Time Warner Launches $1 Billion in 10-, 30-Year Bonds
06/08/2012| 11:35am US/Eastern
--Time Warner selling two-part, $1 billion bond deal
--Deal benefiting as sole issuer
--Sentiment lower as rally stalls
(Updated with launch terms in second paragraph, banker comments in third-fifth paragraphs, Dealogic data in seventh paragraph.)
By Patrick McGee
Time Warner Inc. (>> Time Warner Inc.) is hitting the market with a billion-dollar bond deal, a rarity on Fridays and a sign that the corporate scramble to borrow is not letting up.
The sale includes 10-year and 30-year, triple-B rated bonds, offered at yields of 1.80 and 2.25 percentage points over the comparable Treasury rate.
A banker on the deal said Time Warner has the advantage of being the sole issuer in the market, whereas nine companies competed for investor attention Thursday as the market rallied.
Sentiment is weaker now--Markit's CDX Investment Grade Index deteriorated 0.6% in late-morning trading--but it's actually a better day to borrow because Treasury yields have fallen some 10 basis points. Meantime, spreads--the extra yield corporate bonds offer over Treasurys--are fairly stable.
"It was not an obvious decision to borrow given the weaker tone this morning, but a number of factors show it's actually an attractive day," he said.
Large deals are often called "benchmark" in the morning, with the size being determined later in the day based on demand. But for a Friday, defining the size at $1 billion "helps people get their arms around what we're looking to do here," said another banker. He added that the potential for volatility next week was a factor in closing the transaction now.
The last time a billion-dollar deal priced on a Friday was April 27, when Indonesian government-owned PT Pertaminas sold $2.5 billion, Dealogic shows.
Proceeds are for general corporate purposes, according to an early term sheet.
This marks Time Warner's first deal of 2012. Last October, it sold $1 billion of 10-year and 30-year bonds bearing coupons of 4% and 5.375%, respectively, according to Dealogic. In a $2 billion deal priced in March 2011, coupon rates were 4.75% and 6.25% for the same maturities.
The Time Warner deal follows a flurry of issues placed Thursday including jumbo-size sales from Ford Motor Credit Co., American Express Co. (>> American Express Company), and General Electric Capital Corp. That brought weekly issuance to at least $14 billion, surpassing forecasts of $10 billion.
New deals have been performing well in secondary trading, helping to encourage investors and issuers alike to participate in the primary market.
Deere & Co. (>> Deere & Company), for instance, sold 10-year bonds at 105 basis points over Treasurys on Tuesday; they are now trading at a spread of 96 basis points, according to MarketAxess.
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