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Halliburton Issued High-Grade Bonds to Acquire Baker Hughes

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Overview of the deals

US financials were the biggest issuers of high-grade bonds in the week ended November 6, making up 45.9% or $15.1 billion, of all issues. Yankee issuers were the second biggest, making up 24.4% of all issues. Meanwhile, US corporates issued $4.1 billion worth of high-grade bonds and made up 12.5% of the total issuance. The week ended November 6 brought the year-to-date issuance of high-grade corporate bonds to $1.4 trillion.

Issuances by high-grade corporates form part of mutual funds like John Hancock Bond Fund – Class A (JHNBX) and the Strategic Advisers Core Income Fund (FPCIX).

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Details of Halliburton’s issue

Halliburton (HAL) issued A2/A rated high-grade bonds worth $7.5 billion via five parts:

  • $1.3 billion in 2.7% five-year notes issued at a spread of 110 basis points over similar-maturity Treasuries
  • $1.3 billion in 3.4% seven-year notes issued at a spread of 140 basis points over similar-maturity Treasuries
  • $2.0 billion in 3.8% ten-year notes issued at a spread of 160 basis points over similar-maturity Treasuries
  • $1.0 billion in 4.8% 20-year bonds issued at a spread of 185 basis points over similar-maturity Treasuries
  • $2.0 billion in 5.0% 30-year bonds issued at a spread of 200 basis points over similar-maturity Treasuries

Halliburton will use the proceeds to fund its acquisition of Baker Hughes (BHI).

Details of Shell International Finance’s issue

Shell International Finance, a 100% subsidiary of Royal Dutch Shell (RDS.A), and the issuing vehicle for the group issued Aa1/AA- rated high-grade bonds worth $5.0 billion in five parts:

  • $1.0 billion in 18-month FRNs (floating rate notes) issued at three-month LIBOR + 32 basis points
  • $1.0 billion in 1.3% two-year notes at a spread of 52 basis points over similar-maturity Treasuries
  • $500 million in three-year FRNs (floating rate notes) issued at three-month LIBOR + 58 basis points
  • $1.3 billion in 1.6% three-year notes at a spread of 60 basis points over similar-maturity Treasuries
  • $1.3 billion in 2.3% five-year notes at a spread of 73 basis points over similar-maturity Treasuries
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Details of Ford Motor Credit’s issue

Ford Motor Credit Company, a subsidiary of Ford Motor (F), issued Baa3/BBB- rated high-grade bonds worth $2.0 billion in two parts:

  • $1.3 billion in 3.2% long five-year notes at a spread of 158 basis points over similar-maturity Treasuries
  • $700 million in 4.1% ten-year on-tap notes at a spread of 173 basis points over similar-maturity Treasuries

Details of TransCanada Pipelines Limited’s issue

TransCanada Pipelines Limited (TRP) issued high-grade bonds worth $1.0 billion last week. The single-tranche A3/A rated two-year notes were issued at a coupon rate of 1.6%. The high-grade bonds were issued at a spread of 83 basis points over similar-maturity Treasuries.

Details of IBM’s issue

International Business Machines (IBM) issued high-grade bonds worth $900 million last week. The single-tranche Aa3/AA- rated seven-year notes were issued at a coupon rate of 2.9%. The high-grade bonds were issued at a spread of 95 basis points over similar-maturity Treasuries.

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