Citigroup, Shell, Newmont, Cenovus, JPMorgan sell deals on $31 billion day; spreads tighter

By Andrea Heisinger and Paul Deckelman

New York, Sept. 15 - JPMorgan Chase & Co., Avista Corp., Cenovus Energy Inc., Citigroup Funding and Citibank NA, Shell International Finance BV, Landwirtschaftliche Rentenbank, Newmont Mining Corp. and France's Societe De Financement De L'Economie Francaise all sold bonds Tuesday on what sources said was the second-busiest day ever by dollar amount in the investment-grade market.

There was $31 billion in sales, a market source said, citing his syndicate desk's in-house calculation.

Nearly all of the day's offerings totaled more than $1 billion, with the exception of Avista, which priced $250 million of mortgage bonds due 2022. Toll Brothers Finance Corp. priced $250 million of 10-year split-rated notes.

Among the most watched sales were those from Shell International and the combined offering from Citigroup and Citibank, each totaling $5 billion and having multiple tranches. The Shell sale was increased to add a tranche of floaters.

Cenovus brought its deal overnight, and sold $3.5 billion in three tranches. Germany's Rentenbank also came to market overnight to let other regions outside the United States in on the action, and sold $2.25 billion of government-guaranteed bonds early in the day.

A third sale, from SFEF, was also brought overnight to allow Asian and European markets in. The issuer sold $4.5 billion of five-year notes early in the day via Rule 144A, a source said. Terms were not available at press time.

Newmont Mining sold $2 billion of 10-and 30-year bonds late in the day - one of a handful to price late.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 12 North American high-grade index tightened by 3 basis points to a mid bid-asked spread level of 104 bps.

Advancing issues were seen narrowly leading decliners Tuesday, by a relative handful of issues - perhaps a couple of dozen out of more than several thousand total - this after having trailed them by around the same narrow margin the session before.

Overall market activity, reflected in dollar-volume totals, surged around 30% from Monday's pace.

Spreads in general were seen a bit narrower, in line with modestly higher Treasury yields; for instance, the yield on the benchmark 10-years widened by 3 bps on Tuesday to 3.45%.

"It was a pretty busy day, new issue-wise, in high grade," a trader said - so much so that the secondary market completely took a back seat, several market participants indicated, seeing no aftermarket dealings in the new issues.

Shell upsizes to four tranches

Shell International Finance priced $5 billion of notes in an upsized four tranches late in the day.

The deal was initially in three tranches, with a floating-rate tranche added, a market source said.

The $500 million of two-year floating-rate notes priced at par to yield three-month Libor plus 3 bps.

A $1.5 billion tranche of 1.3% two-year fixed-rate notes priced at a spread of Treasuries plus 37.5 bps.

A $1 billion tranche of 3.25% six-year notes priced at Treasuries plus 90 bps.

The $2 billion tranche of 4.3% 10-year notes also priced at Treasuries plus 90 bps.

The sale was oversubscribed and a "very big benchmark" size, a source close to the deal said. It tightened in from price whispers early in the day, he said.

Bank of America Merrill Lynch, Deutsche Bank Securities and Morgan Stanley ran the books.

Proceeds will be used for general corporate purposes.

The deal is guaranteed by Royal Dutch Shell plc.

The energy and petrochemical company is based in The Hague, The Netherlands.

Citi units sell FDIC notes

Citigroup Funding and Citibank NA priced $5 billion of notes in three tranches with the guarantee of the Federal Deposit Insurance Corp. late on Tuesday, an informed source said.

A $1.5 billion tranche of 1.25% two-year notes issued by Citibank priced at Treasuries plus 32.7 bps.

A $1 billion tranche of three-year floating-rate notes, also sold by Citibank, priced at par to yield three-month Libor plus 0 bps.

The third tranche was $2.5 billion of 1.875% three-year notes priced by Citigroup Funding at Treasuries plus 49.4 bps.

A source away from the deal said he and others on his desk were wondering why the financial decided to dip into the Temporary Liquidity Guarantee Program again.

"We kind of thought everyone was done with that," he said. "You would think they would want to get out from under TLGP, but I guess not."

Issuance under the program ends in October, although most financials ceased selling under the guarantee long ago. General Electric Capital Corp. continues to issue under the program, although in lieu of selling new issues of FDIC-backed notes, has been reopening old deals.

Bookrunner for the Citi deal was the firm's in-house Citigroup Global Markets.

The financial services company is based in New York City.

Newmont offers deal late

Newmont Mining priced $2 billion senior notes in two tranches late in the day, a market source away from the offering said.

A source close to the deal said it was oversubscribed, and was a "large benchmark." It was well at the tight end of initial guidance, he said.

The $900 million of 5.125% 10-year notes priced at Treasuries plus 175 bps.

A $1.1 billion tranche of 6.25% 30-year notes priced at Treasuries plus 210 bps.

Deutsche Bank Securities and UBS Investment Bank were bookrunners.

Proceeds are going for working capital and general corporate purposes, including the costs of exploration, development of project pipelines and acquisition initiatives.

The deal is guaranteed by Newmont USA Ltd.

The gold producer is based in Denver.

