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26-06-2012 18:15:00

Six Companies Selling Bonds in Weak Market

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By Patrick McGee

A series of companies are taking their chances to meet investors and sell bonds near record-low yields despite another day of weak sentiment in the corporate credit markets.

A broad measure of risk sentiment, Markit's CDX North America Investment Grade Index, sank 0.8% in late-morning trading, following a 3.4% weakening Monday, as investors remain anxious ahead of the two-day European Union summit beginning Thursday.

Six borrowers including Deere & Co. (DE) and Comcast Corp. (CMCSA, CMCSK) are doing what they can to get in deals now before the summit potentially brings another downturn to the market.

Jim Probert, managing director and head of investment grade capital markets at Bank of America Merrill Lynch, said investors are getting more comfortable with volatility, enabling issuers to bring debt to the market even on days when equity markets are down sharply.

"It has evolved from perhaps three or six months ago," Probert said. "We wouldn't have recommended moving ahead on days that were down...and now we are confident moving ahead."

One reason both sides of the transaction can be confident: issuers are receiving some of the lowest borrowing costs on record, and investors are seeing good performance in the secondary market.

The Barclays investment-grade index was within 0.02 percentage points of its all-time low at 3.27% Monday, but it also returned 4.85% to date this year.

"It's close to a perfect world scenario," Probert said. "It's rare that two things line up...and both sides are taking advantage of that."

Deere, which sold $1.25 billion of 30-year bonds at one of the lowest yields on record earlier this month, is now selling a three-part deal featuring 22-month floating-rate notes, plus fixed-maturities due in three and 10.5 years.

Comcast is selling 10-year and 30-year bonds, marking its first offering in more than two years, according to Standard & Poor's LCD.

Both deals are "benchmark"-sized, which typically means at least $500 million per tranche.

Other deals appear to be smaller, unlike last week when a range of "jumbo" deals pushed weekly volume well above forecasts. Nearly $20 billion of high-grade bonds were priced last week, versus estimates of $10 billion to $15 billion.

David Trahan, head of investment-grade syndicate at Citigroup, said Monday the stars could align for a continued flood of deals issuance this week.

"This is certainly a week that the market was expecting to be active, in part because of the odd-holiday next week with July 4th falling on Wednesday," he said. "If markets stabilize, we could see a plethora of companies coming to the market."

Luxury goods maker LVMH Moet Hennessy Louis Vuitton SA (MC.FR, LVMUY), and the financing unit of global information services group Experian Plc (EXPN.LN, EXPGY), are each selling $500 million of five-year bonds.

Metropolitan Life Global Funding I, a unit of MetLife Inc. (MET), is also selling a benchmark-sized offering of three-year notes. The two-part transaction features senior unsecured notes as well as funding agreement-backed notes.

Finally, American International Group Inc. (AIG) is adding $250 million to its outstanding issuer of 4.875% coupon bonds due in June 2022.

Write to Patrick McGee at patrick.mcgee@dowjones.com

(END) Dow Jones Newswires

June 26, 2012 12:15 ET (16:15 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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