Coca-Cola, PepsiCo, Southwest, Philip Morris, NXP price; market awaits Fed buys; spreads firm

By Cristal Cody

Tupelo, Miss., April 29 – Coca-Cola Co. led deal volume in the high-grade bond market on Wednesday with a $6.5 billion five-part offering of senior notes.

The company was last in the primary market on March 20 with $5 billion of senior notes in five tranches.

PepsiCo Inc. also returned to the primary market on Wednesday with $2 billion of senior notes in two tranches after selling $6.5 billion of bonds in six tranches on March 17.

Southwest Airlines Co. priced $2 billion of notes in two tranches a day after pricing $2 billion of five-year convertible notes and $1.99 billion of common stock.

Also during the session, Philip Morris International Inc. sold $2.25 billion of notes in three parts.

Co-issuers NXP BV, NXP Funding LLC and NXP USA, Inc. came with $2 billion of senior notes in three tranches in a Rule 144A and Regulation S offering.

Canadian National Railway Co. priced an upsized $600 million of 30-year senior notes.

Consumers Energy Co. brought $525 million of 40-year first mortgage bonds to the primary market.

Also, ONE Gas, Inc. priced $300 million of 10-year senior notes.

The day’s volume pushes week to date corporate bond supply to more than $46 billion.

About $40 billion to $50 billion of issuance was expected by market sources for the week.

The Federal Reserve said in a statement following its monetary policy meeting on Wednesday that it is committed to using its full range of tools to support the U.S. economy during the coronavirus pandemic.

The Federal Open Market Committee maintained the current target range for the federal funds rate at zero to 0.25%.

The Federal Reserve said it will continue to purchase Treasuries and agency residential and commercial mortgage-backed securities to support smooth market functioning.

The Fed also is expected to purchase corporate bonds in the primary and secondary markets.

High-grade supply has been heavy with record-breaking volumes since early March.

“The record setting issuance volumes we are seeing in March and April this year – about twice that from the aftermath of the financial crisis – is because non-financial companies faced a liquidity crisis as the global economy remains partially shut down,” Hans Mikkelsen, a BofA Securities Inc. analyst, said in a note released Wednesday.

“The reason why U.S. IG companies are able to issue at such scale is primarily that the Fed announced plans to buy corporate bonds in the primary and secondary markets,” Mikkelsen said. “That turned everyone else into a buyer – before the Fed has bought a single bond. We still have no effective date for Fed buying but it could be anytime now.”

The Markit CDX North American Investment Grade 33 index firmed more than 4 basis points over the day to end at a spread of 87.24 bps.

Stocks indexes were up more than 2.2%.

High-grade ETFs were stronger on the day.

The iShares iBoxx Investment Grade Corporate Bond ETF rose 0.66% to 130.05.

The PIMCO Investment Grade Corporate Bond Index closed up 0.51% at 110.57.

Coca-Cola prices $6.5 billion

Coca-Cola sold $6.5 billion of senior notes (A1/A+/) in five tranches in the deal, according to a market source.

The company priced $1.5 billion of 1.45% seven-year notes at a spread of Treasuries plus 95 bps, tighter than talk in the 120 bps area.

A $1.5 billion tranche of 1.65% 10-year notes priced at a Treasuries plus 105 bps spread.

Initial price talk was in the 135 bps spread area.

Coca-Cola sold $1 billion of 2.5% 20-year notes at a Treasuries plus 125 bps, compared to initial guidance in the 145 bps spread area.

A $1.5 billion tranche of 2.6% 30-year notes priced at a 135 bps over Treasuries spread.

Initial price talk was at the Treasuries plus 155 bps area.

Also, $1 billion of 2.75% 40-year notes priced at a 150 bps spread.

The notes were talked at the 170 bps spread area.

Barclays, BNP Paribas Securities Corp., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., Morgan Stanley & Co. LLC, Santander Investment Securities Inc., Goldman Sachs & Co. LLC and Standard Chartered Bank were the bookrunners.

Coca-Cola is an Atlanta-based beverage company.

PepsiCo prices $2 billion

PepsiCo priced $2 billion of senior notes (A1/A+/) in two tranches, according to a market source.

A $1 billion tranche of 0.75% three-year notes priced at a spread of 57 bps over Treasuries.

The notes were talked to price in the Treasuries plus 80 bps area.

The company sold $1 billion of 1.625% 10-year notes at a spread of 105 bps over Treasuries.

Initial price talk on the 10-year tranche was in the 135 bps over Treasuries area.

