at Cabot Money
Management.
"People are getting very sensitive in being in cash for a long
time and earning nothing," he said.
Considering high-grade bonds' coupons, yields and relative
ratings stability, "high-grade credit is the place to be," said
Suki Mann, credit strategist at Societe Generale.
So far this month, investment-grade companies have raised $92.6
billion in U.S.-dollar-denominated bonds, according to
Dealogic.
Meanwhile, high-yield issuance is lagging, with only $1.4
billion raised this month. The quarter's tally, at $10.8 billion so
far, is the seventh-lowest quarterly volume on record, according to
Dealogic.
Investor enthusiasm for new junk deals is not evident, according
to Citigroup strategist John Fenn. "For the most part, high yield
has simply been following the equity markets higher on precious
little conviction," Fenn said. He noted that the headlines related
to many high-yield companies have been focused on possible
defaults.
-By Romy Varghese, Dow Jones Newswires; 215-656-8263;
romy.varghese@dowjones.com
-By Kate Haywood, Dow Jones Newswires; 201-938-2348;
kate.haywood@dowjones.com