Ballooning swap spreads in the dollar markets and continued weakness in the euro weighed heavily on bond markets this week. US dollar swaps spreads widened sharply on Wednesday and yesterday (Thursday) in response to declining equity markets and nervousness ahead of today's (Friday) non-farm payroll data. But before the volatility set in, US financials Household, Heller and Associates Corp were able collectively to raise $3.9bn of global debt. Household's five year deal was doubled to $2bn and was still twice oversubscribed at the enlarged size. But the borrower had to pay considerably more than its usual targets to achieve successful execution. Some 20% of the deal was distributed internationally. Household's success encouraged Heller into the market on Tuesday, a day earlier than anticipated, and it too increased its three year deal, from $750m to $900m. Again, up to 20% of the deal was sold outside the US. Associates Corp chose the FRN market for its $1bn three year funding, paying a re-offer spread of 25bp over Libor against price talk of low to mid-20s. Joint lead manager CSFB estimated that 10% to 15% of the deal was placed in Europe and Asia. PNC, in contrast, focused on international distribution for its $750m FRN debut global bond, placing 85% in Europe and Asia. Vodafone's much anticipated short-dated transaction was launched by Lehman Brothers. The deal was larger than expected at $3.75bn, comprising $3bn of 19 month notes paying Libor plus 23bp, and $750m of 13 month notes paying plus 10bp. Phillips Petroleum will next week roadshow its maiden global bond via JP Morgan and Merrill Lynch with expected launch and pricing after the FOMC. The deal has been reduced in size, to $2bn from a reported $3bn, and two or three tranches between three and 10 years are anticipated. Moody's and S&P downgraded Phillips' senior debt two notches in March to Baa2 and BBB. National Australia Bank's $1.5bn two tranche subordinated bond is scheduled for launch next week via Merrill Lynch and Salomon Smith Barney. Ten year bullet and 10 non-call five structures are said to be involved. The euro hit a new low against the dollar yesterday (Thursday) of $0.8848, fuelling expectations that the ECB will have to raise rates to halt pressure on the currency - a very uncomfortable background for the host of transactions in the pipeline. DtA's global bond is expected to appear next week, a Eu1.5bn to Eu2bn 10 year led by Deutsche, HSBC and Morgan Stanley. A spread in the high 30s-40bp over Bunds is being mooted. French speciality chemicals company Rhodia will launch its Eu500m five or seven year deal next week via Bear Stearns and UBS Warburg after roadshows end today. EdF has awarded a mandate to Deutsche and SG to arrange a Eu500m to Eu1bn 10 year bond. Roadshows will start during the week of May 15. SNCF is expected to award a mandate for its Eu500m to Eu1bn 10 year issue shortly. Renault Credit International has appointed CCF and WestLB to lead manage a three year benchmark in the next three weeks. VNU roadshows next week before an issue of Eu700m of seven year bonds to be led by Deutsche and Schroder Salomon Smith Barney. German construction company Linde will roadshow from May 18 to 25 to publicise its euro benchmark bond to be led by Deutsche. And Carrefour is scheduled to launch its Eu1bn 10 year next week at Euribor plus 20bp area. Caixa Geral de Depositos should be in the market next week with up to Eu500m of fixed rate 10 year lower tier 2 debt through CSFB and UBS Warburg. On the FRN front, CFCMB has mandated DG Bank to bring a 10 year FRN of up to Eu300m. Sterling investors will be offered £250m of 15 year debt next week from debut borrower Smiths Industries. Barclays and UBS Warburg have the mandate from this A2 rated manufacturer of aerospace electronics, medical systems and specialist industrial products. The Halifax is also expected to launch its £1bn upper tier 2 perp non-call 15 deal next week via Goldman Sachs.
May 05, 2000
