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Supply smashes expectations

The IG market was yet again in receptive mood heading into the 39th week of the year. Few though, if any, were expecting quite so much supply in what seems set to be a record-breaking month.

Expectations had been for around a lowly $30bn of supply for the week of 22 September. Monday alone delivered more than half of that tally, with Tuesday trumping that, before Wednesday obliterated the prior day yet again.

US dollar corporate and financial supply for the week (excluding Reg S only deals) reached an impressive $54.425bn from 24 borrowers via 52 tranches, including funding as far out as 40 years (only the seventh time we have seen that tenor year to date).

It would be somewhat of an understatement to say that the US IG primary markets have enjoyed a prolonged period of calm, stability, and a seemingly inexhaustible pool of capital keen to be put to work.

Famous last words, of course. But with both bankers and borrowers well versed in bringing multiple offerings to the markets simultaneously, this week we yet again saw both large, and ‘jumbo’, multi-tranche offerings, pricing on top of each other, and pricing well.

While marketing deals is the skill of syndicate and nailing starting IPTs at the right level are key to momentum, there has been a notable change of late whereby more deals are pricing around 30 to 35 bps in from IPTs, where the norm a month or so ago was a near standard 25 bps (see supply table below).

Giant deal from Oracle

Without question, the trade of the week emerged on Wednesday from global technology colossus Oracle.

The huge six-tranche offering (a 5-year floating tranche was dropped at launch) followed large and well received deals earlier in the week from Broadcom and Dell (see below). There had been rumblings of a large trade waiting in the wings, but the deal came as a surprise to many. Oracle spread its funding right across the curve, including both a 30-year and a 40-year tranche, with very deliberate linear IPTs.

With its intentions clearly laid out, Oracle dominated attention on the day, having announced early. Oracle launched and printed $18 billion in total, upsizing from early talk that the borrower was targeting $15bn. At the peak, books were said to be in excess of $88bn, with the final book in the low 80’s. Use of proceeds were telegraphed as GCP, debt restructuring, dividends, stock repurchases, but also critically “future investments or acquisitions” — in other words, good old fashioned “war chesting” in a sector where size matters and many participants are currently flexing their muscles.

Managing investor interest of this magnitude is always going to be challenging, no matter how technologically advanced orderbook systems and automated reconciliation has become, but pricing on this one was a thing of beauty, with all five tranches out to the 30-year pricing 30 bps tighter than IPTs. Only, the 40-year ruined the symmetry, but still tightened by an impressive 28 bps. Buyers for very long tenors are typically insurers and pension funds, and with 40-year tranches rare, it was an opportunity to lock in an asset yielding over 6.0% for a strong and arguably improving mid BBB credit. Leads would have been confident the appetite for longer tenors was there, as evidenced by the strong bid for other recent 30-year prints.

Lowe’s takes out bridge facility

Another stand-out trade of the week came from US retail powerhouse Lowe’s (Baa1/BBB+), which tapped the market on Tuesday with a five-tranche offering to help fund the acquisition of building materials manufacturer Foundation Building Materials.

The purchase is a loud statement of intent from Lowe’s as it reaches into the professional construction and remodeling arena. The deal itself was announced last month and the bridge loans provided by Bank of America and Goldman need to be taken out. Some short-term debt may well be used in conjunction with the term-debt, however, it is this longer-term money that garnered attention on 23 September.

Lowe’s has been somewhat fortuitous with its timing, both in a resurgent M&A market, but also facing an extremely receptive primary market when it needs money. The North Carolina-based borrower announced tranches of two-year, three-year, a long five-year, seven-year and ten-year paper. The deal went well and tightened a near uniform 28bps from IPTs.

As is typical for these M&A-related term debt take-outs, the notes feature a special redemption clause that in essence legislates for the acquisition falling through for some unforeseen reason.

Specifically in this case, should the FBM purchase not close prior to 19 August 2027, then Lowe’s will be required to redeem all of the notes issued on Tuesday at a redemption price equal to 101% of the aggregate principal amount of each tranche. Such language is there to provide comfort to investors, while simultaneously protecting the borrower.

It was little surprise to see the providers of the acquisition liquidity on the top line, with Bank of America and Goldman joined by Lowe’s “local” Charlotte-based bank, Wells Fargo.

Smaller trades highlight resurgent M&A activity

Canadian apparel firm Gildan Activewear (Baa3/BBB-/BBB) priced a dual-tranche $1.2bn deal on Tuesday to help finance the cash portion of the roughly $2.2bn acquisition of HanesBrands which was announced on August 13.

