Zimmer, Ohio Power, Entergy Arkansas price notes; credit spreads recover; secondary mixed

By Cristal Cody

Tupelo, Miss., March 13 – Tone improved over Friday’s session with a handful of issuers in the high-grade primary market and a turnaround in equities after U.S. president Donald Trump declared a national emergency regarding the coronavirus.

Zimmer Biomet Holdings, Inc. came with $1.5 billion of senior notes in two tranches.

The six-year issue priced more than 10 basis points tighter than initial talk, while the second tranche priced on top of guidance.

Ohio Power Co. sold $350 million of 10-year senior notes, 15 bps better than initial talk.

Entergy Arkansas, LLC priced a $100 million reopening of its 4% first mortgage bonds due June 1, 2028, 10 bps tighter than talk.

Credit spread recovery

The deals cap a week of issuance that topped $7 billion as credit spreads widened more than 50 basis points over the first four sessions and the stock market dove into bear territory.

High-grade credit spreads improved more than 15 bps on Friday, closing the week more than 35 bps wider at a spread of 120.34 bps.

Stocks recovered on Friday after indices closed Thursday down nearly 10% in the biggest drop in the S&P 500 index and Dow Jones industrial average since 1987.

On Friday, the S&P 500 finished up 9.29% on the day. The Dow gained 1,985 points, or 9.36%. The week still ended much lower than where it started.

Treasuries gave back some of the risk-off gains from over the week. The benchmark 10-year note yield closed up 10.2 bps at 0.951%.

Coming up

Investment-grade issuance totaled more than $27 billion last week after the Federal Reserve trimmed its benchmark interest rate by 50 bps. Additional cuts are being eyed by market participants.

The Federal Reserve is scheduled to hold its next monetary policy meeting on Tuesday and Wednesday.

The deal pipeline is starting is see a backlog with some issuance expected next week depending on volatility, sources report.

Widespread event, school closings and cancellations began pouring in on Thursday and continued on Friday following the World Health Organization’s designation of the coronavirus as a pandemic on Wednesday.

Also weighing on market sentiment, at least six companies including Boeing Co., Blackstone Group Inc., Carlyle Group LP, Hilton Worldwide Holdings Inc., Royal Caribbean Cruises Ltd. and Wynne Resorts Ltd., announced intentions to draw down credit lines in response to the coronavirus, according to a BofA Securities, Inc. research note released Friday.

High-grade secondary

Bonds were mixed in the secondary market with some issues improving, sources said.

Boeing’s notes traded about 1 bp to 10 bps tighter over the day.

The company’s 2.95% senior notes due Feb. 1, 2030 (A3/A-/A-) improved to 94.89, from 92.06 on Thursday and 93.64 on Wednesday but down from 101.9 on Monday.

The notes traded a week ago with a 107 handle.

Boeing sold $750 million of the notes on July 29, 2019 at 99.88 to yield 2.96% and a spread of 90 bps over Treasuries.

Starbucks Corp.’s new senior notes (Baa1/BBB+/BBB+) remained weaker than issuance going out.

The company’s 3.35% notes due March 12, 2050 were seen about 3 bps softer and down to 95.29 from 97.79 on Thursday.

Starbucks sold $500 million of the 30-year notes on Tuesday at 99.232 to yield 3.391% and a spread of 225 bps over Treasuries.

JPMorgan Chase & Co.’s $2.25 billion of new 2.005% fixed-to-floating rate senior notes due March 13, 2026 (A2/A-/AA-) widened nearly 40 bps to the 181 bps area and improved slightly by late afternoon to 171 bps bid, 167 bps bid offered, sources said.

The notes priced on Tuesday at a spread of Treasuries plus 145 bps.

New issues priced Friday were tighter in aftermarket trading.

Entergy Arkansas' reopened bonds firmed 15 bps to 160 bps bid, a source said.

Zimmer prices $1.5 billion

Zimmer Biomet Holdings priced $1.5 billion of senior notes (Baa3/BBB) in two parts in a deal Friday, according to a market source and an FWP filing with the Securities and Exchange Commission.

The company sold $600 million of 3.05% notes due Jan. 15, 2026 at 99.881 to yield 3.073%.

The notes priced at a spread of Treasuries plus 237.5 bps, tighter than initial talk in the Treasuries plus 250 bps area.

A $900 million tranche of 3.55% notes due March 20, 2030 priced at 99.758 to yield 3.579%. The notes priced on top of guidance at a Treasuries plus 262.5 bps spread.

BofA Securities, Inc., Citigroup Global Markets Inc., RBC Capital Markets, LLC, Wells Fargo Securities LLC, HSBC Securities (USA) Inc. and Mizuho Securities USA LLC were the bookrunners.

Zimmer Biomet, based in Warsaw, Ind., designs, manufactures and markets orthopedic reconstructive and other products.

Ohio Power sells notes

Ohio Power brought $350 million of 2.6% 10-year senior notes at 99.894 to yield 2.612%, according to a market source and an FWP filing.

The notes (A2/A-) priced at a spread of Treasuries plus 170 bps versus initial talk in the 185 bps area.

BNP Paribas Securities Corp., Credit Agricole Securities (USA) Inc., RBC Capital Markets and SunTrust Robinson Humphrey, Inc. were the bookrunners.

Ohio Power is a Columbus, Ohio-based electricity provider and subsidiary of the American Electric Power Co., Inc.

Entergy Arkansas reopens bonds

Entergy Arkansas priced a $100 million reopening of its 4% first mortgage bonds due June 1, 2028 (A2/A) during the session at a spread of 175 bps over Treasuries, according to a market source and an FWP filing.

Initial price talk was in the Treasuries plus 185 bps area.

The bonds priced at 109.473 to yield 2.67%.

BNP Paribas, SMBC Nikko Securities America Inc. and Stephens Inc. were the bookrunners.

Entergy Arkansas originally sold $250 million of the notes on May 8, 2018 at 99.932 to yield 4.008% and a spread of 103 bps over Treasuries. The total outstanding is now $350 million.

Entergy Arkansas is a Little Rock, Ark.-based energy provider.

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