Dell, Home Depot among issuers as primary bursts with deals amid low rates; bonds trade well

By Andrea Heisinger and Cristal Cody

New York, Sept. 7 - It was expected to be busy on Tuesday, but that turned out to be an understatement, with deals from Home Depot, Inc., Dell Inc., Aon Corp., Parker-Hannifin Corp., Allergan, Inc., Burlington Northern Santa Fe, LLC, France Telecom SA, Hospira, Inc., International CCE Inc., Medco Health Solutions, Inc., Canadian Imperial Bank of Commerce, Societe Generale and Health Care REIT, Inc. packing the high-grade bond market.

Most of the deals did not price until late afternoon as they were in multiple tranches and some were more than $1 billion.

Dell's $1.5 billion offering was one of those deals. It was divided into tranches due 2013, 2015 and 2040, with the five-year notes having the largest size.

Home Depot priced its $1 billion deal of notes in two tranches. The deal was split evenly between 10-year notes and 30-year bonds.

Parker-Hannifin sold $300 million of 12-year notes in one of the smaller sales of the day.

Another big sale came from Canada's CIBC, which priced $1.5 billion of three-year notes.

Health-care company Allergan priced its $650 million of 10-year notes at a comparable spread to the last time it sold bonds more than four years ago. The new deal priced at the tight end of guidance.

Aon priced its $1.5 billion sale in three tranches late in the afternoon. All of the notes priced at the tight end of revised guidance and much tighter than whispered talk.

Holding company for railroad subsidiaries Burlington Northern priced an upsized $750 million of notes in two tranches due 2020 and 2041. The size was initially $500 million, with the extra amount added due to demand, a source said.

Medco Health Solutions was another latecomer, not pricing its $1 billion deal in two tranches until late in the day. The sale was split evenly between five-year and 10-year notes.

Health Care REIT priced the only issue in the real estate sector for the day with its $450 million offering of seven-year notes.

Societe Generale also priced late in the day. The Paris-based issuer sold $2 billion of notes in three-year and five-year tranches.

Soft-drink bottler International CCE - soon to be Coca-Cola Enterprises Inc. - sold $1 billion of notes in two tranches. They each priced at the tight end of guidance.

A second Paris-based issuer was France Telecom, which had one of the first bonds to price for the day with its $750 million of five-year notes.

Hospira priced a $500 million sale of 30-year bonds, joining the many other issuers from the health-care sector for the day.

Volume rises

Overall investment-grade Trace volume rose to about $8.8 billion, up from less than $6 billion on Friday, according to a source.

Several of the new deals were mixed to slightly firmer in secondary trading, including Dell's new tranche of bonds due 2040, according to sources.

"Despite the concerns over Europe, Greece and Portugal, the corporate market traded quite well today," said Nick Kalivas, a market strategist at MF Global Holdings Ltd. "Generally, the corporate investment-grade market is being helped by low Treasury yields and people willing to separate their risk profiles. A number of companies came with 30-year deals, and they didn't really disrupt the investment-grade market."

U.S. Treasuries were stronger on Tuesday, sending yields down on a drop in stocks and overseas fears about the recovery of European banks.

"The equity market being down 100 points all day didn't really help matters," said Dan Greenhaus, market strategist at Miller Tabak & Co.

The day was light in economic data and trading volumes, Greenhaus said. The Dow Jones Industrial Average fell 107.24 points, or 1.03%, to 10,340.69.

"It was a pretty slow day. We had a huge reversal last week," Greenhaus said. "In the absence of any real meaningful data and large trading volumes, we're going to have large swings one way or the other."

The markets were closed on Monday. The yield on the benchmark 10-year Treasury note fell to 2.59% on Tuesday from 2.7% before the Labor Day holiday. The yield on the 30-year bond dropped to 3.66% from 3.78%.

Home Depot's $1 billion

Home improvement retailer Home Depot sold $1 billion of notes (Baa1/BBB+/BBB+) in two tranches, a market source away from the sale said.

A $500 million tranche of 3.95% 10-year notes priced at a spread of Treasuries plus 135 basis points.

The second tranche of $500 million 5.4% 30-year bonds priced at a spread of Treasuries plus 175 bps.

The bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities and Morgan Stanley & Co. Inc.

