Discover upsizes; American Tower prices tight; spreads firm; Morgan Stanley, Home Depot ease

By Cristal Cody and Aleesia Forni

Virginia Beach, Aug. 4 – A pair of issuers made their way to Monday’s market to kick off the week’s primary activity.

The session saw Discover Bank bring the larger offering to market, pricing a $750 million issue of seven-year senior notes.

The deal was upsized by $250 million and sold tight of price guidance.

A source noted that the deal’s orderbook was around two times oversubscribed.

American Tower Corp. also priced a seven-year offering of notes at the tight end of talk, bringing to market a $650 million trade.

With the summer lull in full swing, the high-grade calendar is expected to be light this week. Sources are expecting around $15 billion of paper to price.

High-grade corporate credit spreads tightened on the day, though bonds traded mostly unchanged to softer on the long end in quiet activity, according to market sources.

The Markit CDX North American Investment Grade series 22 index firmed 3 basis points to a spread of 64 bps after widening on Thursday and Friday.

In the secondary market, Time Warner Inc.’s 2.1% notes due 2019 were unchanged, a source said.

Verizon Communications Inc.’s 4.15% senior notes due 2024 traded wider, a market source said.

Morgan Stanley’s 3.875% notes due 2024 were quoted about 7 bps weaker from where the paper traded on Thursday, according to a market source.

Home Depot, Inc.’s 4.4% notes due 2045 have widened to near the June issuance price, a source said.

Discover upsizes

Discover Bank priced an upsized $750 million issue of 3.2% seven-year senior notes on Monday tight of guidance with a spread of Treasuries plus 110 bps, a market source said.

The notes (Baa3/BBB/BBB+) priced at 99.732 to yield 3.243%.

Citigroup Global Markets Inc., Barclays and Credit Suisse Securities (USA) LLC were the joint bookrunners.

Proceeds will be used for general corporate purposes.

Discover Bank is the Chicago-based issuer of the Discover credit card and a unit of Discover Financial Services.

American Tower offering

In other primary happenings, American Tower sold a $650 million issue of 3.45% senior notes (Baa3/BBB-/BBB) due 2021 with a spread of Treasuries plus 140 bps, a market source said.

The notes sold at the tight end of talk, which was set in the area of 145 bps over Treasuries.

Pricing was at 99.416 to yield 3.543%.

BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Mizuho Securities USA Inc. and Morgan Stanley & Co. LLC were the bookrunners.

Proceeds will be used to repay debt under an existing credit facility and for general corporate purposes.

The owner and operator of communications towers is based in Boston.

Time Warner flat

Time Warner’s 2.1% notes due 2019 (Baa2/BBB/BBB+) traded flat on the day at 62 bps offered, a market source said.

Time Warner sold $650 million of the five-year notes at Treasuries plus 60 bps on May 20.

The media and entertainment company is based in New York.

Verizon softer

Verizon’s 4.15% notes due 2024 (Baa1/BBB+/A-) widened about 5 bps from the previous week to 124 bps offered, a source said late Monday afternoon.

Verizon sold $1.25 billion of the 10-year notes on March 10 at 140 bps plus Treasuries.

The telecommunications company is based in New York City.

Morgan Stanley eases

Morgan Stanley’s 3.875% notes due 2024 (Baa2/A-/A-) traded weaker at 129 bps offered on Monday, a source said.

The notes were last seen on Thursday at 122 bps offered.

Morgan Stanley sold $3 billion of the notes at a spread of Treasuries plus 130 bps on April 23.

The financial services company is based in New York City.

Home Depot weaker

Home Depot’s 4.4% notes due 2045 (A2/A/) widened by 5 bps to 6 bps to 104 bps offered on Monday from the previous week, a market source said.

Home Depot sold $1 billion of the long bonds at Treasuries plus 105 bps on June 9.

The home improvement retailer is based in Atlanta.

CDS costs decline

Investment-grade bank and brokerage credit default swap prices were lower on Monday, according to a market source.

Bank of America Corp.’s CDS costs ended 4 bps tighter at 73 bps bid, 76 bps offered. Citigroup Inc.’s CDS costs also firmed 4 bps to 70 bps bid, 73 bps offered. JPMorgan Chase & Co.’s CDS costs fell 3 bps to 59 bps bid, 64 bps offered. Wells Fargo & Co.’s CDS costs declined 3 bps to 46 bps bid, 51 bps offered.

Merrill Lynch’s CDS costs closed 4 bps lower at 76 bps bid, 80 bps offered. Morgan Stanley’s CDS costs ended 2 bps tighter at 76 bps bid, 80 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 1 bp lower at 83 bps bid, 88 bps offered.

Paul Deckelman contributed to this review

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