Shell, BHP Billiton, Duke Energy units, Marsh & McLennan sell bonds; Pfizer gains in secondary

By Andrea Heisinger

New York, March 18 - Utility and energy companies dominated Wednesday's activity in the investment-grade bond market, with Shell International Finance BV, BHP Billiton Finance (USA) Ltd., Duke Energy Indiana, Inc., Duke Energy Ohio, Inc. and Marsh & McLennan Cos. Inc. pricing issues.

At least one of the day's deals was affected by wider spreads after the Federal Reserve announcement of a massive infusion of money into Treasuries, sending yields down and spreads up.

Spreads widened significantly by the market close Wednesday as Treasury yields tightened. The 10-year note was down 50 bps to yield 2.51%.

Pfizer Inc. continued to perform well in the secondary market, building on gains from Tuesday in most cases, with a couple of the tranches losing ground.

The new Shell International Finance bonds were seen widening slightly in trading, while those from the Duke Energy subsidiaries barely moved.

BHP upsizes sale

BHP Billiton Finance sold $3.25 billion senior notes in five- and 10-year tranches late Wednesday.

The deal was initially for $3 billion, split evenly between the two tranches, with the 10-year notes bumped to $1.75 billion at pricing, a source said.

The $1.5 billion of 5.5% five-year notes priced to yield Treasuries plus 400 bps, while the upsized $1.75 billion of 6.5% 10-year notes sold at Treasuries plus 400 bps.

There was no official price guidance for the notes, a source close to the sale said, and it was instead based on investor feedback.

A source away from the deal said the issue priced about 8 bps wider because of the Fed injection into the Treasuries.

These notes are guaranteed by BHP Billiton plc and BHP Billiton Ltd., with the diversified natural resources company based in Melbourne, Australia.

Barclays Capital Inc., Citigroup Global Markets Inc. and Goldman Sachs & Co. were the bookrunners.

Shell unit sells five-year notes

Shell International Finance priced $2.5 billion of 4% five-year notes guaranteed by Royal Dutch Shell plc, the oil and natural gas company based in The Hague, The Netherlands.

The notes priced to yield Treasuries plus 210 basis points.

Barclays Capital and Morgan Stanley & Co. Inc. were the bookrunners.

Marsh & McLennan upsizes

Professional services firm Marsh & McLennan Cos. priced an upsized $400 million 10-year senior notes to yield 9.25%. They have a spread of Treasuries plus 629.9 bps.

The company is using proceeds to repay $400 million of senior notes due in June.

Bookrunners were Banc of America Securities LLC, Citigroup Global Markets and J.P. Morgan Securities.

Duke Energy units offer bonds

Duke Energy Ohio and Duke Energy Indiana each priced $450 million of first mortgage bonds.

The Duke Energy Ohio deal consisted of 5.45% 10-year bonds priced to yield Treasuries plus 250 bps.

The Cincinnati-based electric provider is using proceeds to repay short-term notes and for general corporate purposes.

Bookrunners were Barclays Capital, Deutsche Bank Securities, SunTrust Robinson Humphrey and UBS Investment Bank.

Duke Energy Indiana priced 6.45% 30-year bonds at Treasuries plus 270 bps.

The Plainfield, Ind., electricity provider is using the proceeds to replenish cash used to repay senior notes at maturity on March 15, to repay mortgage bonds at maturity July 15, and to fund capital expenditures for its ongoing construction program.

Barclays Capital, BNP Paribas Securities, Goldman Sachs and Wachovia Capital Markets were bookrunners.

Both issuers are subsidiaries of Duke Energy Corp.

Fed move affects deals

The Fed's announcement of injecting more than $1 trillion into Treasuries was bad news for a couple of investment-grade deals Wednesday, a market source said.

The BHP Billiton sale, which priced later in the day than others, came about 8 bps wider because of the Fed move, he said.

