Heavy high-grade supply continues; Anheuser-Busch, Equinor, Shell price; credit spreads widen

By Cristal Cody

Tupelo, Miss., April 1 – Investment-grade supply remained heavy on Wednesday with the Federal Reserve now buying corporate bonds, sources report.

Equinor ASA priced $5 billion of guaranteed notes on Wednesday in five tranches.

“Equinor is in a strong position to handle market volatility and uncertainty,” Lars Christian Bacher, Equinor’s chief financial officer, said in a news release. “In combination with our $3 billion action plan to reduce cost, this transaction will further strengthen our financial resilience and flexibility going forward, and ensure liquidity to prioritized projects.”

Also on Wednesday, NextEra Energy Capital Holdings Inc. priced $1.25 billion of five-year guaranteed debentures.

Southern Co. sold $1 billion of 10-year senior notes.

PPL Capital Funding Inc. priced $1 billion of 10-year senior notes.

In addition, Anheuser-Busch InBev Worldwide Inc. was offering notes (Baa1/A-/) that includes 10-, 20-, 30- and 40-year tranches.

The 10-year notes are talked to price at the Treasuries plus 330 basis points area, the 20-year notes are talked at the 350 bps area, the 30-year issue is talked at the 360 bps area and the 40-year notes are talked to print at the 380 bps spread area.

Shell International Finance BV also offered three tranches of guaranteed senior notes (Aa2/AA-) on Wednesday. A tranche of five- and 30-year notes are initially talked to price with a spread in the 250 bps over Treasuries area, while the 10-year notes are talked at the 260 bps spread area.

Meanwhile, Dollar General Corp. marketed two tranches of senior notes (Baa2/BBB/) during the session. Initial price talk on the 10- and 30-year tranches is in the Treasuries plus 337.5 bps area.

Citigroup Inc. offered six-year fixed-to-floating-rate senior notes (A3/BBB+/A) over the day. The notes are talked to price in the Treasuries plus 312.5 bps area.

In other primary action, PPL Capital Funding Inc. marketed 10-year senior notes (Baa2/BBB+/) talked to print in the 375 bps to 387.5 bps area.

CPPIB Capital Inc. (Aaa/AAA/AAA) offered two-year notes on Wednesday with initial price talk at the mid-swaps plus 35 bps area.

Penske Truck Leasing Co., LP and co-issuer PTL Finance Corp. marketed long five-year senior notes that are initially guided at the Treasuries plus 400 bps area.

In addition, Carnival Corp. (Baa3/BBB) launched $4 billion of 11½% three-year first priority senior secured notes, tighter than talk at the 12% area in a deal run off the high-yield desk.

Meanwhile, a Rule 144A and Regulation S offering of senior secured notes (/BBB-/BBB-) in five- to 40-year tranches from T-Mobile U.S. Inc. subsidiary T-Mobile USA, Inc. is expected as soon as Thursday, a source said. The company announced an offering of senior secured notes over the morning in conjunction with the closing of its merger with Sprint Corp.

The company used a $19 billion bridge loan and a $4 billion secured term loan facility for the acquisition closing, T-Mobile said in an 8-K filing on Wednesday.

Proceeds from the note offering will be used to repay amounts borrowed under the bridge loan and for general corporate purposes.

T-Mobile held a roadshow in 2019 for the deal.

High-grade issuers have priced more than $58 billion of bonds week to date.

About $30 billion to as much as $60 billion of deal volume was expected this week.

April volume was pegged at about $100 billion but some market sources are estimating as much as $200 billion of volume after a record supply of over $258 billion of bonds priced in March.

Market tone weakened on Wednesday.

Ratings downgrades continued in response to the economic fallout from the coronavirus pandemic.

On Wednesday, retailer Macy’s Inc. (Ba1/BB+/BB+) was dropped to pure junk after it was downgraded by Fitch Ratings. Moody’s Investors Service downgraded the retailer to junk last week, while S&P dropped the ratings in February.

High-grade credit spreads moved out more than 10 bps over the day.

The Markit CDX North American Investment Grade 33 index closed at a spread of 124.56 bps from 114.13 bps on Tuesday.

The iShares iBoxx Investment Grade Corporate Bond ETF declined 1.45%.

Stocks were lower on the day with indices including the Dow Jones industrial average down 4.4%.

Treasuries rallied and the 10-year benchmark note yield, which moves opposite its price, closed down 6.3 bps at 0.635%.

High-grade corporate bonds were mixed in the secondary market, sources said.

New issues priced this week have mostly improved.

Visa Inc.’s $4 billion of senior notes (Aa3/AA-/) priced in three tranches on Tuesday firmed about 5 bps to 7 bps.

The company’s $1.5 billion of 2.05% notes due April 15, 2030 tightened 5 bps from issuance at a Treasuries plus 140 bps spread.

Oracle Corp.’s $20 billion of senior notes (A3/A+/A-) priced in six tranches on Monday traded flat to about 9 bps tighter in the secondary market.

NextEra sells $1.25 billion

NextEra Energy Capital Holdings priced $1.25 billion of 2.75% five-year guaranteed debentures (Baa1/BBB+/A-) at a spread of 240 bps over Treasuries on Wednesday, according to a market source and an FWP filing with the Securities and Exchange Commission.

Initial price talk was at the 312.5 bps spread area.

The bonds sold at 99.858 to yield 2.78%.

Bookrunners were BNP Paribas Securities Corp., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Scotia Capital (USA) Inc., TD Securities (USA) LLC, CIBC World Markets Corp., Fifth Third Securities Inc., KeyBanc Capital Markets Inc., Regions Securities LLC, SMBC Nikko Securities America Inc., U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC.

The debentures are guaranteed by NextEra Energy Capital Holdings’ parent company, NextEra Energy, Inc.

NextEra Energy is an energy company based in Juno Beach, Fla.

Southern prices $1 billion

Southern priced $1 billion of 3.7% 10-year senior notes (Baa2/BBB+/BBB+) on Wednesday at a spread of Treasuries plus 310 bps, according to a market source and an FWP filing.

Initial talk was in the Treasuries plus 337.5 bps to 350 bps area.

The notes priced at 99.747 to yield 3.73%.

BNP Paribas, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, MUFG and SunTrust Robinson Humphrey Inc. were the bookrunners.

Southern is an Atlanta-based electric utility company.

PPL Capital brings $1 billion

PPL Capital Funding priced $1 billion of 4.125% 10-year senior notes (Baa2/BBB+/) on Wednesday at 99.966 to yield 4.129% and a spread of Treasuries plus 350 bps, according to a market source and an FWP filing.

The notes were talked print with a spread in the 375 bps to 387.5 bps area.

Credit Suisse, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, CIBC and Scotia Capital were the bookrunners.

The notes will be guaranteed by PPL Corp.

The energy and utility holding company is based in Allentown, Pa.

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