--Verizon offering sized at $4.5 billion, largest this
session
--Microsoft seen borrowing at record-low five-year rate
--Issuance comes on heels of $12 billion sold Thursday
(Updates offering sizes, adds details throughout.)
By Katy Burne and Patrick McGee
U.S. companies including Microsoft Corp. (MSFT) were out to sell
nearly $11 billion worth of new bonds Friday, motivated by strong
demand following the Hurricane Sandy-induced market closure this
week and a promising U.S. jobs report Friday.
Notable was that the burst of activity came on a Friday,
typically a quiet day in the U.S. debt markets. The action followed
about $12 billion of bonds sold Thursday.
With many third-quarter earnings reports from big companies in
the rear-view mirror, an increase in October payrolls and an upward
revision in the prior months' jobs data, companies opted to strike
while the time was ripe ahead of Tuesday's presidential
election.
Leading the issuance was Verizon Communications Inc. (VZ), with
a four-part sale sized at $4.5 billion, Microsoft with a $2.25
billion deal in three parts, and insurer Aetna Inc. (AET) with a $2
billion, three-part bond sale to fund its purchase of Coventry
Health Care Inc. (CVH).
The three-part Microsoft deal is the software giant's first
since February 2011, when the company sold $2.25 billion in new
debt. The triple-A-rated bonds are being sold in five-, 10-, and
30-year maturities. As of early afternoon New York time, the $600
million batch of five-year notes were set to price with a risk
premium of just 0.27 percentage point over comparable Treasurys,
according to a person familiar with the sale. That would be the
lowest spread for a U.S.-denominated corporate bond issued by a
company outside the financial industry since 1994, according to
data provider Dealogic.
A $750 million, 10-year tranche from Microsoft was set to price
with a spread of 0.47 point over Treasurys, and $900 million of
30-year debt at 0.67 point. A Microsoft spokesman declined to
comment.
Others tapping the market Friday included Praxair Inc. (PX) for
$600 million, TransAlta Corp. (TAC) for $400 million, machinery
maker Kennametal Inc. (KMT) for $400 million, Post Apartment Homes
LP for $250 million, and Magellan Midstream Partners LP (MMP) for
$250 million. Two banks, Rabobank and the National Bank of Canada
(NTIOF, NA.T), also were selling an undetermined amount of new
debt.
Friday saw increased issuance because "earnings season is
winding down ... and Hurricane Sandy has delayed issuance that
would have come earlier in the week," said Anthony Valeri,
fixed-income strategist for LPL Financial. "It is all about the
election now, and [I] believe this month's jobs report will take a
back seat."
Jody Lurie, credit strategist at Janney Capital Markets, said
the long-term tranche could price particularly well because of how
Operation Twist--the Federal Reserve's program of buying long-term
Treasurys--has reduced the supply of top-quality bonds available
for purchase.
"There is insatiable demand for high-quality credit,
particularly industrials," added Jesse Fogarty, portfolio manager
at Cutwater Asset Management.
Mr. Fogarty mentioned the Fed's other easing program--its third
round of so-called quantitative easing, in which the central bank
is buying mortgage-backed securities--as another reason demand will
be strong for corporate bonds from highly rated issuers. With so
much of the mortgage market taken out of the system by the Fed,
many buyers of so-called "agency" mortgage bonds from U.S.
government-sponsored enterprises are turning to credit as a
surrogate, he said.
-Write to Katy Burne at katy.burne@dowjones.com and Patrick
McGee at patrick.mcgee@dowjones.com
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