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By Shankar Ramakrishnan
NEW YORK, April 4 (IFR) - Wal-Mart Stores brought some oomphto an otherwise quiet primary US high-grade market on Thursday.
The USD5bn four-part trade launched by the world's largestretailer was one of only two deals in the high-grade market on aday marked by central bank actions and data releases.
Wal-Mart (rated Aa2/AA/AA) sold USD1bn of three-yearnotes at Treasuries plus 30bp (0.6% coupon at 99.929 with yieldof 0.624%), USD1.25bn of five-year notes at plus 45bp (1.125%coupon at 99.908 with 1.144% yield), USD1.75bn of 10-year notesat plus 82bp (2.55% coupon at 99.772 and 2.576%) and USD1bn of30-year notes at plus 102bp (4% coupon at 99.653 at 4.02%).
At the price guidance stage, the three-year was at plus 33bparea, five-year at plus 48bp area, 10-year plus 85bp area and30-year 105bp (Area was +/- 3bp on all). Led by Barclays,Citigroup and Morgan Stanley (active joint books) and JP Morgan,HSBC and BNP (passive), deal proceeds are to fund generalcapital purposes.
For comparables with outstandings, the Wal-Mart 2.8% 2016'swere quoted at Treasuries plus 33bp (G spread plus 31bp; US$106)for a new issue concession on the three-year of a negative 1bp.The Wal-Mart 5.8% 2018s were at plus 40bp (G spread plus 42bp;US$122) so the five-year NIC comes to 3bp.
For the 10-year, there were no direct outstandingcomparables. Wal-Mart 3.25% 2020 was at plus 21bp (G plus 70bp;US$108) while the Wal-Mart 4.25% 2021s were at plus 39bp (G plus78bp; US$115) so adjusting for the extra tenor, NIC could lookabout 5bp.
On the 30-year, the Wal-Mart 5.625% 2041s were at plus 100bpwhich could take NIC to about 2bp.
WalMart Stores' USD5bn trade had a similar structure to adeal it did in 2011. That April 11 2011 trade consisted of aUSD1bn 1.625% three-year at plus 40bp, a USD1bn 2.8% five-yearat plus 57bp, a USD1bn 4.25% 10-year at plus 75bp, and a USD2bn5.625% 30-year at plus 110bp.
Despite a more aggressive share purchase program and an 18%increase in its dividend rate funded in part by additional debt,WalMart's credit quality remains strong and stable.
The company should have little trouble absorbing whateverpenalties are ultimately imposed from the bribery accusations atWalMart de Mexico, according to independent research firmCreditSights.
BMO'S RETURN
Bank of Montreal meanwhile, returned to the Yankeebond market today with a USD1.35bn offering of five-year fixed-and floating-rate notes, via BMO, HSBC, JP Morgan, Goldman Sachsand Wells Fargo Securities.
It priced a USD1bn 1.45% five-year April 2018 at T+80bp, andat the last minute added a USD350m five-year floater at3mL+60bp.
The deal started out with an attractive initial pricethought of around the mid 80s, compared with a spread of G+72bpon its closest comparable, the 1.4% September 2017s. The bookbuilt quickly at that level, enabling leads to pull in officialguidance to 82bp area. By afternoon, orders for the fixed-ratetranche were around USD2bn, resulting in a deal that priced atthe tight end of talk, at 80bp.
At that level some investors thought the deal offered abouta 5-6bp new issue concession to the G spread of the September2017s, after taking into account the credit curve from September2017 to April 2018.
The bank's decision to add a floater is typical of a trendthis year, where investors have appealed to borrowers to providethem with floating-rate securities as a hedge against risinginterest rates.
BMO last came to market in November with a USD1bn 2.55%10-year and a USD1bn 0.8% three-year.
Meanwhile, Barclays has defied the doubters with its newCoCo bond, which traded steadily at around USD100.5 all day. Thebank priced the USD1bn issue with a 7.75% coupon on Wednesday,drawing an order book in excess of USD3.5bn and selling morethan 50% of the deal to US accounts, according to the leads.
The steady after-market performance goes a long way torepairing Barclays' reputation with the US investors,some of whom were critical of the trading behavior, the tightpricing and the large size of Barclay's first SEC-registeredCoCo, the USD3bn 7.625% 10-year bullet Tier 2 done lastNovember. That deal was still trading just below par thismorning at around 99.35 bid.
U.S. Treasuries..........
U.S. Treasury outlook...
U.S. corporate bonds....
U.S. agencies...........
U.S. mortgage-backeds...
U.S. asset-backeds......
U.S. municipal bonds... (Reporting By Shankar Ramakrishnan, John Balassi and DanielleRobinson; Editing by Ciara Linnane)
