Synchrony Financial And UPS Underscore Healthy Demand For High Grade Corporate Bonds

The deal was jointly lead-managed by Citigroup, J.P. Morgan, and Wells Fargo Securities.

Quigley furthermore observed at least 17 potential deals in the pipeline, including from Walgreens Boots Alliance (Nasdaq: WBA), Macy’s (NYSE: M), Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL) – each of which recently registered debt securities-related automatic shelf filings with the SEC.


Meanwhile, Atlanta-based United Parcel Service (NYSE: UPS) also graced the docket Wednesday with a US$1.5bn note sale, primarily to repay outstanding debt.

Spreads on UPS’s new 10-year and 30-year tranches compressed by roughly 12.5bps and 17.5bps, respectively, over the course of pricing.

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Moody's Investors Service rated the new senior unsecured notes ‘A1,’ citing that the issuance will “modestly increase funded debt, with nominal effect on Debt to EBITDA.”

Moody's analysts Jonathan Root and Robert Jankowitz noted that Debt to EBITDA will range between 2.5x and 3x through the end of 2020, compared to 2.9x at end-December 2018.

UPS’s revenues were roughly US$72bn in 2018.

Earlier in March, however, Moody's changed its outlook on UPS to negative from stable due in large part to the potential for the firm’s funded debt to remain elevated through and beyond 2020. The ratings agency said it suspects the level will stay high given the company’s significant shareholder returns during a period of weaker free cash flow generation, amid increased capital investment, as well as ongoing contributions to the company's defined-benefit pension plans.

For its fiscal year 2019, the company expects earnings per share to be in a range of US$7.45 to US$7.75, which includes pension financing costs headwinds of about US$325m. It also anticipates capital expenditures to range between 8.5% and 10% of 2019 consolidated revenue.

Mounting Debt Set to Rise Further

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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 extent that this ...

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