FedEx, Dell, MetLife price; high-grade supply sets record; busy holiday deal pace eyed

By Cristal Cody

Tupelo, Miss., April 3 – High-grade issuers rounded out the week with more than $6 billion of bonds priced on Friday.

FedEx Corp. sold $3 billion of senior notes in three tranches.

Dell Technologies Inc. subsidiaries Dell International LLC and EMC Corp. priced $2.25 billion of guaranteed first-lien senior secured notes in three tranches.

Also, Metropolitan Life Global Funding I sold $1 billion of 10-year notes.

More than $117 billion of investment-grade bonds were priced over the week, outpacing last week’s record volume of about $109 billion.

Looking ahead to next week, primary action is expected to be slower with the early market close on Thursday and full day closure on April 10 for the Good Friday holiday.

Still, steady supply is predicted ahead of earnings-related blackout periods with about $30 billion to $50 billion of issuance forecast for the week, sources said.

High-grade issuance has been extremely heavy in the wake of the coronavirus pandemic and federal stimulus measures that includes corporate bond purchases.

The Federal Reserve’s corporate bond program features primary and secondary market purchases and is expected to exceed $1 trillion, according to a BNP Paribas, London Branch research note on Friday.

“The current communication from the Fed is not yet clear about the total size of the corporate bond buying programs,” BNP’s analysts said. “However, the Fed has been clearer about the commercial paper program in which the limit is determined by the single-issuer cap. By inference, this implies more than $1 [trillion] as the limit for corporate bonds.”

The Fed purchases are projected to total $700 billion in the primary market, while secondary market purchases would include $425 billion of corporate bonds and $40 billion of ETFs, according to the report.

On Friday, market tone softened following the release of a weak March jobs report.

The Labor Department’s nonfarm payroll report showed job numbers fell by 701,000 in March, while the unemployment rate rose 0.9% to 4.4%.

“The changes in these measures reflect the effects of the coronavirus (Covid-19) and efforts to contain it,” the Labor Department release said. “Employment in leisure and hospitality fell by 459,000, mainly in food services and drinking places. Notable declines also occurred in health care and social assistance, professional and business services, retail trade, and construction.”

In the prior 12 months, nonfarm employment growth had averaged 196,000 per month.

On Thursday, the weekly unemployment report showed that 6.65 million seasonally adjusted initial claims were filed for employment benefits in the previous week, up 3.34 million from the prior week’s revised level of 3.3 million initial claims.

U.S. Secretary of Labor Eugene Scalia said in a news release that the March report reflects the initial impact from the public health measures being taken.

“It should be noted the report’s surveys only reference the week and pay periods that include March 12; we know that our report next month will show more extensive job losses, based on the high number of state unemployment claims reported yesterday and the week before,” Scalia said.

Treasuries rallied in the risk-off bid with the 10-year benchmark note yield closed down 4 bps at 0.587%.

Stock indices were down less than 2% on the day with the Dow Jones industrial average finishing off by 1.69%.

The iShares iBoxx Investment Grade Corporate Bond ETF declined 0.52% over the session after closing up 0.26% on Thursday.

The Markit CDX North American Investment Grade 33 index softened nearly 7 bps to a spread of 129.32 bps on Friday.

New issues priced this week have mostly improved in the secondary market, a source said.

Oracle Corp.’s $20 billion six-part offering of senior notes (A3/A+/A-) priced on Monday were mixed with the notes last seen better on the front end of the 5- to 40-year tranches.

Oracle’s 2.5% notes due April 1, 2025 firmed about 40 bps in secondary trading. The company sold $3.5 billion of the five-year notes at a spread of Treasuries plus 210 bps.

Overall high-grade paper was mixed across various sectors, but no widespread spread swings as recorded in March were seen on Friday, a market source said.

FedEx prices $3 billion

Leading the day’s pricing action, FedEx sold $3 billion of senior notes (Baa2/BBB/) in three tranches, according to a market source and an FWP filing with the Securities and Exchange Commission.

A $1 billion tranche of 3.8% % five-year notes priced at 99.724 to yield 3.859%, or a spread of 350 bps over Treasuries.

Initial price talk was at the Treasuries plus 390 bps area.

The company sold $750 million of 4.25% 10-year notes at 99.759 to yield 4.279%. The notes priced with a Treasuries plus 370 bps spread.

The 10-year issue was talked at the 400 bps spread area.

FedEx sold $1.25 billion of 5.25% 30-year notes at 99.05 to yield 5.313%, or Treasuries plus 410 bps.

Price guidance was at the 450 bps over Treasuries area.

BofA Securities, Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Wells Fargo Securities LLC, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Scotia Capital (USA) Inc. were the bookrunners.

FedEx is a Memphis, Tenn.-based package and freight transportation company.

Dell raises $2.25 billion

Dell International and EMC priced $2.25 billion of guaranteed first lien senior secured notes (Baa3/BBB-/BBB-) in three tranches tighter than talk on Friday, according to a market source and news release.

The issuers sold $1 billion of 5.85% five-year notes at a spread of 550 bps over Treasuries.

A $500 million tranche of 6.1% seven-year notes priced with a Treasuries plus 562.5 bps spread.

Also, $750 million of 6.2% 10-year notes were brought at a spread of 562.5 bps over Treasuries.

Initial price talk on all three tranches was in the Treasuries plus 612.5 bps area.

Barclays, BofA Securities, Citigroup, Credit Suisse Securities (USA) LLC, Goldman Sachs and J.P. Morgan were bookrunners of the Rule 144A and Regulation S offering.

Dell is a Round Rock, Texas-based information technology company.

Metropolitan Life prices

Metropolitan Life Global Funding I also priced $1 billion of 2.95% 10-year notes (Aa3/AA-/) at a spread of Treasuries plus 240 bps during the session, according to a market source.

The notes were initially talked to print in the Treasuries plus 287.5 bps area.

BofA Securities, Credit Suisse, Goldman Sachs and J.P. Morgan were the bookrunners.

The issuer is a financing arm of New York City-based insurance and employee benefits company MetLife Inc.

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