Tyson Foods Inc. (TSN:US), the largest U.S. meat processor, and distributor Sysco Corp. (SYY:US) are leading at least $3.4 billion of U.S. corporate bond offerings as sales revive, with each tapping the market for the first time in three years.
Tyson sold $1 billion of 10-year bonds, while Sysco sold $300 million of three-year securities and $450 million of 10- year notes, according to data compiled by Bloomberg. Sales follow $15.2 billion last week, the slowest period since May 18.
Issuance has bounced back after employment figures released Friday indicated the U.S. economic recovery is slowing, which curbed investor risk appetite. Following a two-day issuance freeze, Deere & Co. (DE:US), the largest maker of agricultural equipment, broke the ice yesterday by raising $2.25 billion at record-low coupons. Issuers are locking in longer-term maturities as yields rise from record lows.
“Investors were still operating a little bit shell-shocked on Monday, as we saw on Friday as well, with non-farm payrolls coming out a lot lower than anyone expected,” Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia said in a telephone interview.
Tyson sold $1 billion of 4.5 percent 10-year notes at a relative yield of 290 basis points to benchmarks, Bloomberg data show. The company, which may have its ratings increased, will use proceeds to pay back notes from its last offering in July 2009, when it sold $810 million of 10.5 percent securities due in March 2014, it said in a statement today. Any additional proceeds may go toward repaying the Springdale, Arkansas-based food processor’s $458 million of 3.25 percent bonds due October 2013, according to a Moody’s Investors Service release today.
The company, which sold $32.3 billion of chicken, beef and pork products last year, amended its credit line in order to issue the bonds and modify certain financial covenants, according to a filing today.
With the bond sale and amendment, Tyson may be raised to investment grade, Moody’s said in the release. The company is rated Ba1 by Moody’s, one level below investment grade, BBB- by Standard & Poor’s and BBB by Fitch Ratings. Its senior unsecured debt is rated Ba2, two notches below investment grade, by Moody’s.
Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley, and Royal Bank of Canada are managing the sale.
Gary Mikelson, a spokesman for Tyson, declined to comment.
Employers in the U.S. added the smallest number of jobs in a year in May, stoking concern that the economic recovery is faltering. Payrolls increased by 69,000, below median estimates of 150,000, while the jobless rate rose to 8.2 percent, according to Labor Department figures released June 1.
Corporate bond sales came to a halt on June 1 and June 4, with Deere leading issuance yesterday, Bloomberg data show. Deere issued $1 billion of 2.6 percent 10-year notes that yielded 105 basis points more than similar-maturity Treasuries and $1.25 billion of 3.9 percent 30-year bonds with a 130 basis- point spread, according to data compiled by Bloomberg. The coupons were less than previous lows set Feb. 22 for 10-year debt and in October 1998 for 30-year notes, the data show.
Borrowers are leaning towards longer-term securities, with six of the seven issuers in the market today selling 10- or 30- year debt, according to people familiar with the transaction. Yields on companies from the most creditworthy to the riskiest rose to 4.41 percent yesterday, compared with a low of 4.18 percent reached on May 8, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield Master index.
Sysco, which supplies facilities including restaurants, hospitals and ballparks, issued the 0.55 percent three-year securities to yield 42 basis points more than similar-maturity Treasuries and the 2.6 percent 10-year notes at a spread of 110 basis points, according to Bloomberg data.
The Houston-based company last sold debt in March 2009, issuing $250 million each of 5.375 percent, 10-year bonds at 260 basis points more than similar-maturity Treasuries and 6.625 percent, 30-year debt at a spread of 315 basis points, Bloomberg data show.
Proceeds will be used for general corporate purposes, such as acquisitions, debt refinancing and share repurchases, the company said in a filing today. Goldman Sachs Group Inc. is managing the sale.
The company’s A+ corporate credit rating was put on downgrade watch on Feb. 14 by Standard & Poor’s, with the ratings firm forecasting Sysco’s “profitability and credit ratios will weaken modestly over the next year owing to increasing business transformation costs, high input prices, and intense competition,” according to an S&P release.
Charley Wilson, a Sysco spokesman, confirmed the planned sale and that the proceeds will be used for general corporate purposes.
Other borrowers in the market include Union Pacific Corp. selling a two-part, $600 million offering, Liberty Property Trust, which sold $400 million of notes, Ohio National Life Insurance Co. which sold $250 million of debentures, Duke Realty LP selling $300 million of bonds, and Fifth & Pacific Co. Inc. with a $150 million add-on offering, according to people familiar with the transactions.
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