The deal met with strong demand, allowing pricing to tighten significantly from IPTs (see supply table below). Proceeds from this week’s deal may also be used to refinance existing indebtedness of HanesBrands. Leads on the trades were Morgan Stanley, CIBC and JP Morgan.

Onwards and upwards for Broadcom

On the opportunistic front, US tech giant Broadcom (A3/A-/BBB) was one of the largest trades of the week with its three-tranche offering, raising $5bn. This was the second foray into the markets this year for the California-based member of the “Magnificent Seven”, having brought a five, seven and ten-year offering totaling $6bn back in early July.

Key to the timing and success of 22 September’s offering was the recent upgrade by Moody’s of its senior unsecured debt from Baa1 to A3, a crucial milestone for any credit.

Simultaneously the credit outlook by Moody’s moved to positive from stable, with expectations of significant growth in revenue and free cash flow the driver for their bullish stance.

Monday’s offering also coincided with Broadcom’s announcement that it was partnering with OpenAI to develop a custom AI chip to specifically go head-to-head with Nvidia’s dominance in the space.

The announcement largely surprised the semi-conductor market, but has been broadly received as a positive as manufacturers catch up and are now well placed to challenge the dominance that Nvidia has so enthusiastically, and successfully, embraced. Any new rival chip, however, is unlikely to see actual production until fairly deep into 2026, so watch this space.

This buzz coincided with Monday’s debt offering, and investors responded in kind. This time around the borrower elected to move out only slightly along the curve, versus the July trade, with a senior unsecured five-year alongside a long 10 and a long 12-year.

IPTs were in the area of T+85bps, T+100bps and T+110bps respectively, which uniformly tightened by 32bps to price in turn at T+53bps, T+68bps, and T+78bps.

For context the five-year paper priced 15bps tighter than the equivalent tranche in July.

Overall, with the improving credit story, ratings upgrade, new strategy, and of course the rally in Treasuries, Broadcom is paying a massive 42bps less for five-year money than they did less than three months ago.

Officially, proceeds are slated to refinance existing debt and GCP. It is also worth noting that unlike so many other borrowers, over the last few years Broadcom appears to prefer working with a limited number of banks on the top line, typically only three or four. This time around was no exception, with the issuer opting for BNP Paribas, Bank of America, and JP Morgan.

Dell delivers

We have had five deals of $4.5 billion or greater this week, and only one of those was directly M&A related. This tells us emphatically that the positive backdrop is just to good for a prudent group treasurer to ignore. History has shown us time and time again that it is invariably a wise move to refinance when markets are receptive and in good shape — a classic case of ‘making hay while the sun shines’.

With that sentiment very much in mind, Texan technology and hardware manufacturer Dell (Baa2/BBB/BBB), tapped the market with a four-tranche $4.5bn offering on 22 September.

Back in March it delivered a strikingly similar trade when it priced three, five, seven and ten-years, straight out of the Treasury play book. That deal priced $4bn, neatly divided across billion dollar tranches. The deal went well with threes and fives tightening 35bps from IPTs and the sevens and 10s managing 25bps.

The logic for Monday’s trade was apparent with funding around half a point cheaper across the curve versus the March trade. At first glance the elected maturities seemed bespoke rather than formulaic, with a long three, four, and ten-year tranche and a clean seven-year; however, this was simply a function of prudent management of the debt profile to avoid concentration risk at certain points in time.

If anything, the maturities are the clearest indication of the opportunistic nature of the undertaking. Pricing on this latest trade tightened between 25bps and 32bps from IPTs at T+58bps, T+80bps, T+90bps, and T+100bps respectively. Size-wise, the shortest tranche delivered $750m, while the other three tranches all sized at $1.25bn.

As an aside, famed founder, Michael Dell, was also grabbing headlines on the day of issue, as one of Trump’s favored bidders to step forward to purchase TikTok from China. A separate story of course, but a positive glow nevertheless for investors.

Yankee supply

Most of the big opportunistic trades were domestic names, however, Yankee names weren’t going to be left of the sidelines. Italian utility ENEL (Baa1/BBB/BBB+) brought a four-tranche offering delivering an impressive $4.5bn. Importantly there was a 30-year tranche which tightened the most of any tranche by 33bps from IPTs to price at T+145bps.

“Fun fact” — not only is ENEL the largest European utility by customers, but it is also one of the world’s top producers of renewable energy.

Subdued end to the week

Primary markets took a well deserved breather on 25 September with only four borrowers hitting the tapes. Indeed, three of the deals that came totaled no more than $500m reflecting a more subdued tone in the broader markets, and arguably mildly exhausted investors.

US IG corporate & financial supply