Wells Fargo, Proctor & Gamble, General Dynamics, Thermo Fisher, Humana, others in primary

By Cristal Cody

Tupelo, Miss., March 23 – Investment-grade companies priced more than $19 billion of bonds over Monday’s session after the Federal Reserve took extreme measures to help the economy as the coronavirus engulfs the globe.

Wells Fargo & Co. priced $6 billion of medium-term senior redeemable fixed-to-floating-rate notes in two tranches.

Procter & Gamble Co. sold $5 billion of senior notes in five tranches.

General Dynamics Corp. priced $4 billion of senior notes in five parts.

Thermo Fisher Scientific Inc. priced a $2.2 billion two-part offering of senior notes.

Humana Inc. priced $1.1 billion of senior notes in two tranches.

Alexandria Real Estate Equities, Inc. priced $700 million of long 10-year guaranteed senior notes.

Nstar Electric Co., doing business as Eversource Energy, sold $400 million of 10-year green debentures.

On Friday, high-grade issuers priced more than $15 billion of bonds, bringing the week’s deal total to more than $60 billion.

Three announced deals were postponed last week, including two on Friday. EOG Resources, Inc. postponed Friday’s offering of three tranches of fixed-rate senior notes. Appalachian Power Co. also postponed an offering of fixed-rate senior notes on Friday.

On Tuesday, Entergy Corp. postponed a two-part offering of five- and 10-year senior notes.

Monday’s primary activity follows several Federal Reserve announcements over the morning, including new programs and measures that will provide up to $300 billion in financing as normal activities grind to a halt.

Numerous U.S. states and cities are on lockdowns with residents ordered to stay at home and only essential services to remain open to try to stem the virus’ spread.

“The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time,” the Fed said in one release.

The Fed’s Federal Open Market Committee will purchase Treasuries, agency mortgage-backed securities and agency commercial mortgage-backed securities.

The Federal Reserve is establishing two facilities to support credit to large employers – the Primary Market Corporate Credit Facility for new bond and loan issuance and the Secondary Market Corporate Credit Facility to provide liquidity to outstanding corporate bonds.

Under the primary facility, the New York Federal Reserve Bank will lend to a special purpose vehicle to purchase eligible corporate bonds directly from issuers and to provide loans to issuers. Bonds rated at least Baa3/BBB- and with a maturity of four years or less are eligible.

The secondary market credit facility will apply to individual corporate bonds and eligible corporate bond portfolios in exchange traded funds. The facility will purchase corporate bonds rated at least Baa3/BBB- and with a maturity of five years or less and may purchase ETFs.

The programs are scheduled to end on Sept. 30, 2020.

In addition, a Main Street Business Lending Program is expected to be established to support lending to eligible small-and-medium sized businesses.

The hope is to tighten credit and bond spreads that have ballooned to 2008-2009 financial crisis levels, market sources said.

“The Fed is clearly worried about corporates ability to maintain liquidity and its ability to keep its doors open,” according to a BofA Securities, Inc., global research note on Monday. “Keeping credit flowing will not only help limit the downside shock but can help to facilitate the recovery once the virus has passed.”

The credit facilities “directly address the two main causes of stress in the IG corporate bond market – supply pressure and record outflows,” the BofA note said. “Because it will take some time before the Fed has developed details of the new programs and are set to begin purchases, we expect a very gradual normalization in the IG corporate bond market including tighter credit spreads and steeper maturity spread and quality curves.”

In the past week ended Wednesday, Refinitive Lipper US Fund Flows reported a record $35.59 billion of outflows for corporate investment-grade funds.

Credit spreads improved from Friday’s levels by over 20 basis points on Monday.

The Markit CDX North American Investment Grade 33 index firmed to a spread of 125.86 bps from 146.12 bps on Friday.

Stocks were down with the Dow Jones industrial average finishing the day off 3.04%.

Treasuries rallied across the curve. The benchmark 10-year note yield declined 17.4 bps to 0.764% on the day.

Wells Fargo prices $6 billion

Wells Fargo priced $6 billion of fixed-to-floating-rate notes (A2/A-/A+) in the offering on Monday, according to a market source.

A $2.5 billion tranche of 4.478% fixed-to-floating-rate notes due April 4, 2031 priced at a spread of 375 bps over Treasuries. The notes were initially talked to price in the Treasuries plus 375 bps spread area.

The rate on the notes will convert in April 2030 to a floating rate of Libor plus 377 bps.

Wells Fargo sold $3.5 billion of 5.013% fixed-to-floating-rate notes due April 4, 2051 at a spread of Treasuries plus 370 bps. Initial price talk was in the Treasuries plus 375 bps area.

The fixed fate on the notes will be reset in April 2050 to a floating rate of Libor plus 424 bps.

Both tranches were talked to price at the Treasuries plus 375 bps area.

Wells Fargo Securities LLC was the bookrunner.

The financial services company is based in San Francisco.

Procter & Gamble sells $5 billion

Procter & Gamble sold $5 billion of senior notes (Aa3/AA-/) in five tranches, according to a market source.

A $750 million tranche of 2.45% five-year notes priced at a spread of 210 bps over Treasuries.

