2020-04-04 IFR Magazine

INVESTORS WELCOME HIGH-QUALITY

RETAILERS DESPITE STORE CLOSURES

The retail sector is under extraordinary

pressure as stores close in an attempt to

slow the spread of the coronavirus

pandemic and they are turning to the bond

market to shore up cash reserves.

Two discount retailers, ROSS STORES and

TJX, which runs TJ Maxx and Marshalls,

tested demand for higher-risk retail names

LASTûWEEKûPRICINGûRESPECTIVEû53BNûANDû

53BNûFOUR

PARTûDEALS

They followed higher-quality names from the

sector, including Target, Home Depot, Lowe’s,

#63ûANDû!UTO:ONEûFROMûTHEûWEEKûBEFOREû

All these borrowers that have priced

bonds over past two weeks represent very

disparate parts of the retail sector, but are

all dealing with a common problem – store

closures.

“Even though the coupons are higher,

they are able to access the market and

SECUREûTHEIRûFUNDINGvûSAIDû3EANû3IMKOû

GLOBALûHEADûOFûlXED

INCOMEûPORTFOLIOûFORû3%)û

Investments.

“If they can lock in longer-term debt at

these levels, it will help them get through

any kind of prolonged downturn in the

economy, and if they have the credit to do

it, they will.”

CVS, whose business straddles everything

from drugstore chains to health insurance,

was one of the largest issuers with its four-

PARTû53BNûBOND

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LEVEREDûFOLLOWINGûITSû53BNûTAKEOVERûOFû

INSURERû!ETNAûITSûCASHmOWûISûMUCHûMOREû

DIVERSIlEDûAWAYûFROMûRETAILûUNLIKEû

competitor Walgreens, GimmeCredit noted

in a report.

Kroger, Walmart and Target are other

credits that could be winners through the

downturn, due to their low leverage and

involvement in the grocery segment, the

report noted.

TARGETû!!!n ûPRICEDûAû53BNûlVEû

YEARûATûBPûOVERû4REASURIESûANDûAû53BNû

ûYEARûATûBPûOVERû4HOSEûSPREADSûWEREû

good enough to land the company with

coupons in the 2% area and new-issue

CONCESSIONSûTHATûWEREûmATûTOûBPû

ACCORDINGûTOû)&2ûDATAû

Others did not fare as well, with AUTOZONE

PRICINGûAû53MûlVE

YEARûANDûAû53Mû



YEARûBOTHûATûBPûOVERûWITHûSOMEûBPû

of new-issue concession.

The auto industry as a whole is taking a

hit as vehicle sales fall and car makers and

parts manufacturers close factories.

-OODYSûPLACEDûTHEûRATINGSûOFûû

European car parts suppliers on review for

downgrade and also downgraded six issuers.

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the fact that auto maintenance and repair is

far from discretionary,” GimmeCredit wrote

in the report.

BUILDING MATERIALS

Home building retailers LOWE’S and HOME

DEPOT offer a particularly interesting

convergence of consumer trends.

Both Lowe’s and Home Depot came to the

MARKETûWITHûFOUR

PARTûDEALSûRAISINGû53BNû

ANDû53BNûRESPECTIVELYû

/RDERûBOOKSûTOTALLEDû53BNûACROSSûTHEû

transactions, demonstrating strong investor

demand despite the headwinds.

Lowe’s paid up more, landing its 30-year

bond at 370bp over Treasuries, compared to

Home Depot’s 30-year at 200bp over.

Typically, both names trade as safe-haven

credits during natural disasters, on the

assumption that hurricanes, tornados and

mOODINGûCOULDûLEADûTOûAûJUMPûINûSALESûINûTHEû

aftermath.

But a pandemic does not necessarily lead

to the same boost, even if the stores

continue to operate around the country as

an “essential service”.

3TAY

AT

HOMEûORDERSûCOULDûSPURûHOMEû

improvement projects Lowe’s CEO Mavin

Ellison noted recently, and new online ordering

and in-store pick-up options could boost sales.

But with the economy headed for a

recession, home improvement projects are

OFTENûONEûOFûTHEûlRSTûBUDGETARYûCUTSûFORû

CONSUMERSû#REDIT3IGHTSûNOTEDû

“As a category, home improvement is

unlikely to see a massive uptick in demand

(beyond certain areas like respirators,

gloves, cleaning supplies, etc) from stock-up/

hoarding behaviours, but it also has fewer

discretionary elements.”

