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Supply and exchanges take center stage for the week
admin | May 3, 2019
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors. This material does not constitute research.
May could shape up to be a large month for issuance, with earnings season starting to wrap up and the Fed emphasizing patience. Bristol-Meyers Squibb and IBM are both expected to issue new debt to fund their acquisitions of Celgene and Red Hat, respectively, with Bristol-Meyers also likely to conduct an exchange of nearly $20 billion of existing Celgene notes.
Weekly issuance ahead of forecasts
Despite being plagued with negative headlines of late, both Ford Motor Credit (F) and Boeing Company (BA) successfully tapped the investment grade market this week. Ford, on the heels of a better than expected 1Q results and affirmed full year guidance, issued $1.25 billion of 10-year notes to refinance its upcoming maturity. BA priced $3.5 billion of new debt across five tranches for general corporate purposes. While the new issue market took a bit of a pause on Wednesday ahead of the Fed decision, by Thursday it was back up and running with roughly $7 billion of debt priced across six issuers. The $23 billion of investment grade debt priced through Thursday, May 2nd was already ahead of forecasts of $20 billion for the week.
But more to come
With earnings season starting to wrap up (with the exception of the retailers that report a month later) and the Fed remaining patient, May could shape up to be a large month for issuance. Rumored on deck are Bristol-Myers Squibb (BMY) and International Business Machines (IBM). BMY could be in the market for up to $15 billion as it looks to fund the acquisition of Celgene (CELG). The deal is expected to close by 9/30/19. Furthermore, BMY will be looking to exchange $19.85 billion of CELG notes for new BMY notes. These new BMY notes will be identical to the existing CELG notes in terms of principal amount, coupon and maturity. IBM could be looking to issue up to $25 billion of new debt to fund the Red Hat acquisition as well as finance upcoming debt maturities. IBM has $5.0 billion of debt maturing for the remainder of 2019, after $1.5 billion of debt matured back in February.
T announces tender/exchange of TWX notes
T launched exchange offers for all 26 series of the outstanding Time Warner (TWX) debt. T will exchange all TWX debt for T Global notes with the same principal, coupon and maturity. Concomitantly, T announced the cash tender of 9 series of the aforementioned TWX debt, thereby giving holders of the 9 series of notes the option to tender or exchange. In connection with the tender/exchange, T is soliciting consents from holders to eliminate certain restrictive covenants including cross default language associated with the 6.85% notes due 2026, 6.625% notes due 2029 and 8.3% notes due 2036. Both the exchange and tender incentivize holders to participate by the early participation date, May 15, 2019 5pm NYC time, with full $1,000 principal amount on the exchange and a $30 tender payment per bond on the tender offer. Both expire on 5/31/19 at 9am NYC time. The potential for an exchange of TWX debt was discussed back in the weekly piece on 2/1/19 given that the TWX bonds are guaranteed by Historic Time Warner, HBO and Turner Broadcasting and are structurally senior to T parent debt.
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