Nordstrom Pulls A US$500M Bond Off The Sale Rack

High-end department store chain Nordstrom (NYSE: JWN) recently sold US$500m worth of corporate bonds to refinance existing debt at lower rates, amid a general strengthening of consumer support for the retail sector.

Seattle-headquartered Nordstrom – parent to Nordstrom Rack, HauteLook and Trunk Club – priced the low-tier, ‘BBB’-rated, investment-grade notes to decent demand.

The 4.375% debt due April 2030 was sold at a spread of 260 basis points more than matched-maturity U.S. government bonds, following around 15bps of spread compression over the course of the sale.

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Nordstrom said it intends to use the net proceeds from the deal to repay or retire all US$500m of its outstanding 4.75% senior notes due 2020, with any excess pegged for general corporate purposes, which may include financing capital expenditures and working capital needs.

The deal was co-lead managed by BofA SecuritiesJ.P. Morgan Securities, and U.S. Bancorp Investments.

Although Nordstrom’s issuance comes at a fortuitous time for high-grade corporate bonds, especially following the Federal Reserve’s recent interest rate cut, yields have been running higher after a stronger-than-expected jobs report and a general thawing of trade tensions between the U.S. and China.

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The yield on the 10-year U.S. Treasury note was bid at around 1.86% Tuesday, after sinking to as low as 1.69% on a ‘closing-day’ basis one day after the Fed’s decision to slash the target range for the federal funds rate by another 25 bps – its third cut in 2019 – to 1.50%-1.75%.

Nuveen analysts Bill Martin and John Miller noted that while the cautious market tone this past week weighed on non-Treasury sector performance, most sectors experienced positive total returns. They observed, for example, that longer duration helped the investment-grade corporate and global aggregate sectors post “slightly higher total returns than Treasuries.”

In the week, high-grade corporate securities generated 0.55% in returns compared to 0.52% for U.S. Treasuries, according to Nuveen. Year-to-date, the two asset classes have returned 13.39% and 7.54%, respectively.

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Disclosure: The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the ...

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