US companies raised $25 BILLION Tuesday, albeit at significantly higher payouts

Spreads at 3 to +4X over respective 10 & 30 yr. Treasuries over last year 

US companies raise $25bn as bond market thaws

ExxonMobil, PepsiCo and Verizon lead list of issuers paying higher interest rates to raise cash

16 hours ago 

ExxonMobil, PepsiCo and Verizon were among nine US companies that raced to borrow money on Tuesday as improved market conditions opened the door for the groups to sell tens of billions of dollars in investment-grade corporate bonds.

Companies across the globe have worked to fortify their balance sheets over the past two weeks by securing new loans from banks. On Tuesday, the corporate bond market thawed, providing an opening for better quality groups to issue debt — albeit at higher rates than in recent months.

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"Companies should use any window they can to access liquidity at the moment," said John McClain, a portfolio manager at Diamond Hill Capital Management. "I believe these deals should function smoothly but they will be the first test of the new economic reality we are in."

The nine companies borrowed $25bn, according to FT calculations, with recently downgraded oil and gas producer Exxon clinching $8.5bn, the largest borrower of the day...

However, institutional investors on Tuesday demanded significantly higher payouts, reflecting fears of an economic slowdown. Exxon raised $2bn of the $8.5bn through new 10-year debt, which was priced to yield 240 basis points over a similarly maturing US Treasury, or 3.48 per cent. Less than a year ago it issued 10-year bonds with a so-called spread of just 75 basis points, which yielded 2.44 per cent at the time. 

Wireless carrier Verizon, beverage group PepsiCo and Bank of America faced similar investor demands. The maker of Pepsi and Lays potato chips secured $6.5bn on Tuesday in the second-largest bond offering, with 30-year debt sold to investors at a spread of 200 basis points and a yield of 3.65 per cent. That compared with the premium of 80 basis points it paid last July when it issued a 30-year bond. 

See the whole story on the FT here: https://www.ft.com/content/6c94e0fc-6895-11ea-800d-da70cff6e4d3?desktop=true&segmentId=7c8f09b9-9b61-4fbb-9430-9208a9e233c8#myft:notification:daily-email:content

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