Bondholders’ big concern is that GE could
spin off the best businesses and pay the cash
out to shareholders, leaving bondholders
with a smaller, but much more levered
entity, an investor said.
GE is planning a US$6bn debt-funded
contribution to its pension, according to a
Fitch report released on Tuesday.
It also has debt maturities of US$21bn
coming up over the next two years,
according to Jamie Miller, CFO and senior
vice-president, speaking on a call with
analysts on Tuesday.
Still, in a red-hot US corporate bond
market, investors and syndicate bankers do
not think the company would have to pay
much of a premium to price new bonds.
“The market is pretty open, and GE is still
a leading business,” the investor said. “It’s
HARDûTOûSAYûHOWûMUCHûLEVERAGEû;INVESTORS=û
would have at this point in time.”
'%ûSHARESûSLIDûTOûAûlVE
YEARûLOWûINûMID
November after CEO John Flannery, who
took over in August, outlined steps to turn
the conglomerate into a smaller company,
including shedding more than US$20bn in
assets.
Since then, the company has been
downgraded by S&P, Moody’s and Fitch due
to increasing debt leverage and weaker
CASHmOWû'%ûNOWûCARRIESûRATINGSûOFû!!!
4HEûTHREEûRATINGSûAGENCIESûAFlRMEDûTHOSEû
ratings on Tuesday despite GE’s
announcement that GE Capital would
contribute US$15bn to its legacy insurance
unit between 2018 and 2024.
Moody’s analysts noted that GE Capital
plans to suspend dividends to GE and
further reduce assets. The plan is expected
to restore leverage to within a “more
acceptable range” of 11%-12% within three
years, they said.
“GE’s liquidity is good, taking into
account that GE does not have any material
debt maturities until 2020 and maintains
US$20bn of borrowing availability under its
committed revolving credit facility,” the
Moody’s analysts said.MITSUI FUDOSAN RAISES DOLLARSJapanese real estate developer MITSUI FUDOSAN
ONû4UESDAYûPRICEDû53MûOFûlVE
YEARû
2.95% senior unsecured notes at 99.848 to
yield 2.983%.
This was equivalent to Treasuries plus
62.5bp, inside initial price thoughts of
Treasuries plus 85bp area.
Citigroup, Bank of America Merrill Lynch,
Morgan Stanley and Nomura were joint lead
managers on the 144A/Reg S offering.
The bonds are expected to be rated A2/A
(Moody’s/S&P).EUROS
STARS ALIGN FOR SPANISH ISSUERSInvestors piled in orders for Spanish papers last
week, despite the low concessions on offer.
GAS NATURAL FENOSA’s €850m 10-year on
Tuesday garnered a book of over €2.3bn,
enabling leads to launch at 67bp over mid-
swaps, 4bp back of fair value.
While demand was underpinned by a
concurrent liability management exercise,
leads also pointed to benign market
conditions, the popularity of both the sector
and name among investors, and tighter
spreads between Spanish and German
government bonds as potential supporting
factors.
h!PPETITEûFORûPERIPHERALSûISûREmECTEDûINTOû
executions and receptions of such names,” a
lead banker said.
Government bonds rallied on Tuesday,
the Spanish 10-year yield down 4bp and the
spread to Bunds tightening around 1.5bp.
Spanish government bond yields moved
further on Thursday, to their tightest level
OVERû'ERMANûPEERSûINûOVERûlVEûMONTHS ûONûspeculation about a potential ratings
upgrade for Spain by Fitch late on Friday.
“It seems like everybody has shrugged off
the Catalan situation,” an investor said.
“There doesn’t seem to be much concern
left in the market, even if the Spanish
economy is in a slightly different place
compared to a few months ago.”
Fair value on Gas Natural, rated Baa2/BBB/
BBB+, came out at around plus 63bp, using
January 2027s and October 2029s. That
matched lead estimates, although the
investor saw it wider at 70bp.
“People have enough cash to be active in new
issues. Maybe when there’s more volatility, they
might require extra compensation but, at the
moment, the markets are in good shape,” a
second syndicate banker said.
Under the tender offer, which has a
maximum size of €850m, the Spanish utility
is targeting May 2019s, July 2019s, April
2021s, April 2022s and January 2023s. The
tender, led by Citigroup, CaixaBank, ING and
Natixis, ends on January 22.
Banca IMI, CaixaBank, Citigroup, ING, Mizuho,
MUFG, Natixis, and NatWest Markets led the
new issue.TELEFONICA GETS IN AHEAD OF
REDEMPTIONSOn Monday, TELEFONICA was out with a €1bn
nine-year, getting in early ahead of four
redemptions coming up later in the year.
Mimicking several recent issuers, the
serial borrower started marketing around
20bp back of fair value, before tightening
talk to leave 5bp on the table on books of
€1.7bn. It priced at 58bp over mid-swaps.
“There’s a little bit in it because these
guys need quite a bit of issuance this year;
they’ve got a lot of redemptions coming up,”
an investor said.
The company has €3bn-equivalent of
paper in sterling, euros, US dollars and Swiss
francs due to mature in 2018.BONDS CORPORATESALL INV-GRADE US CORPORATE BONDS
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)
1 Morgan Stanley 3 2,108.45 22.3
2 HSBC 3 1,279.78 13.5
3 Barclays 2 1,221.13 12.9
4 BAML 3 1,194.73 12.6
5 RBC 1 1,108.87 11.7
6 SG 2 746.87 7.9
7 Citigroup 1 582.89 6.2
8 Mizuho 1 499.58 5.3
9 BBVA 1 373.08 3.9
10 Santander 1 124.53 1.3
Total 5 9,464.43
Excluding equity-related debt, ABS/MBS, all foreign issues, global issues
and non corporates.
Source: Thomson Reuters SDC code: F6a
ALL US INVESTMENT GRADE CORPORATE DEBT
(EXCLUDING SOLE SELF FUNDED DEALS)
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)
1 Morgan Stanley 18 6,078.42 10.1
2 BAML 24 5,797.18 9.6
3 Citigroup 21 5,674.23 9.4
4 Goldman Sachs 16 5,186.37 8.6
5 JP Morgan 21 4,914.64 8.1
6 HSBC 10 2,994.29 5.0
7 Barclays 9 2,970.40 4.9
8 Deutsche Bank 10 2,762.84 4.6
9 Credit Suisse 7 1,926.51 3.2
10 Mizuho 8 1,886.41 3.1
Total 43 60,480.36Source: Thomson Reuters SDC code: F09aALL CORPORATE BONDS IN EUROS
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)
1 BNP Paribas 8 1,974.46 10.7
2 UniCredit 6 1,653.07 9.0
3 BAML 6 1,643.91 8.9
4 Deutsche Bank 6 1,208.93 6.5
5 MUFG 4 1,139.89 6.2
6 Credit Agricole 6 1,112.82 6.0
7 HSBC 6 1,099.81 6.0
8 SG 5 1,072.64 5.8
9 Santander 2 953.35 5.2
10 ING 3 912.85 4.9
Total 20 18,461.79
Excluding equity-related debt. FIGs, ABS/MBS.Source: Thomson Reuters SDC code: N8