U.S. Bond Sales Revive

Spain bank bailout opens a window for corporate issuance.

Issuers are returning to the U.S. corporate bond market this week, in the strongest start in more than a month, as Spain’s request for a bank bailout reduced concern that the European debt crisis is spreading.

AT&T Inc., the largest U.S. phone company, and Louisville, Colorado-based Zayo Group LLC are leading sales of at least $5.7 billion, the best opening for a week since May 7, according to data compiled by Bloomberg. Sales totaled $16.3 billion last week, a 7 percent increase from the prior week, though below this year’s average of $28.3 billion for the fourth straight week.

Issuance is picking up after Spain asked euro-region governments over the weekend for as much as 100 billion euros ($125 billion) in bailout funding to help shore up its banking system. The development has calmed some concern that Spain’s strains could exacerbate Europe’s debt crisis and weigh on corporate balance sheets worldwide. The reprieve may be short-lived, given speculation that aid for Spain’s banks may not be enough to stem the European fiscal turmoil and as Greece holds elections on June 17.

“There are these windows of opportunity that companies are seizing,” Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. “Today, investor fears are lower than, say, a week ago.”

Group LLC, a provider of Internet connectivity, is offering $1.25 billion of bonds to finance its acquisition of AboveNet Inc., according to a person familiar with the transaction who asked not to be identified because the terms are private. The deal is the largest high-yield offering since Inmet Mining Corp. sold $1.5 billion of bonds on May 15, according to data compiled by Bloomberg.

Symantec Corp., the world’s biggest seller of security software, may sell five-year bonds at a relative yield of 215 basis points more than benchmarks and 10-year bonds at a spread of 250 basis points, according to a person familiar with the transaction. Proceeds will be used to repay the company’s $1 billion of 1 percent notes due June 2013. The offering will be of benchmark size, typically at least $500 million, said the person, who asked to not be identified because the terms are private.


 

CBS Sale

CBS Corp., the broadcaster and owner of the Showtime cable channel, plans to raise $900 million in a two-part offering of five- and 30-year bonds to repay debt maturing in August.

The five-year notes may yield about 150 basis points more than similar-maturity Treasuries and the 30-year portion may have a spread of about 230 basis points, according to a person familiar with the offering. Both spreads are lower than initial talk of about 175 and 240 more than Treasuries, the person said.

Zayo is planning to issue $750 million of senior secured notes due January 2020 and $500 million of senior debt due July 2020, according to a person familiar with the transaction. The securities are expected to be rated B1 and Caa1 respectively by Moody’s Investors Service.

Zayo last sold bonds in November 2010, issuing $350 million of 10.25 percent, 6.3-year securities, according to data compiled by Bloomberg.

Sales of speculative-grade debt in the U.S. came to a virtual standstill last week with $317 million of bonds sold.

 “We’ve definitely seen a lot less high-yield issuers,” Lurie said. “Because of the volatility in the market, it’s harder to gauge with riskier assets what to do or when to do things.”

AT&T plans to sell five-year bonds that may yield about 110 basis points more than similar-maturity Treasuries and 10-year debt, a reopening, with a 140 basis-point spread, according to a person familiar with the offering.

AT&T issued $1 billion of 1.6 percent five-year notes and an equivalent amount of 3 percent 10-year bonds on Feb. 8, its lowest coupons for those maturities on record, according to data compiled by Bloomberg.

“We expect demand for the new bonds will be strong, as telecom is often viewed as a relatively stable place to invest,” Michael Hodel, a credit analyst at Chicago-based Morningstar Inc., wrote in a research note today.

Other issuers with plans to sell bonds in the market include NiSource Finance Corp. with a $750 million sale, Newell Rubbermaid Inc. with a $500 million offering, and New York Life Insurance Co. with a $250 million issue, according to people familiar with the transaction who asked to not be identified because the terms are private.


 

 

Bloomberg News

 

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