Initial price talk was in the Treasuries plus 245 bps area.

Procter & Gamble sold $500 million of 2.8% seven-year notes at a spread of 220 bps over Treasuries. The notes were talked to price in the Treasuries plus 250 bps area.

A $1.5 billion tranche of 3% 10-year notes were sold at at a spread of 225 bps over Treasuries, compared to talk in the 255 bps area.

The company priced $1 billion of 3.55% 20-year notes at a Treasuries plus 220 bps spread. The notes were initially talked at a 250 bps spread area.

Finally, $1.25 billion of 3.6% 30-year notes priced at a spread of 225 bps over Treasuries, versus initial price talk at the Treasuries plus 260 bps area.

Citigroup Global Markets Inc., Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC were the bookrunners.

The consumer products company is based in Cincinnati.

General Dynamics raises $4 billion

General Dynamics brought $4 billion of senior notes (A2/A/A) in five tranches during the session, according to a market source and an FWP filing with the Securities and Exchange Commission.

The company sold $750 million of 3.25% five-year fixed-rate notes at 99.555 to yield 3.347% and a spread of 295 bps over Treasuries.

Initial talk was in the Treasuries plus 315 bps to 320 bps area.

A $750 million tranche of 3.5% seven-year notes priced at 99.152 to yield 3.638%, or a Treasuries plus 300 bps spread. The notes were talked at the 315 bps to 320 bps spread area.

General Dynamics priced $1 billion of 3.625% 10-year notes at 98.947 to yield 3.752% and a Treasuries plus 300 bps spread.

The 10-year tranche was initially talked to price in the Treasuries plus 320 bps to 325 bps area.

The company sold $750 million of 4.25% 20-year notes at 98.83 to yield 4.338%, or a spread of 295 bps over Treasuries.

The notes were talked at the 320 bps to 325 bps area.

In the final tranche, $750 million of 4.25% 30-year notes priced at 98.53 to yield 4.338% and a Treasuries plus 295 bps spread.

Talk on the 30-year bonds was in the 325 bps to 330 bps spread area.

Wells Fargo, BofA Securities, Inc., J.P. Morgan Securities LLC, BBVA Securities Inc., Mizuho Securities USA LLC and RBC Capital Markets, LLC were the bookrunners.

The notes are guaranteed by American Overseas Marine Company, LLC, Bath Iron Works Corp., Electric Boat Corp., General Dynamics Government Systems Corp., General Dynamics Land Systems Inc., General Dynamics Ordnance and Tactical Systems, Inc., General Dynamics-OTS, Inc., Gulfstream Aerospace Corp. and National Steel and Shipbuilding Co.

General Dynamics is a Falls Church, Va.-based global aerospace and defense company.

Thermo Fisher Scientific prints

Thermo Fisher Scientific priced a $2.2 billion two-part offering of senior notes (Baa1/BBB+/BBB), according to a market source and FWP filings.

A $1.1 billion tranche of 4.133% five-year notes priced at par to yield a spread of Treasuries plus 375 bps.

Thermo Fisher sold $1.1 billion of 4.497% 10-year notes at par to yield a Treasuries plus 375 bps spread.

Initial price talk on both tranches was at the Treasuries plus 400 bps area.

J.P. Morgan, Morgan Stanley, BofA Securities, Deutsche Bank Securities Inc. and Mizuho were the bookrunners.

Thermo Fisher is a Waltham, Mass.-based science technology company.

Humana brings $1.1 billion

Humana priced $1.1 billion of senior notes (Baa3/BBB+/BBB) in two tranches on Monday, according to a market source and an FWP filing.

A $600 million tranche of 4.5% five-year notes priced at 99.875 to yield 4.528% and a spread of Treasuries plus 412.5 bps.

The company sold $500 million of 4.875% 10-year notes at 99.788 to yield 4.902%, or a 412.5 bps spread over Treasuries.

Both tranches were initially talked to price at the Treasuries plus 412.5 bps area.

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

The health care and insurance company is based in Louisville, Ky.

Alexandria Real Estate prices

Alexandria Real Estate Equities priced $700 million of 4.9% guaranteed senior notes due Dec. 15, 2030 (Baa1/BBB+/) at a spread of 415 bps over Treasuries, according to a market source and an FWP filing.

The notes were initially talked to price at the Treasuries plus 425 bps area.

The issue priced at 99.933 to yield 4.909%.

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

The notes are guaranteed by Alexandria Real Estate Equities, LP.

Pasadena, Calif.-based Alexandria Real Estate Equities is a real estate investment trust focused on life science and technology campuses.

Nstar sells green bonds

Also, Nstar Electric, doing business as Eversource Energy, priced $400 million of 3.95% 10-year green debentures (A1/A/A+) at a spread of Treasuries plus 325 bps on Monday, according to a market source and an FWP filing.

The bonds were talked to price at the Treasuries plus 337.5 bps area.

The debentures were sold at 99.452 to yield 4.017%.

BofA Securities, Citigroup, Mizuho, MUFG and RBC Capital Markets were the bookrunners.

The Boston-based company operates in the energy delivery business through utility subsidiaries.

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