UnitedHealth, Export Development Canada price bonds, Rio Tinto plans sale; UnitedHealth firmer

By Andrea Heisinger and Cristal Cody

New York, Oct. 20 - UnitedHealth Group Inc. and Export Development Canada each sold bonds on Wednesday as the market saw a rocky tone for the third day in a row.

Minnesota-based UnitedHealth sold $750 million of notes in two tranches of long bonds. Both priced in line with price talk.

Export Development Canada priced $1 billion of five-year global bonds that are guaranteed by that country's government.

Rio Tinto Finance USA Ltd. announced it is selling senior notes in conjunction with a tender offer for $2.5 billion in outstanding notes due 2013.

Earnings from large banks continued to falter with Morgan Stanley reporting a net loss of $91 million for the third quarter at the top of the day. The bank had net revenue of $6.78 billion - a decrease from the $8.47 billion from third quarter of 2009. Wells Fargo & Co. was a bright spot, posting a $3.3 billion profit, or 7% increase from the same quarter the previous year when they earned $3.24 billion.

The tone has been dragged down for the week by continuing headlines on foreclosures and somewhat disappointing earnings from big banks. Things didn't change much on Wednesday.

"I would say it wasn't any worse," one source said. "We didn't have much to price but [UnitedHealth] did OK."

Another source said that the market felt "more solid today" despite the consensus across syndicate desks that there's still uncertainty.

New issues in pipeline

The trickle of new bonds is expected to continue on Thursday with another market source saying he knew of "two or three" sales in the pipeline. Other desks reported that they could have some deals but it was dependent on how the market looks at the open.

Overall investment-grade Trace volume was flat on the day at about $13 billion, a source said.

In the secondary market, the new deal from UnitedHealth firmed, according to traders.

The Markit CDX Series 14 North American investment-grade index firmed 2 basis points to a spread of 98 bps, Markit Group Ltd. said.

Treasuries rallied early in the day, but started to drag late afternoon, sending yields rising as the market digested the Federal Reserve's Beige Book data from Fed branches.

The yield on the Treasury's 10-year benchmark note ended the day unchanged at 2.48%. The two-year note yield eased 1 bp to 0.35%. The 30-year bond yield fell 2 bps to 3.89%.

UnitedHealth offers tranches

UnitedHealth Group sold $750 million of senior notes (Baa1/A-/A-) in two tranches by mid-afternoon, a source who worked on the deal said.

The $450 million of 3.875% 10-year notes priced at a spread of 145 bps over Treasuries. This was in line with whispered guidance in the mid-100 bps area, and at the tight end of revised guidance in the 150 bps area, plus or minus 5 bps.

A $300 million tranche of 5.7% 30-year bonds sold at Treasuries plus 185 bps. The notes also priced in line with whispered talk in the high 100 bps, and at the tight end of guidance in the 190 bps area, plus or minus 5 bps.

There was about $4 billion on the books for the sale, leaving in more than four times oversubscribed on a day when there was no competition from other deals in the high-grade corporate market.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds are being added to the company's general funds.

In secondary trading, the notes due 2020 tightened, traders said.

The 10-years were seen at 139 bps bid, 134 bps offered. The bonds due 2040 were 2 bps tighter on the bid side, trading at 178 bps bid, 174 bps offered.

UnitedHealth last priced bonds in a $3 billion sale in four tranches on Feb. 4, 2008. The 6% 10-year notes from that sale priced at Treasuries plus 237.5 bps, or nearly twice the spread of the new issue. A 6.875% 30-year bond from that same offering also priced considerably higher than the new paper with a spread of 262.5 bps over Treasuries.

The health benefits provider is based in Minnetonka, Minn.

Export Development Canada prices $1 billion

Export Development Canada sold $1 billion of 1.25% five-year global bonds on Wednesday to yield Treasuries plus 21.2 basis points, a syndicate source away from the sale said.

They were talked in the area of mid-swaps minus 3 bps, a source said early in the day.

The bonds (Aaa/AAA) priced at 99.85. They are non-callable and guaranteed by the government of Canada.

Bank of America Merrill Lynch, HSBC Securities USA Inc., RBC Capital Markets Corp. and RBS Securities were bookrunners.

Proceeds will be used for general corporate purposes.

The issuer provides funding for the export industry in Canada and is based in Ottawa.

Rio Tinto's planned sale

Rio Tinto Finance USA is planning a senior note sale in connection with a tender offer for some outstanding notes, according to a press release from the company.

The tender offer for $2.5 billion in outstanding 5.875% notes due on July 15, 2013 expires on Oct. 27.

Details and bookrunners for the senior note sale have not been announced, but could be the same as those for the tender offer, which are Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC, BNP Paribas Securities Corp., Credit Agricole Securities (USA) Inc. and HSBC Securities (USA) Inc.

The mining company is based in London and Melbourne, Australia.

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