Cenovus sells three tranches

Cenovus Energy sold $3.5 billion of notes in three tranches after going overnight, a market source said.

The sale was announced early Monday, but marketing continued into Tuesday to allow other markets in on the books, a source close to the sale said.

The $800 million of 4.5% five-year notes priced at Treasuries plus 212.5 bps.

A $1.3 billion tranche of 5.7% 10-year notes priced at a spread of 225 bps over Treasuries.

The final $1.4 billion tranche of 6.75% 30-year notes priced at Treasuries plus 250 bps.

The notes were priced via Rule 144A and Regulation S.

Bank of America Merrill Lynch, Barclays Capital and RBS Securities were bookrunners.

Proceeds will be used for the acquisition of assets from parent company EnCana Corp., to be placed in escrow.

Natural gas and oil company EnCana is based in Calgary, Alta.

JPMorgan upsizes deal

JPMorgan Chase priced an upsized $1.5 billion of 3.7% notes due 2015 at Treasuries plus 135 bps, a source away from the sale said.

The size was initially $1 billion, the source said.

Bookrunner was J.P. Morgan Securities.

The financial services company is based in New York City.

Primary volume explodes

On a day when volume was expected to pick up, it did just that, and then some. An investment-grade syndicate source said it was the second-busiest day ever in the high-grade market. A second source backed this up, saying his desk had calculated $31 billion in sales. The busiest day by dollar amount was on Feb. 18 of this year, he said.

Sources could not pin the wealth of new deals on anything specific. One said it was "just a good day to get stuff done."

Another cited the number of large deals, which likely urged others into the market.

A syndicate source who worked on both the Newmont Mining and Shell International sales said "they were both planning to issue today."

It didn't have a lot to do with other issuers in the market, he added.

"Today was a good day," he said.

A source who worked on some of the sales as a co-manager said it was "more of the same," in terms of why companies came into the market.

"Once you get some of those $5 billion deals [announced], everyone wants in," he said, specifically citing the large deal from Citigroup and Citibank.

Avista offers mortgage bonds

Utility company Avista priced $250 million 5.125% first mortgage bonds due 2022 by early afternoon at Treasuries plus 170 bps.

J.P. Morgan Securities and UBS Investment Bank ran the books.

Proceeds will be used to retire variable-rate short-term borrowings outstanding under a $320 million credit facility maturing in April, 2011, and for general corporate purposes.

The issuer is based in Spokane, Wash.

Rentenbank prices overnight

Rentenbank sold $2.25 billion 1.875% three-year senior notes that are backed by the German government, according to an FWP filing with the Securities and Exchange Commission.

They priced at 99.791. The spread and yield were not available.

The deal went overnight after being announced late Monday, a source close to the sale said.

J.P. Morgan Securities, Morgan Stanley and RBC Capital Markets were bookrunners.

Proceeds are being used to finance lending.

The bank provides financing to the agriculture and food industry in Germany, and is based in Frankfurt.

Toll sells split-rated notes

Toll Brothers Finance sold $250 million of 6.75% 10-year split-rated notes (Ba1/BBB-/BBB-) at 99.84 to yield 6¾%, a market source on the high-yield side said.

The yield was printed at the tight end of the 6 7/8% area price talk.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities. The offering came off the investment-grade desk.

The credit and lending service for builder Toll Brothers Inc. is based in Huntingdon Valley, Pa.

Existing EnCana, Shell paper seen wider

While no immediate trading was seen in the new issues, a market source did see Cenovus parent EnCana's existing bonds somewhat wider in the face of the company's big new multi-part mega-deal. The Calgary, Alta.-based energy exploration and production company's EnCana Holdings Finance 5.80% notes due 2014 were seen having widened out nearly 20 bps, to about the 180 bps over level.

A market source meantime saw Shell International Finance's outstanding 6.375% notes due 2038 widen about 10 bps to the 101 bps level, in fairly active dealings.

Most existing Citi issues tighter

On the other hand, several existing Citigroup issues were seen having tightened up even as the New York-based banking giant was bringing its big new deal to market.

One of the most active was Citi's 6.375% notes due 2014; a market source saw those bonds having tightened about 10 bps on the session to 305 bps, with almost $90 million of the bonds having changed hands as of mid-afternoon.

Citi's 8.50% notes due 2019 were quoted at 318 bps over, in by about 5 bps to 10 bps, with nearly $65 million of the bonds traded at mid-afternoon.

However, Citi's 5% notes due 2014 were seen having widened out to levels as wide as 375 bps, about a 35 bps widening on the day.

Bank, brokerage CDS costs tighten up

A trader who follows the credit default swaps market said that the cost of protecting holders of big-bank debt against a possible event of default were between 3 bps and 15 bps tighter on Tuesday, after having been unchanged to 5 bps tighter on Monday.

He said that Citigroup's CDS cost was 15 bps tighter, down to 200 bps bid, 210 bps offered.

The trader said the CDS costs for major brokerage company paper were 5 bps to 10 bps tighter on Tuesday, versus unchanged to 5 bps tighter on Monday.

He said that Morgan Stanley's CDS cost was 10 bps tighter at 145 bps bid, 155 bps offered.

© 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.