HG bonds: Caterpillar places $500M of 2031 notes to repay 2022 issue; terms

Caterpillar Inc. today completed a $500 million, "no-grow" public offering of 1.90% 10-year senior holding-company notes due March 12, 2031 at T+57. Caterpillar expects to use the net proceeds of the offering and cash on hand to redeem all of its $500 million outstanding of 2.60% notes due June 26, 2022, including the make-whole redemption price.

The expected A/A3/A ratings for the proposed notes offering reflect stable outlooks on all sides. S&P Global Ratings today said the stable outlook reflects a view that, "despite a meaningful contraction in demand in 2020, the company maintains sufficient cushion" relative to ratings tolerances for the current grade, and expectations for Caterpillar's end markets to begin to recover in 2021. However, the agency cautioned that it expects "it will take a few years for revenues to return to 2019 levels."

Caterpillar last printed notes at the holding-company level in April 2020 via a $2 billion offering across $800 million of 2.6% notes due 2030 and $1.2 billion of 3.25% notes due 2050, both priced at T+200 reoffer spreads. Those spreads levels have ebbed considerably since then, including trades on Friday at T+47 for the 2030 notes, trade data show. At the yield level, the 1.92% for the notes on Friday compared with 1.38% in early January, despite a comparable spread, reflecting the sharp rise in underlying Treasury yields in recent weeks.

The company's Caterpillar Financial Services Corp. subsidiary completed a $1.75 billion offering on Feb. 22 this year, across 0.25% two-year notes at T+18 and 0.9% five-year notes at T+35. Notably, at the time of pricing, the 0.25% coupon and 0.293% reoffer yields for the 2023 issue marked the lowest rates on record for a two-year placement, according to LCD. Peer John Deere Capital yesterday placed short two-year notes (due Jan. 17, 2023) with a 0.25% coupon, 0.269% reoffer yield, and T+15 spread. Terms: