Discovery, Union Pacific, Rabobank among day's trades; spreads mostly flat; Union Pacific firms

By Aleesia Forni and Andrea Heisinger

New York, March 12 - The flow of new high-grade bonds slowed slightly on Tuesday, with Union Pacific Corp., the Netherlands' Rabobank, Georgia Power Co. and Discovery Communications, LLC among those tapping the market.

Discovery Communications priced $1.2 billion of senior notes due 2023 and 2043.

Georgia Power priced an upsized $650 million of notes in two parts. There was a three-year floating-rate tranche and a 30-year bond. The size was increased from $450 million.

The utility saw high demand for its bonds, with about $1.6 billion on the books for the 30-year bond and about $1 billion for the floaters, a source close to the sale said.

Omaha-based Union Pacific sold $650 million of paper, split evenly between 10-year notes and 30-year bonds. The books were more than two times oversubscribed, with about $1.2 billion of demand on the 10-year notes and $1 billion for the 30-year bonds, an informed source said.

Financial services company Rabobank priced $2.5 billion of notes. The sale included three-year floaters and five-year notes.

There was a $250 million offering of 10-year senior notes from Duke Realty LP.

A $1.75 billion offering of five-year notes was priced early in the day from Bank Nederlandse Gemeenten. The trade went overnight after being announced on Monday.

Germany's FMS Wertmanagement is planning a $2 billion sale of bonds with a three year maturity for Wednesday pricing.

The preferred stock primary market was buzzing on Tuesday with two new sales announced. Astoria Financial Corp. and PPL Capital Funding, Inc. each launched offerings.

The appetite for high-grade bonds hasn't slowed, as shown by the oversubscribed books for Union Pacific and Georgia Power.

A market source said, "There's no shortage of interest" in people buying the bonds.

"We've done a lot of reverse inquiry and that's why you're seeing maybe a long bond with a short bond," he added.

Wednesday should see more issuers from the industrial space, a syndicate source said, along with "a couple of other small ones."

Spreads in the investment-grade secondary market were "generally unchanged, maybe a little wider" on Tuesday, one market source said during the session.

The Markit CDX Series 18 North American Investment Grade index was unchanged to a spread of 80 bps.

The new issue from Union Pacific traded 2 bps to 3 bps better following the deal's pricing, a trader said.

In other trading, Monday's new issue from Virginia Electric & Power Co. continued to trade better on the day.

Union Pacific's two notes

Union Pacific priced an upsized $650 million of bonds (Baa1/A-/) in two maturities, an informed source said.

A $325 million tranche of 2.75% 10-year notes sold at a spread of Treasuries plus 80 bps. Whispered guidance was in the 90 bps area.

The notes were quoted 2 bps better at 78 bps bid near the end of the session.

The $325 million tranche of 4.25% 30-year bonds priced at 110 bps over Treasuries. The bonds were talked in the 115 bps area.

A trader quoted the notes at 107 bps bid later during the day.

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

Proceeds are being used for general corporate purposes, including common stock share repurchase.

Union Pacific was last in the U.S. bond market with a $600 million sale of notes due 2023 and 2042 on June 6, 2012. The 2.95% long 10-year notes sold at 130 basis points over Treasuries while the 4.3% 30-year bonds were priced at 158 bps over Treasuries.

The railroad transportation company is based in Omaha.

Georgia Power upsizes

Georgia Power priced an upsized $650 million of senior notes (A3/A/A+) in two parts, a market source said.

There was an upsized $250 million tranche of three-year floating-rate notes sold at par to yield Libor plus 32 bps. The size was initially $150 million.

A $400 million tranche of 4.3% 30-year bonds sold at a spread of Treasuries plus 110 bps. The tranche size was increased from $300 million. Pricing was at the tight end of talk in the 115 bps area, plus or minus 5 bps.

Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and UBS Securities LLC were bookrunners for the fixed-rate tranche. Barclays, BofA, Citigroup and J.P. Morgan ran the books on the floating-rate tranche.

Proceeds are being used to repay $350 million of series 2010A floating-rate senior notes due March 15, to repay a portion of outstanding short-term debt totaling about $382 million and for general corporate purposes.

The electric utility is based in Atlanta.

Duke's $250 million sale

Duke Realty priced $250 million of 3.625% 10-year senior notes (Baa2/BBB-/) at Treasuries plus 170 bps, a source close to the trade said.

Bookrunners were Barclays, J.P. Morgan Securities LLC, RBC Capital Markets LLC and Wells Fargo Securities LLC.

Proceeds are being used to repay outstanding debt with near-term maturities, including all or a portion under an existing revolving credit facility, and for general corporate purposes.

The real estate investment trust is based in Indianapolis.

Discovery prices two parts

Discovery Communications was in the market with a $1.2 billion sale of senior notes (Baa2/BBB/BBB) in two parts, a market source said.

