Aristotle brings second large deal; Kimberly-Clark, bank reopenings price; bank paper firms

By Andrea Heisinger and Cristal Cody

New York, Feb. 6 - Aristotle Holding, Inc. brought its second bond sale to the high-grade market on Monday, only a couple of months after pricing $4.1 billion of paper in a four-tranche deal to fund a merger.

The new $3.5 billion offering was sold late in the day in three parts and the proceeds are again going toward the cost of the merger with Medco Health Solutions, Inc.

The sale is going toward Express Scripts, Inc. and Medco becoming subsidiaries of Aristotle. Both Express Scripts and Medco were in the news on Monday as it was reported that the Federal Trade Commission antitrust regulators were investigating whether it had enough evidence to block the merger.

The Food Marketing Institute wrote a letter to the FTC asking them to block the deal. Stock shares of Medco and Express Scripts both saw their prices drop on the news.

"There was about $13 billion in demand [on the books] so not a lot of concerns out there," a source away from the trade said. "There weren't any drops. [The news] wasn't anything new."

Kimberly-Clark Corp. brought a $300 million sale of 10-year senior notes to the market and the deal priced by early afternoon.

Deutsche Bank AG, London branch reopened its issue of 3.25% notes due in 2016 to add an upsized $800 million. The deal was increased from $700 million and the total amount outstanding will be $2.1 billion.

There was another reopening from a financial name as the National Bank of Canada priced a $600 million retap of 2.2% covered bonds due in 2016. They were priced via Rule 144A and Regulation S.

The day showed that despite some headlines about Greece over the weekend and at the open, companies and investors are able to look past that news.

"I had all of these e-mails in my inbox this morning about Greece this, or Greece that, and I think we had a few sit on the sidelines because of that," a syndicate source said. "We were still busy, though."

Tuesday is expected to be "an active day" with at least a couple of deals on tap, sources said.

Investment-grade bonds traded mostly flat in light activity. The Markit CDX Series 17 North American investment-grade index eased 1 basis point to a spread of 95 bps.

"Felt like a Sunday today," one trader said.

Several sources attributed the quiet day to the aftermath of the Super Bowl, which aired the previous night.

"Very light," one trader said.

Overall trading volume was flat at about $13.5 billion on Monday.

Kimberly-Clark's notes due 2022 traded 4 bps tighter in trading.

Bank and financial paper traded about 5 bps better over the day.

Deutsche Bank's reopened issue traded more than 10 bps tighter.

National Bank of Canada's bonds firmed 2 bps.

Bank of America Corp.'s 5.7% notes due 2022 that were sold last month traded about 5 bps better.

Investment-grade bank and brokerage credit default swaps costs traded lower on Monday.

Bank of America's CDS costs fell 5 bps to 240 bps bid, 245 bps offered. The CDS costs for Citi traded 3 bps lower at 195 bps bid, 200 bps offered. J.P. Morgan's CDS costs ended 3 bps lower at 103 bps bid, 108 bps offered.

On the brokerage side, Goldman Sachs' CDS costs were flat at 201 bps bid, 215 bps offered.

Merrill Lynch's CDS costs traded 5 bps lower at 260 bps bid, 265 bps offered.

Morgan Stanley's CDS costs fell 5 bps to 252 bps bid, 257 bps offered.

Treasuries finished better on renewed concerns that Greece will default on its sovereign debt. The 10-year Treasury note yield fell 2 bps to 1.9%. The 30-year bond yield dropped 3 bps to 3.09%.

Aristotle sells $3.5 billion

Aristotle Holding priced a $3.5 billion deal of bonds (Baa3/BBB+/BBB) in three tranches late in the day, a source who worked on the trade said.

The $1 billion of 2.1% three-year notes priced at a spread of Treasuries plus 195 bps.

There also was a $1.5 billion tranche of 2.65% five-year paper sold at 210 bps over Treasuries.

Finally, there was $1 billion of 3.9% 10-year notes priced at Treasuries plus 225 bps.

The deal was done under Rule 144A and Regulation S.

Bookrunners were Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and RBS Securities Inc.

The proceeds are being used to pay a portion of the cash consideration payable to stock holders of Medco Health Solutions, Inc. in connection with a previously-announced merger where Express Scripts, Inc. and Medco became subsidiaries of Aristotle. The money raised may also be used to repay debt in connection with the merger along with related fees and expenses.

The new notes are guaranteed by Express Scripts and certain of their domestic subsidiaries, certain Aristotle subsidiaries including Medco and its subsidiaries following the merger.

There also is a change-of-control put at 101 if the merger isn't consummated, the source said.

"I think that put probably helped give some investors piece of mind," a market source said of the provision.

Aristotle last priced a $4.1 billion deal of notes in four tranches on Nov. 14, 2011. The 2.75% three-year paper from that offering sold at 240 bps over Treasuries while a 3.5% tranche of five-year notes priced at 260 bps. The 4.75% 10-year tranche from the previous sale sold at 280 bps over Treasuries.

The prescription benefit company is based in St. Louis.

Kimberly-Clark's quick sale

Kimberly-Clark priced $300 million of 2.4% 10-year senior notes (A2/A/A) to yield Treasuries plus 68 bps, a market source said.

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

The proceeds are being used for general corporate purposes, including repayment of $400 million in 5.625% notes due on Feb. 15.

Kimberly-Clark was last in the bond market with a $700 million sale of notes with 10- and 30-year maturities on Jan. 27, 2011. The 3.875% 10-year notes from that sale were sold at 60 bps over Treasuries.

Kimberly-Clark's notes due 2022 firmed in trading to 64 bps bid, 60 bps offered, a trader said.

The consumer paper products company is based in Irving, Texas.

Deutsche Bank reopens

Deutsche Bank AG, London branch reopened its issue of 3.25% notes due in 2016 to add $800 million, a market source away from the deal said.

The deal size was increased from $700 million.

The notes (Aa3/A+/A+) were sold at a spread of Treasuries plus 180 bps.

Total issuance is $2.1 billion, including the original $1 billion deal priced on Jan. 5, 2011 at 130 bps over Treasuries and a $300 million reopening done at 116 bps on Feb. 15, 2011.

Deutsche Bank Securities Inc. ran the books.

The 3.25% notes due 2016 traded better at 174 bps bid, 169 bps offered, a trader said.

The financial services company is based in Frankfurt.

National Bank of Canada retap

National Bank of Canada reopened its issue of 2.2% covered bonds due in October 2016 to add $600 million, a source away from the deal said.

The notes (Aaa/AAA) were priced at a spread of Treasuries plus 67 bps.

Total issuance is $2 billion, including $1.4 billion priced at 104.5 bps over Treasuries on Oct. 12, 2011.

The deal was done under Rule 144A and Regulation S.

Bookrunners were National Bank of Canada Financial, RBC Capital Markets LLC and RBS Securities Inc.

In the secondary market, the bonds firmed to 65 bps bid, 60 bps offered, a trader said.

The financial services company is based in Montreal.

Bank of America firms

Bank of America's 5.7% notes due 2022 firmed 5 bps to 310 bps bid, 300 bps offered, a trader said.

The issue priced on Jan. 24 in a $750 million offering at a spread of 325 bps over Treasuries.

The financial services company is based in Charlotte, N.C.

Paul Deckelman contributed to this review

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