PepsiCo sells $2.5 billion; CNA faces pushback; PepsiCo existing bonds soften; Coca-Cola flat

By Aleesia Forni and Cristal Cody

New York, Feb. 19 – PepsiCo Inc. and CNA Financial Corp. sold new high-grade bond issues to close the week on Friday, though the two deals received decidedly different receptions from investors.

PepsiCo saw spreads on its new $2.5 billion four-part new issue firm 15 basis points to 20 bps from initial price thoughts. The deal attracted a book that was more than three times oversubscribed.

CNA Financial, meantime, was forced to trim the size of its new issue to $400 million from $500 million.

The deal also sold around 15 bps outside of initial price guidance.

A market source noted that the deal’s struggle was more credit-specific than an indication of the market’s tone, adding that the market was still looking strong for the most part.

The day’s new deals closed what had been an otherwise solid week for the high-grade space, with more than $47 billion of new paper pricing during the week shortened by the extended Presidents Day holiday weekend.

Coming off the deluge of issuance, sources are preparing for what could be another “huge” week ahead, with around $30 billion of new issuance forecasted.

Investment-grade credit spreads ended the day weaker. The Markit CDX North American Investment Grade index closed 1 bp wider at a spread of 118 bps.

In the secondary market, PepsiCo’s existing bonds traded 2 bps to 6 bps weaker on the day.

Coca-Cola Co.’s 2.875% senior notes due 2025 were unchanged.

AT&T Inc.’s notes (Baa1/BBB+/A-) eased 2 bps to 3 bps on Friday.

Funds see outflows

Lipper US Fund Flows reported $1.12 billion of outflows from corporate investment-grade bond funds for the week ended Feb. 17.

This follows last week’s $55 million of inflows and brings the total year-to-date outflows to about $5.5 billion.

PepsiCo four-parter

PepsiCo priced on Friday $2.5 billion of senior notes (A1/A/A) in four tranches, according to an informed source.

A $600 million tranche of 1.5% three-year notes sold at 99.971 to yield 1.51%, or Treasuries plus 60 bps.

The issue sold at the tightest side of guidance set in the Treasuries plus 62.5 bps area and inside initial talk set in the Treasuries plus 80 bps area.

And $400 million of three-year floaters sold at par to yield Libor plus 59 bps.

There was $750 million of 2.85% 10-year bonds sold with a 110 bps spread over Treasuries. Pricing was at 99.922 to yield 2.859%.

Guidance was in the Treasuries plus 115 bps area, and the notes were initially talked in the Treasuries plus 130 bps area.

The company also sold a $750 million tap of its existing 4.45% bonds due 2046 at 105.791 to yield 4.11%, or Treasuries plus 150 bps.

The tranche sold at the tight end of guidance that was set in the Treasuries plus 155 bps area, having firmed from the Treasuries plus 165 bps area.

The bookrunners for the offering are BNP Paribas Securities Corp., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds will be used for general corporate purposes, including the repayment of commercial paper.

PepsiCo’s existing 2.75% notes due 2025 eased 2 bps on Friday to 100 bps bid in the secondary market, a source said.

The company sold $1 billion of the notes (A1/A-/A) on April 27, 2015 at a spread of Treasuries plus 87 bps.

PepsiCo is a Purchase, N.Y.-based food and beverage company.

CNA downsizes

CNA Financial sold a downsized $400 million issue of 4.5% senior notes (Baa2/BBB/BBB) on Friday with a spread of Treasuries plus 275 bps, according to a market source and an FWP filed with the Securities and Exchange Commission.

Pricing was at 99.975 to yield 4.503%.

The notes sold wide of price talk set in the Treasuries plus 265 bps area.

Bookrunners were Citigroup Global Markets Inc., JPMorgan, U.S. Bancorp Investments, Inc., Barclays, BofA Merrill Lynch and Wells Fargo Securities LLC.

Proceeds will be used to repay the company’s $350 million of 6.5% senior notes due Aug. 15, 2016.

The insurance company is based in Chicago.

Fannie Mae notes

Elsewhere in Friday’s primary, Fannie Mae sold $3 billion of 1% Benchmark Notes due Feb. 26, 2019.

The notes sold at 99.764 to yield 1.08%, or Treasuries plus 16.5 bps.

Barclays, Deutsche Bank Securities Inc. and JPMorgan are the joint lead managers.

By region, U.S. investors picked up 96%, while Asian investors nabbed 2%.

About 75% of orders came from fund managers, 10% from corporations and pensions, 8% from local governments, 5% from commercial banks and around 1% for central banks and insurance companies, respectively.

Fannie Mae will apply to list the securities on the EuroMTF market of the Luxembourg Stock Exchange.

The mortgage credit provider is based in Washington, D.C

Hydro One prices notes

Hydro One Inc. tapped the Canadian primary market on Friday with a C$1.35 billion three-tranche offering of medium-term notes.

The company sold C$500 million of 1.84% notes due Feb. 24, 2021 with a spread of 125 bps over the interpolated Government of Canada bond curve.

The company priced C$500 million of 2.77% notes due Feb. 24, 2026 at 157 bps versus the bond curve.

In the final tranche, Hydro One priced C$350 million of 3.91% notes due Feb. 23, 2046 at a spread of 200 bps over the Government of Canada benchmark.

Coca-Cola stable

Coca-Cola’s 2.875% notes due 2025 were unchanged on the day at 99 bps bid, a market source said.

The company sold $1.75 billion of the notes (Aa3/AA/A+) on Oct. 22 at Treasuries plus 87 bps.

Coca-Cola is an Atlanta-based beverage company.

AT&T widens

AT&T’s 4.125% notes due 2026 eased 2 bps to 212 bps bid in secondary trading on Friday, a market source said.

The company sold $1.75 billion of the notes (Baa1/BBB+/A-) on Jan. 29 at 220 bps over Treasuries.

AT&T’s 5.65% bonds due 2047 headed out 3 bps weaker at 294 bps bid.

The company sold $1.5 billion of the bonds in the Jan. 29 offering at Treasuries plus 290 bps.

AT&T is a Dallas-based telecommunications company.

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