A $350 million tranche of 3.25%10-year notes priced at a spread of Treasuries plus 125 bps.

There was also $850 million of 4.875% 30-year bonds sold at a spread of 165 bps over Treasuries.

BofA Merrill Lynch, Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC were active bookrunners. Passives were Citigroup Global Markets Inc. and RBS Securities Inc.

Proceeds are being used for general corporate purposes.

The sale is guaranteed by Discovery Communications, Inc.

Discovery was last in the bond market with a $1 billion sale of bonds in two parts on May 10, 2012. That trade included a 3.3% 10-year note priced at 155 basis points over Treasuries and a 4.95% 30-year bond sold at 195 bps over Treasuries.

The global media company is based in Silver Spring, Maryland.

Rabobank's $2.5 billion

Rabobank Nederland priced $2.5 billion of bonds (Aa2/AA-/) in two maturities through its New York branch, a source away from the trade said.

There was $1 billion of three-year floating-rate notes sold at par to yield Libor plus 48 bps.

A $1.5 billion tranche of 1.7% five-year notes sold at a spread of Treasuries plus 88 bps. The notes sold at the low end of guidance in the 90 bps area.

BofA Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC were bookrunners.

The financial services company is based in Utrecht, the Netherlands.

BNG sells five-years

Bank Nederlandse Gemeenten sold $1.75 billion of 1.375% five-year notes (Aaa/AAA/AAA) at mid-swaps plus 37 bps, or Treasuries plus 52 bps, an informed source said.

Initial price guidance was in the mid-swaps plus high 30 bps area, the source said late Monday before the sale went overnight.

The size, while announced at a minimum of $500 million was expected to be "$1 billion plus," the source added.

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

Bookrunners were Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and RBC Capital Markets LLC.

The local government funding agency is based in The Hague, the Netherlands.

FMS preps offering

FMS Wertmanagement is expected to price a $2 billion sale of three-year notes (Aaa/AAA/AAA) on Wednesday, an informed source said.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC are bookrunners.

Proceeds are being used to refinance existing liabilities, to replace short-term with long-term funding and for general corporate purposes.

The sale is guaranteed by the Federal Republic of Germany.

The financial services company is based in Munich.

GE details reopening

General Electric Capital Corp. reopened an issue of 3.1% notes due Jan. 9, 2023 to add $200 million, according to an FWP with the Securities and Exchange Commission.

Pricing was at a spread of Treasuries plus 131 bps.

Total issuance is $2.3 billion, including $2.1 billion sold in two previous offerings.

Bookrunner was RBS Securities Inc.

The funding arm of General Electric Co. is based in Norwalk, Conn.

Astoria's preferreds

Astoria Financial has launched an offering of at least $125 million series C noncumulative perpetual preferred stock, according to a prospectus filed with the SEC.

The preferreds will be issued as depositary shares representing a 1/40th interest. Price talk is around 6.5%, according to a trader.

Barclays Capital, Raymond James & Associates Inc. and RBC Capital Markets LLC are the joint bookrunning managers.

The preferreds can be redeemed in whole or in part on or after April 15, 2018 at par plus accrued dividends. The shares can also be redeemed in whole at any time in the event of a regulatory capital treatment event.

Astoria Financial intends to list the new preferreds on the New York Stock Exchange under the ticker symbol "AFPC."

Proceeds will be used for general corporate purposes, including a potential redemption of 9.75% junior subordinated debentures due 2029, as well as investments made at the holding company level.

Astoria Financial is a Lake Success, N.Y.-based banking institution.

PPL sells $25-pars

PPL priced $400 million of 5.9% $25-par 2013 series B junior subordinated notes due April 30, 2073, a market sure reported on Tuesday.

The notes will be fully and unconditionally guaranteed by PPL Corp.

BofA Merrill Lynch, Citigroup Global Markets Inc., Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers.

Interest will be paid on the 30th day of January, April, July and October, beginning July 30. The company can defer payments for up to 10 consecutive years, but in doing so, the interest rate will compound.

The notes become redeemable on or after April 30, 2018 at par plus accrued. The company can call the issue prior to that date within 90 days of a tax event, also at par plus accrued.

Upon the occurrence of a rating agency event, the notes can also be called prior to the call date in whole at 102% of par plus accrued.

Or, the company can choose to call the issue at any time at par plus a make-whole premium.

Proceeds will be used to fund capital expenditures and for general corporate purposes.

PPL is an Allentown, Pa.-based energy company.

Vepco notes firm

One market source saw Virginia Electric's new notes trading 1 bp better at 70 bps bid, 67 bps offered on Tuesday.

Virginia Electric & Power was in Monday's session with a $500 million sale of 2.75% 10-year senior notes priced at 73 bps over Treasuries.

The electric utility is based in Richmond, Va.

Stephanie N. Rotondo contributed to this review

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