HSBC, Macquarie join ERP, Total Capital in primary market; Total Capital mixed in secondary

By Aleesia Forni and Cristal Cody

Virginia Beach, June 16 – The high-grade bond market’s week kicked off with issuers including HSBC USA Inc., Macquarie Bank, ERP Operating LP and Total Capital international pricing $7.3 billion of supply.

HSBC USA was in the market with a $2.25 billion offering, and Macquarie Bank priced $1.5 billion of notes in two tranches.

The details of Macquarie Bank’s sale were unavailable at press time.

In other primary action on Monday, ERP Operating brought to market a $1.2 billion two-part new issue, and Total Capital International priced a $2.25 billion offering.

The session also saw Northern States Power Co. price a $100 million offering of first mortgage bonds.

Sources are expecting the pace of issuance to calm slightly compared to the $30 billion-plus week the high-grade primary saw last week.

Around $15 billion to $20 billion of new issuance is expected to price this week.

The deals that did price during Monday’s session were met with solid demand, sources said.

The order books for both HSBC’s new issue and Total’s deal were more than two times oversubscribed.

“Things looked good today,” a market source said.

Several of the new bonds priced late in the day, and no secondary markets were seen in some of the issues as the session closed, including ERP Operating’s two-part deal, according to a trader.

No markets were seen in Northern States Power’s 3.3% bonds due 2024, which was a “small deal,” a trader said.

Total Capital’s two-part offering traded wrapped around issuance to about 1 bp wider, a trader said.

Investment-grade bonds headed out slightly weaker in thin trading, according to market sources.

The Markit CDX North American Investment Grade series 22 index was about ½ basis point wider at a spread of 60.3 bps.

HSBC prices tight

Monday’s high-grade primary saw HSBC USA price $2.25 billion of notes (Aa3/A+/AA-) in four parts, an informed source said.

All three fixed-rate tranches of the trade sold tight of guidance, the source added.

The sale included $250 million of three-year floaters priced at par to yield Libor plus 30 bps and $500 million of 1.3% three-year notes priced at 99.848 to yield 1.35%, or Treasuries plus 40 bps.

A third tranche was $750 million of 2.25% five-year notes priced at 99.76 to yield 2.301%, or Treasuries plus 60 bps.

Finally, $750 million of 3.5% 10-year notes sold at 95 bps over Treasuries, or 99.574 to yield 3.551%.

HSBC Securities (USA) Inc. was the bookrunner.

The financial services company is based in London.

Total brings $2.25 billion

Total Capital International, a wholly owned subsidiary of Total SA, was also in the market with a $2.25 billion offering of senior notes (Aa1/AA-/), according to a market source and an FWP filed with the Securities and Exchange Commission.

The company priced $250 million of five-year floaters at par to yield Libor plus 35 bps.

A second tranche was $1 billion of 2.1% five-year notes sold at 99.868 to yield 2.128%, or Treasuries plus 43 bps.

There was also a $1 billion tranche of 2.75% notes sold with a spread of Treasuries plus 58 bps.

Pricing was at 99.811 to yield 2.78%.

The notes were sold at the tight end of talk.

Total Capital’s 2.1% notes due 2019 traded wrapped around issuance at 43 bps bid, 40 bps offered in aftermarket trading, a trader said.

The 2.75% notes due 2021 eased 1 bp to 59 bps bid, 55 bps offered in the secondary market.

Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., RBC Capital Markets LLC, Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners.

Proceeds will be used for general corporate purposes.

The company was last in the market with $2.5 billion of notes in three parts on Jan. 8.

That trade included $500 million of 1% notes due 2017 priced at Treasuries plus 25 bps, $750 million of 2.125% five-year notes sold at 45 bps over Treasuries and $1.25 billion of 3.75% notes due 2024 sold at Treasuries plus 85 bps.

The notes are guaranteed by the parent company, an oil and gas company based in Courbevoie, France.

ERP two-parter

In other primary happenings, ERP Operating priced $1.2 billion of notes (Baa1/BBB+/BBB+) in tranches due 2019 and 2044, according to a market source.

A $450 million tranche of 2.375% five-year issue of notes sold at 99.9 to yield 2.396%, or Treasuries plus 70 bps.

There was also $750 million of 4.5% 30-year bonds priced with a spread of Treasuries plus 115 bps.

The notes sold at 99.297 to yield 4.543%.

The bookrunners were BofA Merrill Lynch, Deutsche Bank Securities Inc. and UBS Securities LLC.

Proceeds will be used for working capital and general corporate purposes, including repayment of the balance under a revolving credit facility and term loan facility.

The unit of apartment property builder and manager Equity Residential is based in Chicago.

Northern States mortgage bonds

Northern States Power came to Monday’s market with $100 million of 3.3% first mortgage bonds due June 15, 2024 priced with a spread of Treasuries plus 75 bps, according to a market source and an FWP filing with the SEC.

The notes (Aa3/A/A+) sold at the tight end of talk.

Pricing was at 99.647 to yield 3.342%.

The bookrunners were Citigroup and Wells Fargo Securities LLC.

Proceeds from the offering will be used to repay short-term debt borrowings and for general corporate purposes.

Northern States Power was last in the U.S. bond market with a $300 million sale of 4.125% 30-year first mortgage bonds priced with a spread of 77 bps over Treasuries on May 6.

The electric and natural gas utility is based in Minneapolis.

CDS costs unchanged to higher

Investment-grade bank and brokerage credit default swap prices were unchanged to higher, according to a market source.

Bank of America Corp.’s CDS costs increased 2 bps to 60 bps bid, 64 bps offered. Citigroup Inc.’s CDS costs widened 1 bp to 59 bps bid, 63 bps offered. JPMorgan Chase & Co.’s CDS costs were flat at 48 bps bid, 52 bps offered. Wells Fargo & Co.’s CDS costs ended flat at 35 bps bid, 39 bps offered.

Merrill Lynch’s CDS costs increased 2 bps to 65 bps bid, 67 bps offered. Morgan Stanley’s CDS costs ended 1 bp higher at 61 bps bid, 65 bps offered. Goldman Sachs Group, Inc.’s CDS costs widened 1 bp to 66 bps bid, 69 bps offered.

Stephanie Rotondo contributed to this review

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