Consumer goods company Procter & Gamble took advantage of investor hunger for defensive credits amid turbulence in risk assets that has stifled issuance in the investment-grade primary market this week.
Procter & Gamble, rated Aa3/AA-, raised on Thursday a two-part senior unsecured note made up of a US$1bn five-year and a US$850m 10-year, following the pattern of its previous debt raise when it raised US$2bn across five and 10-year senior notes last April.
Price thoughts started at Treasuries plus 45bp area and 65bp area, respectively, before the bonds were priced at 27bp and 50bp over.
Procter & Gamble's existing 1% 2026 senior notes, issued in April 2021, last changed hands at 15bp over Treasuries on Thursday, according to MarketAxess.
The new offering could help refinance incoming maturities, with Procter & Gamble's US$1bn 2.3% 2022 senior notes due in February. Yet with a cash pile of US$11.5bn and little leverage, the company will not feel an urgent need to pay down debt.
Procter & Gamble's strong financials were expected to be a big lure to investors against a cautious backdrop, sparked by the Federal Reserve's unwillingness to rule out an aggressive tightening path at the central bank's policy meeting this week, said investors.
“When you see the market worried about volatility, it’s always nice to have a double A issuer market. It’s less of a credit worry,” said a banker away from the deal.
The hawkish stance outlined by the Fed comes against heated inflationary pressures that drove December consumer price growth to an annualized rate of 7%. Supply-chain pressures and freight costs have cut into margins for consumer good companies like Procter & Gamble but it has continued to maintain its strong performance during the pandemic.
"We do not expect much in the way of [new issue concessions] given PG’s conservative balance sheet and strong operating metrics, even in the face of recent inflationary headwinds that are pressuring margins across the space," said CreditSights analysts.
For its fiscal second quarter Procter & Gamble reported net income of US$4.22bn, up from US$3.85bn a year earlier.
Bookrunners were Deutsche Bank, Citigroup and HSBC.