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CREDIT SUPPLY: Merck KgaA Hybrid pricing: FV 4.07% area

CREDIT SUPPLY
  • MRKGR has 2 bonds totalling 1bn due to be called this year. I assume the new issue will be close to 1bn in size.
  • In Nov '23, they partially tendered 300m of the Call 26 & Call29
  • I would prefer if they had gone for a longer dated bond given that 633m is due in June 29.  
  • This new bond will be callable between Aug-Nov 29.
  • Existing curve trades with low Sub_Snr spread of +90bps  vs TTEFP +112, ENGIFP +101, ORAFP +110, ENIIM +132, IBESM +135.
  • IPT:  4.625% =  z+215  with Senior z+55 gives Sub_Sen 160bps
  • The new bond will need some discount to secondary to work.
  • I would think Sub-Sen +105 -> z+160  or 4.07% yield should be fair.
  • Note, FV is what it is worth, not a guess as to where it will come.  Syndicate ought to have guided on size but that is not on bloomberg yet. That will be a determining factor.  
  • Recent company results were strong with a good beat in semi-conductors. 
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