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By Shankar Ramakrishnan and Danielle Robinson
NEW YORK, Sept 17 (IFR) - The US high-grade market did notsee a rush of deals on Tuesday, but the few that did comegarnered a strong response from investors, proving that issuanceconditions remain solid.
Some in the market were surprised by the lack of supply, but put that to nervousness ahead of the Fed's verdict on taperingof the quantitative easing programme on Wednesday.
Among the two countable trades (according to Thomson Reuterscriteria) that raised USD1.35bn, HSBC's two-part was thechunkiest. The bank priced USD1bn of five-year fixed andfloating-rate notes with no new issue concession, taking someobservers by surprise.
The fixed rate notes were priced at T+105bp, from initialprice thoughts of 120bp area and on USD3.5bn of orders.
"In today's context I would have thought it would come atleast with some new issue concession," said one FIG banker.
Toyota Motor Credit Corp also tapped the US market forUSD300m of two-year floaters at 3mL+15bp, via Citigroup, Cabera,CastleOak, Drexel, Siebert and Toussaint. It ended with modestbooks of USD550m.
SLM Corp also tapped the market for USD1.25bn of 5.5%five-year notes. The deal was priced to yield 5.75%, in linewith guidance, after attracting USD3bn of orders.
STRONG DEMAND FOR DOLLAR HYBRIDS
There's no shortage of demand for hybrid bonds in the USmarket, as Italian utility Enel Spa discovered today, when itattracted more than USD7bn of demand for its USD1.25bn 60non-call 10-year offering.
The deal was launched as a 144A only - no Reg S - so as tospecifically target the US investor base without compromisingthe trading of its euro and sterling hybrids issued earlier thismonth.
Investors, wowed by the 9.25% area initial price thoughts onthe deal, rushed to place orders with the long list of leadmanagers: JP Morgan, Bank of America Merrill Lynch, Barclays,Citigroup, Credit Suisse, Goldman Sachs, Morgan StanleyMitsubishi UFJ Securities and Mizuho.
The deluge enabled leads to ratchet in price guidance to9.00%, plus or minus 12bp, and launch at 8.875%.
Price discovery was based on an implied new issue level ofaround 300bp for an Enel 10-year senior unsecured offering,which includes a 25bp concession.
Add another 300bp for the senior/hybrid differential and2.85% of 10-year Treasury yield takes the level to 8.85%, closeto the 8.875% pricing.
Some thought Enel paid about 37.5bp to 50bp more on aswapped basis than what it would have paid had it issued ineuros.
Nonetheless, the deal gave Enel much needed fundingdiversification after issuing EUR1.25bn of 60NC5 and GBP400m of62NC7 hybrids earlier this month.
The 25bp new issue premium is currently standard for a highbeta name or structure in the US market.
The vast majority of the bonds were sold to US investors.
Supply is expected to be scarce on Wednesday, with activityin the coming days exected to hinge on the market reaction tothe Fed statement.
HSBC
HSBC USA Inc., A2/A+/AA- (s/n/s), announced a USD benchmarkSEC registered senior unsecured offering, consisting of a 5-year(9/24/2018) fixed and/or floating rate note. HSBC is the solebookrunner on the deal. UOP: general corporate purposes. Settle:T+5 (9/24/2013).
IPT: T+120bp area
PRICE GUIDANCE: T+110bp area (+/-5bp) on the 5-year fixedand Libor equivalents on the 5-year FRN
LAUNCH: USD1bn 2-part.
- USD750m 5-year fixed T+105bp
- USD250m 5-year FRN 3mL+88bp
PRICED: USD1bn 2-part
- USD750m. Cpn 2.625%. Due 9/24/18. Ip 99.828. Yld 2.662%.T+105bp
- USD250m Cpn 3mL+88bp. Due 9/25/18. Ip par. Yld 3mL+88bp
BOOK SIZE: USD3.5bn
NIC: 5-year fixed: flat
COMPS:
HSBC 1.625% Jan 2018s at T+79bp, G+105bp
SLM CORPORATION
SLM Corporation (SLMA), Ba1/BBB-/BB+ (n/n/n), announced aUSD500m SEC registered senior unsecured 5-year due 1/2019. Thenotes contain a change of control put at 101%. The activebookrunners are Bank of America Merrill Lynch, Deutsche Bank andJP Morgan. UOP: general corporate purposes.
PRICE GUIDANCE: 5.75%
LAUNCH: USD1.25bn (upsized from USD500m) at 5.75%
PRICED: USD1.25bn. Cpn 5.50%. Due 1/15/19. Ip 98.877. Yld5.75%. T+414.1bp. MWC T+50bp. Settlement date 09/20
BOOK SIZE: USD3bn
NIC: 25bp. The comps imply straight January 19 fair valueyield at 5.5%
COMPS:
SLM 8.45% 2018s at 5.00%
SLM 8% March 2020s at 6.4%
ENEL
Enel SpA, expected issue ratings Ba1/BB+/BBB-, announced aUSD benchmark 144a (DTC only) 60-year non-call 10-yearsubordinate note due September 2073. First call and first step(25bp) date is September 2023. Second step (75bp) date isSeptember 2043. The joint bookrunners are JP Morgan, Bank ofAmerica Merrill Lynch, Barclays, Citigroup, Credit Suisse,Goldman Sachs, Morgan Stanley,Mitsubishi-UFJ and Mizuho.Settle: 9/24/13.
EARLY REDEMPTION: Par calls on first call date and every 5yrs thereafter. SPECIAL CALLS: Withholding Tax Event at Par;Accounting Event, Rating Methodology Event, SubstantialRepurchase Event, Tax Deductability Event at 101% until firstcall date, then par thereafter.Fixed Rate until First Call Date,Reset fixed rate equivalent to relevant 5-yr swap rate + initialcredit spread + step-up.
IPT: 9.25% area
PRICE GUIDANCE: 9% area (+/- 12.5bp)
LAUNCH: USD1.25bn at 8.875% (8.75% coupon at discount)
PRICED: USD1.25bn. Cpn 8.75%. Due 9/24/73 NC10. Ip 99.183.Yld 8.875%. T+602.9bp
BOOK SIZE: USD7bn
TOYOTA MOTOR CREDIT
Toyota Motor Credit Corp, Aa3/AA- (s/s), announced a USD300mSEC registered two-year (9/18/15) senior floating rate note. Thejoint bookrunners are Citi, Cabera, CastleOak, Drexel, Siebertand Toussaint. UOP: general corporate purposes. Settle: T+3.
IPT: 3mL+15bp
PRICE GUIDANCE: 3mL+15bp
LAUNCH: USD350m (upsized from USD300m) at 3mL+15bp
PRICED: USD350m (upsized from USD300m). Cpn 3mL+15bp. Due9/18/15. Ip par. Yield 3mL+15bp
BOOK SIZE: USD550m (Reporting by Shankar Ramakrishnan and Danielle Robinson, IFRMarkets; Editing by Natalie Harrison)
