Post-Labor Day market brings flood of issuers; CSX, Unilever, Caterpillar, United Airlines price

By Rebecca Melvin

New York, Sept. 3 – The investment-grade bond market on Tuesday saw its busiest day since September 2015 as a flood of issuers pulled the trigger on deals at the soonest possible moment after the Labor Day holiday, which traditionally marks a market reset following summer holidays.

There were as many as 21 deals across IG, including a few emerging markets IG deals, compared to 17 deals that came in a single session in September 2015, a New York-based market source said.

“I’m just coming up for air and catching my breath. It’s been a very busy day and broke a record in terms of the largest number of individual deals,” the source said.

Volume-wise, there was roughly $23 billion in issuance, but that wasn’t a record breaker.

The number of deals speaks to the low-rate environment that currently exists globally as investors are looking for safety and strong returns. Bond investors had a lot from which to choose on Tuesday, but it was notable that most of the trades were very well received, moving 15 basis points to 25 bps tighter during marketing.

“For the buyer base to focus on so many deals and to stay with us and for pricing to go tighter, shows the incredible depth of this market,” the source said.

Walt Disney Co. was able to notch a fresh low in its pricing with a 2.75% coupon among its six tranches pricing on Tuesday. Final terms for the Walt Disney tranches were not seen by Prospect News’ deadline.

CSX Corp. also notched a fresh record with the lowest BBB coupon for 10- and 30-year paper.

The Jacksonville, Fla.-based transportation company priced $1 billion of senior notes (Baa1/BBB+) in two tranches on Tuesday, according to an FWP filing with the Securities and Exchange Commission.

The company sold $400 million of 2.4% notes due 2039 at 99.644 to yield 2.439%. The notes priced with a spread of Treasuries plus 97 bps.

CSX placed $600 million of 3.35% 30-year notes at 99.308 to yield 3.387% and a spread of 145 bps over Treasuries.

Proceeds will be used to redeem in full the company’s 3.7% notes due Oct. 30, 2020 and for general corporate purposes, which may include repurchases of common stock, capital investments, pension contributions, working capital requirements, productivity improvements and other cost reductions at CSX’s major transportation units.

The fact that the issuers could price so well against a backdrop that was “marginal at best:” speaks to the depth of the market, the New York-based source said.

Financial markets remain worried about the potential for a full blown trade war between the United States and China and some of the data released was not positive, including the ISM CPI data. But the chase for yield has brought many to the corporate U.S. market where yields have flattened but have not gone negative as they have done in Europe. The low rates have created a flow of funds in the United States, which has seen 18 consecutive inflow gains of $1 billion or more.

Deere & Co. priced $500 million of 2.875% 30-year notes (Baa2/BBB) on Tuesday at a spread of 95 bps over Treasuries, according to an FWP filed with the Securities and Exchange Commission.

The notes priced at 99.96 to yield 2.877%.

BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, MUFG and RBC Capital Markets LLC were the bookrunners.

Proceeds will be used for general corporate purposes, including repaying at maturity of $750 million of 4.375% notes due Oct. 16.

Deere, located in Moline, Ill., manufactures and distributes agricultural and commercial equipment.

Among other issuers were Caterpillar Financial Services Corp., Unilever Capital Corp. and United Airlines Inc., which priced $1,221,245,000 of pass-through certificates series 2019-2, according to a 424B3 filing with the Securities and Exchange Commission.

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

Deutsche Bank Securities Inc., Barclays, BofA Securities, Inc., BBVA Securities Inc., BNP Paribas Securities Corp., Credit Agricole Securities, Standard Chartered Bank and Wells Fargo Securities LLC are also bookrunners.

Proceeds will be used to acquire equipment notes.

In addition, Philadelphia-based electric transmission company PECO Energy Co. plans to price first and refunding mortgage bonds due 2049; Minneapolis-based utility Northern States Power Co. said it is selling green first mortgage bonds due March 1, 2050; Allentown, Pa.-based utility PPL Electric Utilities Corp. expects to price first mortgage bonds due Oct. 1, 2049Houston-based crude and refined oil products company Phillips 66 Partners LP is planning to sell fixed-rate senior notes in two parts; risk adviser Willis North America Inc. plans to price a two-part offering of fixed-rate senior notes due 2029 and 2049; Los Angeles-based real estate investment trust Kilroy Realty, LP is planning to sell guaranteed senior notes; Pasadena. Calif.-based REIT Alexandria Real Estate Equities, Inc. intends to offer fixed-rate notes in two tranches, including an add-on to its 4% senior notes (Baa1/BBB+) due Feb. 1, 2050; London-based tobacco company B.A.T Capital Corp. plans to sell four tranches of fixed-rate notes due in 2024, 2026, 2029 and 2049.

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