Hewlett-Packard Stormed High-Grade Bond Market Last Week
(Continued from Prior Part)
Deals overview
US corporates were the biggest issuers of high-grade bonds in the week ended October 2, making up 67.7%, or $17.78 billion, of all issues. SAS (supranational, agencies, and sovereigns) were the second biggest issuers, making 28.5% of all issues. Yankees issued $1 billion worth of high-grade bonds and made up 3.8% of the total issuance. On the other hand, US financials and emerging markets stayed away from the primary market last week.
The week ended October 2 brought the year-to-date issuance of high-grade corporate bonds to $1.22 trillion. Issuances by high-grade corporates form part of mutual funds like the Vanguard Total Bond Market Index Inv (VBMFX) and the PIMCO Total Return A (PTTAX).
Details of Hewlett-Packard Enterprise Company’s issue
Hewlett-Packard Enterprise Company, a wholly owned subsidiary of Hewlett-Packard Company (HPQ), issued high-grade bonds rated Baa2/BBB worth $14.6 billion in nine parts:
- $350 million in two-year FRNs (floating rate notes) at three-month LIBOR + 174 basis points
- $2.25 billion in 2.45% two-year notes at a spread of 185 basis points over similar-maturity Treasuries
- $250 million in three-year FRNs at three-month LIBOR + 193 basis points
- $2.65 billion in 2.85% three-year notes at a spread of 200 basis points over similar-maturity Treasuries
- $3.00 billion in 3.60% five-year notes at a spread of 225 basis points over similar-maturity Treasuries
- $1.35 billion in 4.40% seven-year notes at a spread of 270 basis points over similar-maturity Treasuries
- $2.50 billion in 4.90% ten-year notes at a spread of 290 basis points over similar-maturity Treasuries
- $750 million in 6.20% 20-year bonds at a spread of 335 basis points over similar-maturity Treasuries
- $1.50 billion in 6.35% 30-year bonds at a spread of 350 basis points over similar-maturity Treasuries
Hewlett-Packard Company will be separated into two independent companies: Hewlett-Packard Enterprise Company and HP Inc. The separation is expected to be completed on November 1, 2015.
The proceeds of the issue will be used to repurchase and redeem outstanding senior notes and repay other debts to facilitate the separation.
Details of Enbridge Energy Partners’ issue
Enbridge Energy Partners (EEP) is a large-cap MLP. Enbridge owns and operates crude oil and natural gas transportation systems in the US. EEP issued high-grade bonds rated Baa3/BBB worth $1.6 billion in three parts:
- $500 million in 4.375% five-year notes at a spread of 312.5 basis points over similar-maturity Treasuries
- $500 million in 5.875% ten-year notes at a spread of 387.5 basis points over similar-maturity Treasuries
- $600 million in 7.375% 30-year bonds at a spread of 462.5 basis points over similar-maturity Treasuries
Details of WEA Finance’s issue
WEA Finance, a subsidiary of Westfield America, issued bonds worth $1.0 billion last week. The single-tranche notes were rated A3/BBB+ and were issued for five years with a coupon rate of 3.25%. The high-grade bonds were issued at a spread of 190 basis points over similar-maturity Treasuries.
Details of PPL Electric Utilities’ issue
PPL Electric Utilities, a subsidiary of PPL Corporation (PPL), issued bonds worth $350 million last week. The single-tranche A1/A-rated bonds were issued for 30 years with a coupon rate of 4.15%. The high-grade bonds were issued at a spread of 132 basis points over similar-maturity Treasuries.
Details of PECO Energy Company’s issue
PECO Energy Company, a subsidiary of Exelon Corporation (EXC), issued bonds worth $350 million last week. The single-tranche notes rated Aa3/A- were issued for ten years with a coupon rate of 3.15%. The high-grade bonds were issued at a spread of 110 basis points over similar-maturity Treasuries.
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