uploads///Total IG Bond Issuance for WE March

EMD Finance’s Yankee Corporate Issue Is the Largest in 2015

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Mar. 26 2015, Updated 12:06 p.m. ET

Deals overview

Yankee bonds dominated the issuance in the week. They accounted for 43.5% of all the issues. Yankee corporates made up 31.3% of all the issues. Yankee financials made up 12.2%. US corporates took a back seat this week. They issued debt worth $2.325 billion in the week ending March 20, 2015. This is far below the $18.74 billion issuance in the previous week.

Domestic financials were more active. They issued bonds worth $4.95 billion last week. The week ending March 20 brought the YTD (year-to-date) issuance of corporate investment-grade debt to $412.7 billion.

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This year’s largest issuance was by Actavis Plc (ACT). Actavis manufactures of generic, brand, and bio-similar pharmaceuticals. It issued bonds worth $21 billion in the week ending March 6. This was also the second largest deal ever. It was behind Verizon’s (VZ) $49 billion issue in September 2013. Verizon’s debt issues form part of the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD).

Last week, EMD Finance—a subsidiary of Germany’s Merck KGaA—was the largest issuer with a five-part $4 billion bond issue. It was the largest multi-tranche Yankee issuance so far this year.

Details of EMD Finance’s issue

EMD Finance LLC is a debt issuing vehicle. It’s based in Delaware. It’s a subsidiary of German pharma major Merck KGaA. It issued bonds worth $4 billion. The five-tranche, Baa1/A rated sale consisted of:

  • $250 million in two-year FRNs (floating rate notes) at three-month LIBOR + 35 basis points, or bps
  • $400 million in 1.70% three-year notes at a spread of 65 bps over similar maturity Treasuries
  • $750 million in 2.40% five-year notes at a spread of 85 bps over similar maturity Treasuries
  • $1 billion in 2.95% seven-year notes at a spread of 110 bps over similar maturity Treasuries
  • $1.6 billion in 3.25% ten-year notes at a spread of 125 bps over similar maturity Treasuries

Merck KGaA plans to use the proceeds from this offering to finance part of its $17 billion acquisition of Sigma-Aldrich (SIAL)—a US lab supplies company.

Details of Mizuho Bank’s issue

Mizuho Bank is the retail and corporate banking unit of Mizuho Financial Group (MFG). It was another large Yankee bond issuer last week. Its four-part, A1/A+ rated $2.5 billion issue consisted of:

  • $500 million in three-year FRNs at three-month LIBOR + 64 bps
  • $500 million in 1.80% three-year notes at a spread of 85 bps over similar maturity Treasuries
  • $1 billion in 2.40% five-year notes at a spread of 95 bps over similar maturity Treasuries
  • $500 million in 3.20% ten-year notes at a spread of 125 bps over similar maturity Treasuries

Bank of America (BAC) and Goldman Sachs (GS) were among the issue’s lead arrangers.

Bank of America was the largest US financial issuer to hit the market. It issued bonds worth $1.75 billion. The 1.65% three-year notes were issued at a spread of 75 bps over similar maturity Treasuries.

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