Morgan Stanley debt issue is highest among high-grade borrowers


Jul. 29 2014, Updated 9:00 a.m. ET

Morgan Stanley debt issue

The week ending July 18, had 15 deals over 20 tranches in the high-grade corporate bond (LQD) segment bringing issuance volumes to $14.4 billion. Last week was also the third lowest in 2014 year-to-date (or YTD) in terms of volumes. Volumes were affected by the ongoing earnings season, when a number of corporates are subject to blackouts (Data source: Bloomberg).

Issuance by sector: Financials dominate issuance

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Financial (XLF) sector firms dominated primary market issuance, comprising ~55% of total volumes. Major issuers in the financials sector included Morgan Stanley (MS) at $3 billion, Bank of Nova Scotia at $1.75 billion, Toronto-Dominion Bank $1.25 billion, and Wells Fargo Corp (WFC) at $700 million, among others. MS and WFC are part of the S&P 100 Index (OEF).

In the largest issue of the week, MS came up with a $3 billion, two-tranche offering which included $500 million in floating rate notes and $2.50 billion in 2.375% coupon notes, both due in five years. The MS issue made up ~21% of the total issuance in the week.

Both the floating rate issues made last week were made by financials sector borrowers, namely MS at $500 million and the Toronto-Dominion Bank at $1.25 billion.

Other corporate debt issues: Bed, Bath & Beyond, CSX Corp., and Toyota deals

Other corporate borrowers accounted for ~26% of the issuance in the week ending July 18—up from about 12% in the previous week. The industrial, consumer, and auto sectors each had one deal.

Rail transportation company, CSX Corp. came out with a $1 billion two-tranche senior unsecured notes issue with $550 million issued at a coupon of 3.40% for ten years and $450 million issued at a 4.50% coupon for 40 years. The 40-year maturity is an unusual one that isn’t usually tapped by issuers. However, the issue was well received by markets.

Bed, Bath and Beyond Inc. issued $1.50 billion in three parts, with $300 million each maturing in ten and 20 years, and $900 million maturing in 30 years. The company plans to use the proceeds for funding share buybacks.

In the automobile sector, Toyota Motor Credit Corp. came up with a $1.25 billion five-year note offering, issued at a coupon of 2.125%.

Secondary market trends

In the next section, we’ll discuss secondary market trends for investment-grade bonds including yields and spreads analysis, returns, and flows into mutual funds in the week ending July 18.



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