Primary sees Unilever, Telefonica price; issuance light for week; new bonds firm; volume off

By Andrea Heisinger and Cristal Cody

New York, Feb. 7 - Unilever Capital Corp. and Telefonica Emisiones SAU sold bonds on an unexciting Monday in the high-grade bond market.

Though there were only two new deals, they were both large.

Spain's Telefonica sold a well-oversubscribed $2.75 billion of bonds in two tranches. The size was increased from $2 billion, and both the five-year and 10-year maturities priced at the lowest end of guidance.

Consumer products company Unilever sold $1.5 billion, also with five-year and 10-year maturities. Both priced at the tight end of price talk.

The appetite for high-grade paper is still there based on investors clamoring for the day's two sales. The new-issue calendar for the rest of the week isn't large, so those wanting to buy decided to get in on these, a source said.

"They like Unilever because they recognize it," she said. "Telefonica [was popular] because of the yield."

Issuance isn't expected to top $15 billion for the week, a syndicate source said, and $4.25 billion of that already priced.

"We have maybe a couple of deals coming up in the next couple of days," the syndicate source said.

Trading was light on Monday. Overall investment-grade Trace volume fell to about $11 billion on Monday after a 30% drop to less than $13 billion on Friday, sources said.

In the secondary market, Unilever Capital's tranches of notes due 2016 and 2021 firmed, sources said.

The Markit CDX Series 14 North American investment-grade index was 2 basis points tighter at a spread of 80 bps on Monday, according to Markit Group Ltd.

Treasuries regained some losses to end mostly flat, with the long end of the curve rallying. The 30-year bond yield fell 3 bps to 4.7%. The 10-year Treasury note yield was flat at 3.63%.

Telefonica sells $2.75 billion

Telefonica Emisiones priced an upsized $2.75 billion of notes (Baa1/A-/A-) in two tranches, a source close to the sale said late in the day.

The deal size had originally been planned by the company at $2 billion, the source said, but it was "upsized due to outrageous demand."

The deal ended up with about $10.5 billion on the books, the source said.

A $1.25 billion tranche of 3.992% five-year notes priced at par to yield 3.992% with a spread of Treasuries plus 173 bps. The tranche sold at the tight end of price guidance of 175 bps with a margin of plus or minus 2 bps.

The second part was $1.5 billion of 5.462% 10-year notes priced at par to yield 5.462% with a 183 bps over Treasuries spread. These notes also priced at the tight end of guidance in the 185 bps area, plus or minus 2 bps.

Citigroup Global Markets Inc. and Goldman Sachs & Co. were active bookrunners. HSBC Securities (USA) Inc. was a passive bookrunner.

Proceeds are being used by guarantor Telefonica SA for general corporate purposes.

The communications group is based in Madrid.

Unilever unit's deal

Unilever Capital sold $1.5 billion of senior notes (A1/A+/A+) in two parts ahead of the market close, an informed source said.

There was "plenty of demand" for the deal that had a do-not-grow provision, the source said. The source declined to say how much was on the books.

The $500 million of 2.75% five-year notes priced at a spread of Treasuries plus 50 bps. The tranche came in at the low end of guidance in the 50 bps to 53 bps range, a source said.

A tranche of $1 billion of 4.25% 10-year notes priced at 65 bps over Treasuries. The notes also priced at the tight end of guidance in the 65 bps to 68 bps range.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and UBS Securities LLC were the bookrunners.

Proceeds are being used for general corporate purposes.

The sale is guaranteed by Unilever NV, Unilever plc and Unilever United States, Inc.

In the secondary market, the notes due 2016 were quoted 5 bps tighter on the offer side at 45 bps, a source said. Closing out the day, the notes traded at 49 bps bid, 45 bps offered, another source said.

The tranche of notes due 2021 also traded 5 bps stronger at 60 bps offered. In the late afternoon, another trader saw the notes at 64 bps bid, 61 bps offered.

The multi-national company for consumer products is based in Englewood Cliffs, N.J.

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