And a planned sale from the State of Israel was delayed until Thursday because of the announcement.

"Rates were higher," he said in explanation.

Treasury yields were seen significantly tighter at the market close.

Another source said he didn't know how this would affect Thursday's issuance

"I'm not sure what's coming out tomorrow, but it could get a couple of people to reconsider," he said. "It's all about what happens in the morning."

Pfizer talk continues

An asset manager for a mutual fund said they played big in the Pfizer sale and also played the bridge, which allowed preferential treatment with respect to allocations.

The $22 billion bridge was syndicated to accounts, he said. There is still $7 billion of a bridge commitment out there, which still might need to be covered by the accounts who got in on the bridge loan, he added.

New issue concessions were around 140 bps to 150 bps more than existing paper, the source said.

Pfizer bonds remain tighter

The four tranches of fixed-rate notes from the $13.5 billion Pfizer issue Tuesday remained tighter than pricing levels Wednesday, with the 10- and 30-year tranches losing gains, a trader said.

The 4.45% notes due 2012 were at 233 bps offered, in sharply from the 305 bps over Treasuries pricing level. They were seen at 245 bps bid, 240 bps offered at Tuesday's close.

The 5.35% notes due 2015 were at 300 bps bid, 298 bps offered, also in nicely from the 340 bps price. This also continued gains from Tuesday when they were seen at 308 bps.

The 6.2% notes due 2019 priced at 325 bps over Treasuries and were trading at 302 bps bid, 297 bps offered, the trader said. While tighter than pricing, this was a loss of gains from Tuesday when they were at 297 bps.

The 7.2% tranche of notes due 2039 was at 328 bps bid, 320 bps offered, which remained in from the 345 bps price. This was the biggest loss of gains, as the notes were trading Tuesday at 315 bps.

Duke Energy Ohio in slightly

The new 5.45% notes due 2019 from Duke Energy Ohio were seen slightly tighter after pricing Wednesday at Treasuries plus 250 bps. They were seen trading at 243 bps offered, a trader said.

Duke Energy Indiana unchanged

The new 6.45% notes due 2039 from Duke Energy Indiana were mostly unchanged from their Treasuries plus 270 bps price, a trader said. He quoted the issue at 270 bps bid, 262 bps offered.

Shell bond widens

The new 4% bond due 2014 from Shell International Finance was unchanged to a few basis points wider shortly after pricing at Treasuries plus 210 bps, a trader said.

The bond was seen trading at 214 bps bid, 201 bps offered.

Financial trading slows after rally

The financial sector of the secondary was quiet after the Treasury rally in response to a Federal Reserve plan to buy large chunks of securities, a trader said.

The Fed is pumping more than $1 trillion into Treasuries to aid the economy.

Most of the action this week has been in the non-financial side of the market, the source said.

GE Capital bond sees high volume

A 5.25% bond due 2012 from General Electric Capital Corp. remained the top traded as of early afternoon Wednesday.

The same bond was the most traded on Tuesday.

Another GE Capital bond - the 6% issue due 2012 - was right behind this in volume.

A trader on the financial side of the secondary said the repeat appearances on the trading volume list are "absolutely" in response to the previous week's ratings downgrade of a notch, which was less drastic than expected.

Bank, broker CDS widen

Bank and broker credit-default swaps were seen wider late Wednesday, a trader said.

Bank names were 5 bps wider across the board, he said. Broker and investment bank CDS were 5 to 10 bps wider.

Covidien, AmEx Credit big movers

Covidien International Finance SA and Macy's Retail Holdings were two names that saw their bonds tighten the most by late Wednesday, while American Express Credit saw one of the day's biggest widenings.

Covidien's 6% issue due 2017 was nearly 50 bps tighter, while Macy's 7.875% notes due 2015 were seen doing nearly the same.

AmEx Credit's 7.3% notes due 2013 were about 70 bps wider.

All of these movements are in relation to the previous week's levels.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.