Mylan, Methanex, American Water, Brandywine price ahead of FOMC; secondary spreads flat

By Aleesia Forni and Andrea Heisinger

New York, Dec. 12 - Sales were muted in the high-grade bond market on Wednesday ahead of an announcement at the conclusion of a two-day Federal Reserve meeting.

American Water Capital Corp., Mylan Inc., Methanex Corp. and Brandywine Operating Partnership, LP all were in the primary pricing bonds.

TCF Financial Corp. priced $100 million of perpetual preferred stock.

The Federal Open Market Committee ended its two-day meeting with no change to interest rates but announced a plan on how to deal with stagnant unemployment numbers.

All of the day's sales were less than $1 billion.

American Water Capital sold $300 million of 30-year senior notes to finance debt redemption and repayment.

Pharmaceutical company Mylan priced an upsized $750 million of 10-year notes via Rule 144A and Regulation S.

Real estate investment trust Brandywine priced $250 million of 10-year guaranteed notes.

There was a split-rated sale from Canada's Methanex, which sold $350 million of seven-year senior notes. The sale, done off the high-grade syndicate desk, was increased in size from $300 million.

The Fed announced that it would continue with its third round of quantitative easing, known as QE3, and keep interest rates near zero until the unemployment rate drops to 6.5% or lower from its current 7.7% level. There is a caveat if inflation rises above 2.5%.

There wasn't much reaction to the Fed announcement in the high-grade market, as nearly all of the day's trades were over or close to being priced by the time it was made.

"We didn't see much change," a source who worked on a couple of the day's offerings said. "It was nothing unexpected," she added, referring to the Fed's actions.

"Everyone priced early, or were nearly done."

Thursday should see another small crop of offerings, including one "benchmark [size] non-financial," one market source said.

The Markit CDX Series 18 North American Investment Grade index was unchanged at a spread of 93 bps on Wednesday.

Trading in the secondary market was muted on Wednesday due in part to the FOMC meeting.

"Things are just slowed down today, it feels like," one market source said during the session.

Methanex's new notes were trading 10 bps tighter near the end of the session.

In recent deals, Bank of Nova Scotia's $1 billion of 1.375% five-year senior notes was quoted 5 bps better.

One trader quoted Highwoods Realty LP's $250 million of 3.625% notes due 2023 flat at 210 bps bid.

Bank paper from JPMorgan and Citigroup traded better on Wednesday.

Both JPMorgan's 6.3% notes due 2019 and Citigroup's 6.375% notes due 2014 closed the session 4 bps better, respectively.

Bank of America's 7.375% notes due 2014 were 2 bps wider at the end of the day's trading.

Mylan upsizes

Mylan priced an upsized $750 million of 3.125% 10-year notes to yield Treasuries plus 145 bps, an informed source said.

The notes (Baa3/BBB/) were sold tighter than initial price talk in the 162.5 bps area and at the low end of revised guidance in the 150 bps area, plus or minus 5 bps. The size was increased from $500 million due to demand of nearly $4 billion on the books, the source said.

The sale was done via Rule 144A and Regulation S.

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

The generic and specialty pharmaceutical company is based in Canonsburg, Pa.

Brandywine sells $250 million

Brandywine Operating Partnership priced $250 million of 3.95% 10-year notes (Baa3/BBB-/) at a spread of 235 bps over Treasuries, a source away from the trade said.

The notes sold in line with guidance in the 225 bps to 237.5 bps range, the source said.

Bookrunners were Bank of America Merrill Lynch, JPMorgan and RBS Securities Inc.

Proceeds will be used for general corporate purposes and the repayment, repurchase or other retirement of existing debt, including outstanding funded unsecured bank term loans, mortgage loans and other unsecured debt.

The notes are guaranteed by Brandywine Realty Trust.

Brandywine was last in the straight bond market with a $325 million sale of 4.95% notes due 2018 on March 30, 2011.

The real estate investment trust for office and industrial properties is based in Radnor, Pa.

Methanex prices tight

Methanex priced an upsized $350 million of 3.25% seven-year split-rated senior notes (Ba1/BBB-/BBB-) to yield Treasuries plus 230 bps, a market source said.

The size of the sale was increased from $300 million. Pricing was at the low end of price guidance that was in the 235 bps area.

The notes were trading at 220 bps bid, 210 bps offered at the end of the session.

JPMorgan and RBC Capital Markets LLC were the active bookrunners.

Proceeds will be used for capital expenditures and any one or more debt repayments, for working capital and for other general corporate purposes.

The worldwide methanol supplier is based in Vancouver, B.C.

American Water taps market

American Water Capital was in the market with a $300 million sale of 30-year senior notes (Baa2/BBB+/) priced at 142 bps over Treasuries, a market source said.

There was a do-not-grow provision on the sale, a source said. Initial price talk was in the 160 bps area.

Bookrunners were Bank of America Merrill Lynch, Goldman Sachs & Co. and RBS Securities.

Proceeds will be used to finance some redemptions of long-term debt and to fund repayment of short-term debt.

The investor-owned water and wastewater utility is based in Voorhees, N.J.

TCF's preferreds price

TCF Financial priced $100 million of 6.45% series B noncumulative perpetual preferred stock, according to market sources.

The size of the sale was increased from a minimum of $75 million. Pricing was inside of talk in the 6.5% area, a trader said.

"It's doing well," the trader said, seeing paper trading around $24.85 in the midday gray market.

After pricing, he saw the paper offered at $24.85.

After the market closed, a source saw the issue at $24.70 bid, $24.80 offered.

The source noted that Fitch Ratings had applied a rating to the new securities, but that Moody's Investors Service and Standard & Poor's had not.

Joint bookrunners are Morgan Stanley & Co. Inc. and UBS Securities.

Proceeds will be used for general corporate purposes.

TCF Financial is based in Wayzata, Minn.

Scotiabank firms

The Bank of Nova Scotia's $1 billion of 1.375% five-year senior notes was trading at 72 bps bid, 70 bps offered near the end of the session.

The notes were priced to yield Treasuries plus 77 bps on Tuesday.

The financial services company is based in Toronto.

Highwoods flat

Highwoods Realty's $250 million of 3.625% notes due 2023 were quoted flat at 210 bps bid, 200 bps offered.

The notes sold on Tuesday to yield Treasuries plus 210 bps.

The real estate investment trust is based in Raleigh, N.C.

Bank of America wider

In other trading, Bank of America's 7.375% notes due 2014 weakened 2 bps to 110 bps bid during the session.

The bank priced $3 billion of the notes due 2014 at Treasuries plus 537.5 bps on May 8, 2009.

JPMorgan firms

The secondary also saw the $3 billion 6.3% issue from JPMorgan due 2019 tighten 4 bps to 65 bps bid.

JPMorgan priced the 10-year bonds on April 16, 2009 at 305 bps over Treasuries.

Citi tightens

Citigroup's 6.375% notes due 2014 firmed 4 bps to 107 bps bid.

The bank priced $2.5 billion five-year notes at Treasuries plus 380 bps on Aug. 5, 2009.

Stephanie N. Rotondo and Cristal Cody contributed to this review

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