Lowe's prices three-tranche deal, bonds mostly flat; Citi unchanged, Morgan Stanley eases

By Andrea Heisinger and Cristal Cody

New York, April 16 - Lowe's Cos. Inc. sold bonds in the high-grade market Monday as others sat out amid continued first-quarter earnings announcements and negative headlines about Spain's debt.

Lowe's priced $2 billion of paper in tranches due 2017, 2022 and 2042. The deal was nearly four times oversubscribed.

Terms also were given for a reopening of floating-rate notes from the Province of Ontario that priced on Friday.

The week got off to a mixed start as Citigroup Inc. announced Q1 earnings that beat analyst expectations. The banking giant reported revenue of $19.4 billion, or $1.11 per share, which was up slightly from the same quarter in 2011.

The tone was hurt, however, by yields on Spain's bonds rising amid fears about its debt.

Lowe's was not afraid to price bonds despite the news on Spain, a source who worked on the deal said. The offering was announced early in the morning.

There's expected to be light issuance for the week - a continuation of the slow month of April.

"We have one for sure tomorrow," a syndicate source said. "Should be a couple out there. Nothing major."

Investment-grade bonds were mostly unchanged on Monday. The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 101 bps.

"It's been kind of trading all over, but nothing's very active," a trader said.

Lowe's new bonds were seen trading tighter in the gray market.

John Deere Capital Corp.'s notes (A2/A/) sold the previous week firmed about 1 bp.

Bank and financial paper was mostly unchanged to weaker.

Citigroup Inc.'s notes traded flat, while Morgan Stanley's notes eased 5 bps.

Investment-grade bank and brokerage credit default swaps costs were higher on the day on Monday.

Banks widened. Bank of America's CDS costs eased 5 bps to 270 bps bid, 280 bps offered. Citi's CDS costs traded 5 bps weaker to 245 bps bid, 250 bps offered.

Brokers also were wider. Merrill Lynch's CDS costs rose 5 bps to 290 bps bid, 305 bps offered.

Morgan Stanley's CDS costs traded 5 bps wider at 370 bps bid, 380 bps offered. Goldman Sachs' CDS costs were unchanged at 270 bps bid, 280 bps offered.

Treasuries ended unchanged. The 10-year note yield closed flat at 1.98%, while the 30-year bond yield was unchanged at 3.13%.

Lowe's sells to large demand

Lowe's sold $2 billion of senior notes (A3/A-/BBB+) in three parts, a source close to the trade said.

There was about $7.75 billion on the books for the trade and the company "had no problem getting it done," the source added.

The $500 million of 1.625% five-year paper sold at a spread of Treasuries plus 80 bps. The five-year notes were priced in line with whispered guidance of 30 bps below the spread of the 10-year tranche.

A second tranche of $750 million in 3.12% 10-year notes priced at 115 bps over Treasuries. The paper sold below talk in the 125 bps area.

The third part was $750 million of 4.65% 30-year bonds sold at Treasuries plus 155 bps. The bonds were sold in line with price talk of 40 bps more than the 10-year spread.

Goldman Sachs & Co., U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were bookrunners.

The proceeds are being used for general corporate purposes, including repurchase of common stock shares, acquisitions, capital expenditures and working capital needs.

Lowe's was last in the market with a $1 billion deal of 10- and 30-year notes on Nov. 16, 2011. The 3.8% 10-year paper sold at 180 bps over Treasuries while the 5.125% 30-year bonds priced at 210 bps over Treasuries.

Lowe's new notes due 2022 were quoted 5 bps better in the gray market at 110 bps bid, 105 bps offered, a trader said.

The home improvement retailer is based in Mooresville, N.C.

Ontario gives floaters terms

The Province of Ontario reopened its issue of medium-term floaters due in April of 2015 to add $100 million, according to an FWP filing with the Securities and Exchange Commission.

The notes (Aa1/AA-/) were sold at par plus accrued and unpaid interest with a coupon of Libor plus 15 bps.

Total issuance is $450 million, including $350 million issued on Feb. 29.

Goldman Sachs International was bookrunner.

The issuer is based in Toronto.

John Deere tighter

John Deere Capital's 2.25% notes due 2019 traded at 80 bps bid, 77 bps offered Monday afternoon, according to a trader.

The $500 million offering of seven-year paper priced at Treasuries plus 87 bps as part of a two-tranche deal on Thursday.

The funding arm of agricultural and industrial equipment maker and distributor John Deere is based in Moline, Ill.

Citi unchanged

Citigroup's notes traded unchanged on Monday after it released its first-quarter earnings report.

The 4.5% notes due 2022 (A3/A-/A+) were flat at 260 bps bid, 250 bps offered, a trader said.

Citi sold $250 million in an add-on Dec. 7 at a spread of Treasuries plus 290 bps. The issue originally priced Oct. 25 in a $1 billion offering.

The financial services company is based in New York City.

Morgan Stanley lower

Morgan Stanley's 5.5% notes due 2021 traded about 5 bps wider on the day to 420 bps bid, 410 bps offered, a trader said on Monday.

The notes were quoted on Friday at 415 bps bid, 400 bps offered.

Morgan Stanley sold $1 billion of the notes (A2/A/A) on Oct. 27 at a spread of 335 bps over Treasuries.

The investment bank is based in New York.

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