DELL ADDS TO TECH SUPPLY

WITH SECURED DEBT OFFERING

DELL TECHNOLOGIESûWASûINûTHEû53ûHIGH

GRADEû

bond market on Friday, shopping a three-

part deal in a sign that demand for low

Triple B paper is still strong.

3UBSIDIARIESûDELL INTERNATIONAL and EMC

CORP were co-issuers on the trade.

The company’s senior unsecured ratings

are high-yield but the bond issue is being

secured, which bumps it up to Baa3/BBB–/

BBB–.

The computer maker is expected use the

PROCEEDSûTOûRElNANCEûDEBTû)TûPLANSûTOûPAYû

DOWNû53BNûOFûDEBTûINûlSCALûYEARûû

according to a company press release.

On Thursday, software company VMWARE,

in which Dell Technologies holds a majority

SHAREHOLDERûSTAKEûPRICEDûAû53BNûTHREE

part note.

VMware holds low Triple B unsecured

ratings and was forced to pay around 48bp

of new-issue concessions for its new notes,

ACCORDINGûTOû)&2ûDATA

The last time Dell Technologies was in the

MARKETûWASû-ARCHûûASûITûTOOKû

advantage of the tight spreads at the time to

TERMûOUTûDEBTûINûAû53BNûTRADE

“People are building out their home

OFlCESûANDûBUILDINGûREMOTEûSITESûSOûTECHûISûAû

sector that should be well positioned to take

advantage of the current environment,” said

Matt Daly, head of corporate credit research

at Conning.

International Financing Review April 4 2020 39

BONDS CORPORATES

ALL INV-GRADE US CORPORATE BONDS

BOOKRUNNERS: 1/1/2020–31/3/2020

Managing No of Total Share

bank or group issues US$(m) (%)

Excluding equity-related debt, ABS/MBS, all foreign issues, global issues

and non corporates.

Source: Refinitiv SDC code: F6a

1 BofA Securities 38 14,552.92 15.9

2 JP Morgan 33 12,788.23 14.0

3 Wells Fargo 25 10,330.33 11.3

4 Goldman Sachs 19 9,472.33 10.4

5 Bank of NY Mellon 3 5,177.95 5.7

6 Barclays 19 3,901.95 4.3

7 Citigroup 22 3,867.87 4.2

8 Morgan Stanley 15 3,283.42 3.6

9 Deutsche Bank 8 2,980.08 3.3

10 TD Securities 12 2,699.46 3.0

Total 74 91,398.00

ALL INVESTMENT-GRADE BONDS IN EUROS

BOOKRUNNERS: 1/1/2020–31/3/2020

Managing No of Total Share

bank or group issues €(m) (%)

Excluding ABS/MBS, equity-related debt.

Source: Refinitiv SDC code: N9

1 JP Morgan 83 33,486.38 8.9

2 BNP Paribas 77 25,233.29 6.7

3 HSBC 80 25,172.42 6.7

4 Barclays 76 23,973.44 6.4

5 Credit Agricole 77 23,943.54 6.4

6 SG 59 22,207.43 5.9

7 Deutsche Bank 68 21,056.63 5.6

8 UniCredit 64 20,937.13 5.6

9 BofA Securities 55 18,129.26 4.8

10 Goldman Sachs 35 15,812.51 4.2

Total 365 376,453.93

ALL CORPORATE BONDS IN STERLING

BOOKRUNNERS: 1/1/2020–31/3/2020

Managing No of Total Share

bank or group issues £(m) (%)

Source: Refinitiv SDC code: N8a

1 Barclays 10 1,241.39 17.0

2 JP Morgan 6 910.00 12.5

3 BNP Paribas 6 593.89 8.1

4 HSBC 6 520.67 7.1

5 NatWest Markets 5 480.21 6.6

6 RBC 5 464.22 6.4

7 Lloyds Bank 4 455.46 6.2

8 Citigroup 3 439.30 6.0

9 Deutsche Bank 2 297.89 4.1

10 Goldman Sachs 3 239.39 3.3

Total 15 7,295.36

6 IFR Bonds 2327 p 25 - 65 .indd 39 03 / 04 / 2020 20 : 28 : 59