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Time Warner Launches $1 Billion in Bonds

06/08/2012 | 02:45pm US/Eastern
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--Time Warner sells two-part, $1 billion bond deal

--Deal benefits as sole issuer Friday

--Sentiment lower as rally stalls

Time Warner Inc. (>> Time Warner Inc.) hit the market with a billion-dollar bond deal, a rarity on Fridays and a sign that the corporate scramble to borrow isn't letting up.

The sale included 10-year and 30-year triple-B rated bonds, offered at yields of 3.417% and 4.969%, respectively, or 1.80 and 2.25 percentage points over the comparable Treasury rate.

A banker on the deal said Time Warner had the advantage of being the sole issuer in the market, whereas nine companies competed for investor attention Thursday as the market rallied.

Sentiment was weaker in early morning--Markit's CDX Investment Grade Index deteriorated 0.6%--but it was actually a better day to borrow because Treasury yields had fallen some 10 basis points, the banker said. Meantime, spreads--the extra-yield corporate bonds offer over Treasurys--were 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 followed 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. This 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 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 93 basis points, including a three-basis-point tightening Friday, according to MarketAxess.

Write to Patrick McGee at patrick.mcgee@dowjones.com.

Stocks mentioned in the article : Time Warner Inc., American Express Company, Deere & Company
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