American Air, SoCal Edison, others price; Occidental Petroleum on tap; funds post outflow

By Cristal Cody

Tupelo, Miss., Aug. 1 – High-grade supply revved up on Thursday with about $5 billion of bonds priced following the Federal Reserve’s first rate cut since 2008 in the previous session.

American Airlines, Inc. sold $1.1 billion of pass-through certificates in three tranches.

Southern California Edison Co. priced $1.2 billion of new and reopened first and refunding mortgage bonds.

Crown Castle International Corp. brought $900 million of senior notes in two parts to the primary market.

In addition, Ryder System, Inc. sold $550 million of five-year medium-term notes.

Meanwhile, Occidental Petroleum Corp. is marketing up to nine tranches of senior notes to fund its acquisition of Anadarko Petroleum Corp. with fixed income investor calls on Thursday and Friday.

Investment-grade issuers stayed out of the primary market on Wednesday with the focus on the Fed’s monetary policy decision to cut rates by 25 basis points.

Week to date, investment-grade bond supply totals more than $23 billion. Market sources expected about $20 billion to $25 billion of issuance for the week.

Supply is expected to slow over the back half of August but remain strong with about $75 billion up to $100 billion of supply forecasted for the month, market sources report.

Corporate investment-grade funds saw an outflow of $62 million for the past week ended Wednesday, according to Lipper US Fund Flows on Thursday. In the previous week, fund inflows declined to $2.5 billion from $3.65 billion in the prior week.

The Markit CDX North American Investment Grade 32 index ended the day about 1 bp softer at a spread of 56 bps.

American Airlines sells $1.1 billion

American Airlines priced $1,096,508,000 of series 2019-1 pass-through certificates in three tranches on Thursday, according to a market source.

The company sold $578,712,000 of 3.15% class AA senior certificates (Aa3/AA/) at a spread of 126 bps over Treasuries.

A tranche of $289,358,000 of 3.5% class A subordinated certificates (A2/A/) priced with a Treasuries plus 161 bps spread.

American Airlines sold $228,438,000 of 3.85% class B junior subordinated certificates (Baa3/BBB-/) at a 217 bps over Treasuries spread.

The notes priced tighter than initial talk.

The class AA and class A certificates have a weighted average life of 8.7 years. The class B certificates have a 5.6-year weighted average life.

The class AA and A certificates have a final distribution date of Feb. 15, 2032 and a legal distribution date of Aug. 15, 2033, while the class B certificates have a final distribution date of Feb. 15, 2028 and a legal distribution date of Aug. 15, 2029.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC were the lead bookrunners.

The commercial airline, which is a subsidiary of AMR Corp., is based in Fort Worth, Texas.

SoCal Edison prices $1.2 billion

Southern California Edison priced $1.2 billion of new and reopened first and refunding mortgage bonds (A3/A-/BBB+) on Thursday, according to FWP filings with the Securities and Exchange Commission.

The company sold $400 million of new 2.85% 10-year bonds at 99.845 to yield 2.868%, or a Treasuries plus 95 bps spread.

Southern California Edison placed an $800 million add-on to its 4% series 2017A first and refunding bonds due April 1, 2047 at 103.988 to yield 3.764%. The bonds priced with a Treasuries plus 130 bps spread.

The 4% bonds were first issued March 24, 2017 in a $700 million offering at 99.93 to yield 4.004% and a spread of 95 bps over Treasuries. The issue was reopened on Sept. 8, 2017 in a $300 million offering at 107.283 to yield 3.594%, or a Treasuries plus 90 bps spread. The total outstanding is $1.8 billion.

Bookrunners were J.P. Morgan Securities LLC, BofA Securities, Inc., MUFG, SMBC Nikko Securities America, Inc. and TD Securities (USA) LLC.

Southern California Edison is a Rosemead, Calif.-based electric utility company and subsidiary of Edison International.

Crown Castle raises $900 million

Crown Castle International priced $900 million of senior notes (Baa3/BBB-/BBB) in two tranches on Thursday, according to an FWP filing with the SEC.

The company sold $550 million of 3.1% 10-year notes at 99.811 to yield 3.122%, or a spread of Treasuries plus 122 bps.

A $350 million tranche of 4% 30-year notes priced with a Treasuries plus 157 bps spread. The notes were sold at 99.657 to yield 4.02%.

Bookrunners were Citigroup Global Markets, Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, SunTrust Robinson Humphrey Inc., Barclays, BNP Paribas Securities Corp., BofA Securities, Commerz Markets LLC, Fifth Third Securities, Inc., J.P. Morgan Securities, Mizuho Securities USA LLC, Morgan Stanley, MUFG, PNC Capital Markets LLC, Scotia Capital (USA) Inc., SG Americas Securities, LLC, SMBC Nikko Securities America and TD Securities.

Houston-based Crown Castle provides shared wireless infrastructure to wireless carriers.

Ryder sells five-year notes

Ryder System priced $550 million of 2.5% five-year medium-term notes on Thursday at 99.919 and a spread of 83 bps over Treasuries, according to a market source and a 424B3 filed with the SEC.

The notes (Baa1/BBB+/A-) were initially talked to price with a spread in the 100 bps area.

BB&T Capital Markets, Lloyds Securities Inc., MUFG, U.S. Bancorp Investments Inc. and Wells Fargo Securities, LLC were the bookrunners.

Ryder System is a Miami-based truck rental and fleet management company.

Occidental Petroleum in pipeline

Occidental Petroleum is holding fixed income investor calls on Thursday and Friday for up to nine tranches of senior notes (Baa3/A/), according to a market source and 424B5 filed with the Securities and Exchange Commission on Thursday.

The deal is expected to include 18-month, two-year and three-year floating-rate notes and fixed-rate notes in two-, three-, five-, seven- and 10-year tranches.

BofA Securities, Citigroup Global Markets, J.P. Morgan Securities and Wells Fargo Securities are the bookrunners.

The Los Angeles oil and gas, chemical and midstream company will use the proceeds to finance its merger with Anadarko Petroleum Corp.

The deal, valued at about $38 billion, was announced in April and is expected to close after Anadarko’s special shareholders’ meeting on Aug. 8.

If the acquisition is not completed on or before May 14, 2020, the notes will have a special mandatory call at 101.

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