Capital Markets

Thaw Continues in Corporate Bond Market

Four new issues set for launch today, including Brown-Forman, Tyco International Finance, TransCanada Pipelines, and Devon Energy.
Stephen TaubJanuary 6, 2009

At least four new corporate bond issues slated for today alone suggest that that market, anyway, has gotten off to a strong start this year.

Brown-Forman Corp. is expected to sell $250 million of five-year notes, while Tyco International Finance, guaranteed by Tyco International Ltd., is planning to bring $500 million of 10-year notes to market, according to Reuters. In addition, TransCanada Pipelines Ltd. is planning to offer 30-year bonds, and Devon Energy is expected to sell five- and 10-year notes, according to the wire service.

In late November, TransCanada Corp. offered about $793 million common stock. Also, on Tuesday Barclays cut its rating on Devon’s stock, in large part because it has not hedged a substantial portion of its 2009 natural gas production.

Later this week, Centerpoint Energy is expected to bring $300 million in 5-year notes to market, while Anheuser-Busch is scheduled to issue five-year, 10-year, and 30-year paper.

These offerings come on the heels of yesterday’s $10 billion sale of FDIC-backed paper from General Electric Capital Corp. in a three-part deal as well as smaller issues from PacifiCorp, a unit of MidAmerican Energy Holdings, and Weatherford International, Reuters pointed out.

The wire service noted that in 2008, sales of corporate bonds plunged nearly 35 percent to $645 billion, the slowest year since 2002, as investors shunned risky offerings. The market started to turn last month for FDIC-backed paper and other issues with the highest credit ratings. But most issuers are paying a hefty spread to Treasuries to get their deal done.

If these spreads tighten amid the lowest interest rates in decades, there could be a surge in new issues, especially if the economy starts to show signs of improvement.

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