Capital Markets

Jumbo Bonds Are Back

In two days, more than $15 billion has been raised by just a handful of companies.
Stephen TaubMarch 19, 2004

The bond market has seen an astounding volume of new issuance in just the last 48 hours. According to several reports, more than $15 billion has been raised by just a handful of companies.

The massive volume and size of the deals took many pros by surprise. Although interest rates continue at 45-year lows, many companies are flush with cash and are not yet hiring significantly or committing big sums to capital spending.

Most of the issuers are in the financial services sector. One major exception is Pacific Gas & Electric Co., a unit of PGE Corp., which sold $6.7 of debt in five parts. It issued 2-year notes, 5-year notes, 7-year notes, 10-year notes, and 30-year bonds, led by UBS Investment Bank and Lehman Brothers Inc.

Among the financial services companies, Wells Fargo & Co. issued $5.5 billion of notes in two parts, led by Citigroup and Morgan Stanley. The debt was marketed in Asia — reportedly Wells Fargo’s first debt launch in that region — and in Europe.

“Demand out of Asia in particular has been focused on high-quality securities,” William Cunningham, head of credit strategy at FTN Financial, told Reuters. “The investor base is not only high-quality-focused, but tends to be a little less price sensitive than Europe.”

Other financial-services issuers:

  • Countrywide Home Loans Inc., a subsidiary of Countrywide Financial Corp., issued $1.35 billion in 7-year global notes, led by Lehman Brothers Inc., Banc of America Securities, and J.P. Morgan.
  • SunTrust Banks Inc., a southeast regional bank, sold $1 billion of 2-year senior floating-rate bank notes.
  • Washington Mutual Inc. issued $750 million in 10-year global subordinated notes, up from an originally planned $500 million, led by J.P. Morgan, Lehman Brothers, and Morgan Stanley.

Meanwhile, Toyota Motor Credit Corp., the finance unit of Toyota Motor Corp., filed a shelf registration to periodically sell up to $12 billion in debt securities. The company announced that it plans to use the proceeds for general corporate purposes, debt repayment and investments.

And Eastman Chemical Co. filed a shelf registration to occasionally sell up to $1 billion in debt securities, common and preferred stock, and other securities. It plans to use the proceeds for general corporate purposes, including working capital, refinancing debt, capital spending, and possible acquisitions.