May 30 (IFR) - In a day when investment sentiment was completely risk-off, Kraft Foods demonstrated the continued liquidity of the US investment grade market by raising $6 billion through a four-tranche senior unsecured deal.
Kraft, rated Baa2/BBB, was rumoured to be initially looking at raising anywhere between $4 billion to $6 billion and started off looking to price a three-year, five-year, 10-year and 30-year tranche conservatively.
The issuer’s initial stance reflected that even it was unsure how the market would react to a transaction on a day when equities were selling off and bond trades from Tuesday were not holding up for the most part.
Initial whispers on the three-year were at Treasuries plus 150 basis point (bp) area, while the five-year was at 175bp-187.50, the 10-year at 212.5bp area and the 30-year at 250bp area.
This worked out to a new issue concession range of about 40bp-67.5bp across the various tranches.
Kraft legacy debt will remain with the snacks group Mondolez and is SEC registered. Wednesday’s deal for the new Kraft Foods which houses the North American grocery business is 144a.
Once initial price thoughts were out, there was a sense that the deal may be struggling a bit. The environment was clearly not the most conducive for issuance with stocks down in double-digits.
Tuesday’s Danone 3.00% June 2022’s priced at plus 130bp and at mid-day were trading around 160bp.
Another Tuesday trade, the Eastman Chemical $2.4 billion three-part 4.8% 2042s, was at 215bp-210bp, compared with pricing of plus 200bp. The Eastman 3.6% 2022’s were quoted at 205bp-200bp after pricing at plus 195bp.
However, despite all of this, when Kraft guidance emerged, it came tight of initial thoughts, with book size heard at $17.5 billion.
The three-year guidance was set at plus 140bp area, 10bp tight of initial price talk. The five-year at plus 165bp area, or 10bp-22.5bp tight of initial price talk; the 10-year at plus 205bp area, 7.5bp tight of initial price talk and the 30-year plus 240bp area, 10bp tighter than initial price talk.
Finally, Kraft printed a $6 billion deal 12bp-15bp inside initial guidance with the $1 billion three-year at plus 135bp; $1 billion five-year at 160bp; $2 billion 10-year at 200bp; and $2 billion 30-year at 235bp.
The final new issue concessions on the different tranches were in the 27bp-35bp range and the coupons were one of the tightest seen on a Kraft deal.
Proceeds will be distributed to Kraft ParentCo to fund repurchases or redemptions of existing debt and for general capital purposes.