uploads///Total IG Bond Issuance for WE July

CVS Health Issues Most High-Grade Bonds in Week Ended July 17

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Jul. 22 2015, Updated 11:07 a.m. ET

Deals last week

US corporates were the highest issuers of high-grade bonds in the week ended July 17, making up 36.1% of all issues. Yankee bond issuers returned in force to the market, with issuance worth $16.5 billion, or 29.8% of total issuance. Meanwhile, US financials accounted for 18.8% of all issues. The week ended July 17 brought the year-to-date issuance of corporate high-grade bonds to $965.4 billion.

Issuances by high-grade corporates form part of the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD). Treasuries—the other high-grade bond category—are tracked by ETFs such as the iShares 1-3 Year Treasury Bond ETF (SHY).

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Details of CVS Health’s issue

CVS Health (CVS), along with its subsidiaries, provides pharmacy healthcare services in the US. It issued bonds worth $15 billion last week—the largest bond issuance. The Baa1/BBB+ rated bonds were issued via the following six tranches:

  • $2.25 billion in 1.9% three-year notes at a spread of 85 basis points over Treasuries of similar maturity
  • $2.75 billion in 2.8% five-year notes at a spread of 110 basis points over Treasuries of similar maturity
  • $1.5 billion in 3.5% seven-year notes at a spread of 135 basis points over Treasuries of similar maturity
  • $3 billion in 3.875% ten-year notes at a spread of 155 basis points over Treasuries of similar maturity
  • $2 billion in 4.875% 20-year bonds at a spread of 175 basis points over Treasuries of similar maturity
  • $3.5 billion in 5.125% 30-year bonds at a spread of 190 basis points over Treasuries of similar maturity

CVS Health raised these bonds to finance its acquisitions of Omnicare (OCR) and the pharmacy and clinic businesses belonging to Target (TGT).

Details of Wells Fargo’s issue

Wells Fargo (WFC) issued A2/A+ rated high-grade bonds worth $6 billion in three parts:

  • $750 million in five-year FRNs (floating-rate notes) at three-month LIBOR (IntercontinentalExchange London Interbank Offered Rate) + 88 basis points
  • $2.75 billion in 2.6% five-year notes at a spread of 100 basis points over Treasuries of similar maturity
  • $2.5 billion in 4.3% 12-year notes at a spread of 200 basis points over Treasuries of similar maturity
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Details of Imperial Tobacco’s issue

Imperial Tobacco manufactures and sells tobacco and related products. Its subsidiary, Imperial Tobacco Finance, raised Baa3/BBB rated high-grade bonds worth $4.5 billion via the following four tranches:

  • $500 million in 2.05% three-year notes at a spread of 120 basis points over Treasuries of similar maturity
  • $1.25 billion in 2.95% five-year notes at a spread of 155 basis points over Treasuries of similar maturity
  • $1.25 billion in 3.75% seven-year notes at a spread of 195 basis points over Treasuries of similar maturity
  • $1.5 billion in 4.25% ten-year notes at a spread of 215 basis points over Treasuries of similar maturity

Imperial Tobacco raised this loan to back its $7.1 billion acquisition of assets belonging to Reynolds American (RAI).

Details of PepsiCo’s issue

PepsiCo (PEP) issued high-grade bonds worth $3.25 billion. The A1/A rated bonds were issued via the following five parts:

  • $600 million in two-year FRNs at three-month LIBOR + 25 basis points
  • $650 million in 1.125% two-year notes at a spread of 50 basis points over Treasuries of similar maturity
  • $800 million in 3.1% seven-year notes at a spread of 100 basis points over Treasuries of similar maturity
  • $700 million in 3.5% ten-year notes at a spread of 115 basis points over Treasuries of similar maturity
  • $500 million in 4.6% 30-year bonds at a spread of 140 basis points over Treasuries of similar maturity
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