Capital Markets

Gimme an “A”: Bond Market Perks Up

Corporate issues get healthier by the day, with A-rated offerings by Verizon, Kimberly-Clark, Estee Lauder, and Coke just since Wednesday.
Stephen TaubOctober 30, 2008

Each day, the corporate bond market slow shows more signs of life.

On Wednesday and Thursday alone, at least four companies trotted out sizable offerings, while another major company file a shelf registration to issue debt In the future. All of the offerings were rated at least Single-A by Standard & Poor’s.

Verizon Communications Inc. launched $3.25 billion of debt in a two-part offering on Thursday, according to Reuters. It initially had planned to raise $3 billion. S&P rated the offering Single-A, and the telecom sold $2 billion in 10-year notes and $1.25 billion in 30-year bonds.

The issues, which were to be priced late in the day, were expected to yield 487.5 basis points over U.S. Treasuries, the wire service noted. Proceeds will repay commercial paper, and will go for general corporate purposes. Reuters also said that when Verizon last sold debt in April, in a $4 billion three-part sale, the five-year notes sold at 270 basis points over Treasuries, while the 10-year and 30-year paper were priced at 260 basis points over Treasuries.

Meanwhile, Kimberly-Clark sold $500 million in 10-year notes. Reuters said the notes — rated A2 by Moody’s and Single-A by S&P — were priced to yield 7.553 percent, or 362.5 basis points over U.S. Treasuries. Joint lead managers on the sale were Goldman Sachs and Morgan Stanley.

Also on Thursday, Estee Lauder sold $300 million in five-year notes, priced to yield 7.767 percent, 500 basis points over Treasuries. That is a hefty spread, given that the cosmetics company is rated A2 by Moody’s and Single-A by S&P. Banc of America Securities and JPMorgan were the joint bookrunning managers for the sale, according to Reuters.

On Wednesday, Coca-Cola Enterprises Inc. sold $1 billion of senior notes due March 2014. They were priced to yield 7.402 percent, or 468 points over Treasuries, and the issue was rated A3 by Moody’s and Single-A by S&P. Credit Suisse and Deutsche Bank Securities were the joint bookrunning managers.

Meanwhile, Boeing Capital Corp. filed a shelf registration to sell up to $5 billion in debt securities, according to Reuters. The financing unit of Boeing Co. plans to use proceeds to buy equipment for leases, to make loans, fund other investments, and for other general corporate purposes.