Corning sells upsized deal in otherwise quiet primary; banks widen; Goldman leads weakness

By Andrea Heisinger and Cristal Cody

New York, Feb. 15 - After peaking the day before, issuance in the investment-grade bond market cooled on Wednesday with one sale from Corning Inc.

The New York-based maker of glass products sold $750 million of bonds after adding a 25-year tranche to the original single-tranche, 30-year deal.

There was also a $250 million sale of $25-par preferred stock from National Retail Properties Inc.

The day's small amount of issuance was in stark contrast with the more than $6.2 billion in corporate high-grade bonds priced on Tuesday.

Sources said they were surprised by how quiet the primary was following the strong showing in the market the previous day.

"It was a weird day," one syndicate source said. "Things were fine in the morning."

Another source said they "have no clue" why more companies didn't tap the market for the day.

"We didn't even have anyone looking who decided to hold off," the second source said. "Maybe we'll have more tomorrow."

The week's deals so far haven't hit the $10 billion minimum issuance prediction.

New issues traded mostly better, but bonds overall stayed wider in the secondary market on Wednesday, sources said.

The Markit CDX Series 17 North American high-grade index eased 3 basis points to a spread of 101 bps.

"It was kind of in spurts today," a trader said of activity, noting "light flows this week. Today definitely was a weaker day."

Rock-Tenn Co.'s two tranches of bonds sold the previous day continue to trade more than 20 bps tighter.

Deals from Total Capital International and Toyota Motor Credit Corp. stayed firmer.

Macquarie Bank Ltd.'s notes traded about 15 bps tighter on Wednesday, while the bank and financial sector moved out 5 bps to 30 bps, traders said.

Goldman Sachs Group Inc.'s 5.75% notes due 2022 were seen widening out 30 bps on the day to 355 bps bid, 345 bps offered, a trader said. Goldman sold the issue on Jan. 19 at a spread of 380 bps over Treasuries.

Investment-grade bank and brokerage credit default swaps costs were higher on Wednesday, a source said.

Bank paper CDS costs were seen 4 bps to 15 bps higher. Bank of America's CDS costs were quoted at 290 bps bid, 300 bps offered. JPMorgan's CDS costs traded at 127 bps bid, 134 bps offered.

Brokerage paper CDS costs also moved higher. Goldman Sachs' CDS costs rose 18 bps to 273 bps bid, 283 bps offered. Merrill Lynch's CDS costs traded 20 bps higher at 315 bps bid, 335 bps offered. Morgan Stanley's CDS costs were quoted 30 bps higher going out at 320 bps bid, 330 bps offered.

Treasuries ended mostly unchanged. The 10-year note yield fell 1 bp to 1.93%. The 30-year bond yield was flat at 3.09%.

Corning upsizes, adds tranche

Corning sold an upsized $750 million of bonds (A3/BBB+/A-) in two tranches, an informed source said.

A $250 million tranche of 4.7% 25-year paper was added to the deal. The notes priced at a spread of Treasuries plus 165 bps. This was at the tight end of talk in the 170 bps area.

There was also the original $500 million of 4.75% 30-year bonds that priced at 170 bps over Treasuries. The notes were sold at tight end of guidance in the 175 bps area.

The deal saw "upwards of $3.5 billion" in demand, the informed source said. Prior to the addition of the 25-year notes, there was about $3 billion on the books for the 30-year bonds.

The company opted to add the tranche of 25-year paper because Corning didn't need $750 million of funding all in the 30-year maturity, the source said.

"They didn't need to do that much, but did because the market was good," they said.

J.P. Morgan Securities LLC and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be used for general corporate purposes.

Corning last priced debt in a $700 million sale of notes in 10- and 30-year maturities on Aug. 3, 2010. The 5.75% 30-year notes were priced at 175 bps over Treasuries.

In the secondary market, the tranche of bonds due 2037 firmed about 2 bps to 163 bps bid, 156 bps offered, a trader said.

Corning's 30-year bonds also traded 2 bps tighter at 168 bps bid, 162 bps offered.

The global glass and display technology company is based in Corning, N.Y.

National Retail's preferreds

National Retail Properties priced an upsized offering of 6.625% $25-par series D cumulative redeemable preferred stock, according to a press release.

The deal was increased to $250 million, or 10 million shares, from $125 million, or 5 million shares. The issue came at the low end of price talk.

The preferred shares will be issued as a 1/100th of an interest in the newly designated perpetual preferreds, the company said the press release.

Underwriters will have an over-allotment option of 1.5 million preferred shares.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Wells Fargo Securities and RBC Capital Markets LLC were the bookrunners.

Proceeds will be used by the Orlando, Fla.-based real estate investment trust for the redemption of the company's series C preferreds and for general corporate purposes, which may include paying down debt under a credit facility.

Rock-Tenn stronger

Rock-Tenn's split-rated senior notes (Ba1/BBB-/) sold in a $750 million two-tranche offering the previous day stayed stronger in the secondary market, a trader said on Wednesday.

The 4.45% notes due 2019 were quoted stronger at 290 bps bid, 283 bps offered. The company sold $350 million of the notes at a spread of Treasuries plus 312.5 bps.

Rock-Tenn's 4.9% notes due 2022 also were stronger at 277 bps bid, 270 bps offered. The notes priced at 300 bps over Treasuries.

The paper and packaging manufacturer is based in Norcross, Ga.

Toyota Credit better

Toyota Motor Credit's 1% notes due 2015 traded about 2 bps better at 65 bps bid, 60 bps offered, a trader said on Wednesday.

Toyota Motor Credit sold $1.25 billion of the three-year notes (Aa3/AA-/) at 67 bps over Treasuries on Tuesday.

The U.S. funding arm of Toyota is based in Torrance, Calif.

Total Capital holds in

Total Capital International's $2 billion of guaranteed notes (Aa1/AA-/AA) sold in two tranches the previous day traded 1 bp to 4 bps better, a trader said on Wednesday.

The 1.5% notes due 2017, priced in a $1 billion offering at a spread of Treasuries plus 78 bps, firmed to 74 bps bid, 70 bps offered.

The 2.875% 10-year notes were quoted going out at 94 bps bid, 90 bps offered. Total Capital sold the tranche at 95 bps over Treasuries.

The oil and gas company is based in Courbevoie, France.

Macquarie Bank edges tighter

Macquarie Bank's 5% notes due 2017 (A1/A/A+) held tighter at 405 bps bid, 400 bps offered on Wednesday, a trader said.

The bank sold $700 million of the notes on Tuesday at a spread of Treasuries plus 420 bps.

The banking unit of Macquarie Group Ltd. is based in Sydney, Australia.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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