Goldman Sachs, Mizuho Securities USA Inc. and Morgan Stanley were the bookrunners.

PepsiCo also priced €2 billion of senior notes in two tranches on Wednesday.

The food and beverage company is based in Purchase, N.Y.

Southwest Airlines prints

Southwest Airlines priced $2 billion of notes (Baa1/BBB/BBB+) in two tranches on Wednesday, according to a market source and an FWP filing with the Securities and Exchange Commission.

A $750 million tranche of 4.75% three-year notes priced at 99.586 to yield 4.9%.

The three-year notes were talked at the 5.625% area.

Southwest Airlines sold $1.25 billion of 5.25% five-year notes at 99.783 to yield 5.3%.

Initial price talk was in the 6.125% area.

BofA Securities, BNP Paribas, Citigroup, J.P. Morgan Securities LLC, Morgan Stanley, Goldman Sachs and Wells Fargo Securities LLC were the bookrunners.

The airline company is based in Dallas.

Philip Morris prices $2.25 billion

Philip Morris International sold $2.25 billion of notes (A2/A/A) in three tranches on Wednesday, according to a market source.

The company priced $750 million of 1.125% three-year notes at a spread of 100 bps over Treasuries, versus initial talk in the 140 bps to 145 bps area.

A $750 million tranche of 1.5% five-year notes priced with a Treasuries plus 125 bps spread.

Initial talk was in the 155 bps to 160 bps area.

Philip Morris sold $750 million of 2.1% 10-year notes at a spread of 155 bps over Treasuries.

Initial guidance was at the 185 bps to 190 bps over Treasuries area.

Citigroup Global Markets Inc., Goldman Sachs, Mizuho, Banca IMI, BBVA Securities Inc., Deutsche and SMBC Nikko Securities America Inc. were the bookrunners.

The producer of cigarette and tobacco products is based in New York.

NXP prices $2 billion

NXP sold $2 billion of senior notes (Baa3/BBB/BBB-) in three tranches in a Rule 144A and Regulation S transaction on Wednesday, according to a market source.

A $500 million tranche of 2.7% five-year notes priced at a spread of Treasuries plus 235 bps.

Initial price talk was in the Treasuries plus 300 bps area.

A $500 million offering of 3.15% seven-year notes priced at a 265 bps over Treasuries spread.

The seven-year tranche was talked at the 325 bps spread area.

The issuers also priced $1 billion of 3.4% 10-year green notes at a spread of 280 bps over Treasuries.

The 10-year green bond was initially talked to price in the Treasuries plus 335 bps area.

BofA Securities, Deutsche and Goldman Sachs were the active managers.

The notes will be guaranteed by parent company NXP Semiconductors NV.

A portion of the proceeds will be used for eligible green projects.

NXP is an Eindhoven, the Netherlands-based manufacturer and retailer of semiconductor chips.

Canadian Railway upsizes

Canadian National Railway priced an upsized $600 million of 2.45% 30-year senior notes (A2/A/DBRS: A) on Wednesday at 97.871 to yield 2.552%, or a spread of Treasuries plus 130 bps, according to a market source and an FWP filing.

Initial price talk was in the Treasuries plus 155 bps area.

The deal was upsized from $500 million.

BofA Securities, Citigroup Global Markets Inc., Scotia Capital (USA) Inc. and Wells Fargo were the bookrunners.

The railway transportation company is based in Montreal.

Consumers Energy sells $525 million

Consumers Energy priced $525 million of 2.5% first mortgage bonds due May 1, 2060 (Aa3/A/A+) on Wednesday at 99.149 to yield 2.534%, or a spread of Treasuries plus 130 bps, according to a market source and an FWP filing.

Initial price talk was in the 165 bps spread area.

BNP Paribas, BofA Securities, KeyBanc Capital Markets Inc., Mizuho, PNC Capital Markets LLC, Scotia, SMBC Nikko and Wells Fargo were the bookrunners.

Consumers Energy is an electric and gas utility based in Jackson, Miss.

ONE Gas prices $300 million

ONE Gas (A2/A/) priced $300 million of 2% 10-year senior notes at a spread of Treasuries plus 145 bps on Wednesday, according to a market source and an FWP filing.

The notes were initially talked to price in the Treasuries plus 187.5 bps spread area.

The issue priced at 99.476 to yield 2.058%.

BofA Securities and Mizuho were the bookrunners.

ONE Gas is a natural gas distribution company based in Tulsa, Okla.

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