Proceeds will be used for the replacement of cash funds used to repay $1 billion of 4.625% notes that matured on Aug. 15.

The company doesn't have any recent outstanding bonds for comparison. A source said that they haven't sold bonds since late 2006.

In secondary trading, the notes due 2020 were quoted at 136 bps bid, 130 bps offered. In late afternoon trading, the notes were seen at 133 bps bid, 132 bps offered.

The 5.4% bonds due 2040 traded late in the day at 176 bps bid, 173 bps offered.

The issuer is based in Atlanta.

Dell prices late

Dell priced $1.5 billion of unsecured notes (A2/A-) in three tranches late in the day, a source away from the sale said.

The $500 million tranche of 1.4% three-year notes priced at a spread of Treasuries plus 70 bps.

A $700 million tranche of 2.3% five-year notes priced at a spread of 90 bps over Treasuries.

The final tranche was $300 million in 5.4% 30-year bonds priced at Treasuries plus 175 bps.

Barclays Capital Inc., Goldman, Sachs & Co. Inc. and Morgan Stanley ran the books.

Proceeds are being used for general corporate purposes.

The company last sold bonds in a $1 billion deal with three-year and 10-year maturities on June 10, 2009. The 3.375% three-year notes priced at more than twice the spread of the new three-years at 150 bps.

Dell's notes were trading about 10 bps in range between bids and offers in the secondary market, a trader said.

The notes due 2013 were seen 1 point tighter at 69 bps bid. The notes due 2015 traded late in the day mixed at 93 bps bid, 83 bps offered.

The bonds due 2040 traded stronger at 174 bps bid, 164 bps offered, the trader said.

The technology and IT company is based in Round Rock, Texas.

Companies swamp primary

There were nearly $13 billion in new deals for the day, getting September and the week off to a hectic start.

Issuers jumped in for the same reasons they've been doing so recently: low borrowing rates, stable market conditions and holiday schedules.

Some companies waited until after the long Labor Day weekend, while others tried to get in ahead of the Rosh Hashanah holiday that begins at sundown on Wednesday. That means that Wednesday could also have a substantial calendar.

"Oh, we're definitely not done," a source said when asked what the coming day looked like. The number of deals is not expected to be "quite as overwhelming," she said.

Many names jumped into the market for a specific reason, like redeeming notes or paying for an acquisition.

"I think some of them just needed capital," another market source said.

Deals from Aon, Hospira, International CCE and Home Depot were among those listing a specific use of proceeds, while others like Dell and Burlington Northern simply said "general corporate purposes."

Allergan prices 10-years

Allergan priced $650 million in 3.375% 10-year senior unsecured notes on Tuesday to yield Treasuries plus 80 bps, a source associated with the deal said.

The deal priced at the tight end of talk that was in the range of 80 to 85 bps, a source said.

The notes (A3/A+/A-) priced at 99.697 to yield 3.411%.

Bank of America Merrill Lynch, Goldman Sachs, Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Morgan Stanley were bookrunners.

Proceeds are being used for general corporate purposes including working capital, capital expenditures, repayment of outstanding debt, repurchase of shares under an evergreen stock repurchase program and acquisition and licensing activities.

Allergan's last bond sale was $800 million of 5.75% 10-year notes priced on April 6, 2006 at a comparable Treasuries plus 90 bps.

The multi-specialty health-care company is based in Irvine, Calif.

Aon sells three tranches

Aon priced $1.5 billion of notes (Baa2/BBB+/BBB+) in three tranches late in the afternoon, a source who worked on the deal said.

A $600 million tranche of 3.5% five-year notes priced at a spread of 220 bps over Treasuries. They priced at the tight end of guidance, which was initially in the 237.5 bps area and then revised to a range of 220 to 225 bps.

The $600 million of 5% 10-year notes priced at Treasuries plus 245 bps. This tranche also priced at the tight end of talk whispered in the 262.5 bps area and then revised to a range of 245 to 250 bps.

The third tranche was $300 million of 6.25% 30-year bonds priced at a 265 bps spread over Treasuries. Price talk was initially in the 287.5 bps area and then put down to a range of 265 to 270 bps, which the notes priced at the tight end of.

Credit Suisse Securities, Morgan Stanley and Bank of America Merrill Lynch were active bookrunners, while Deutsche Bank Securities and RBS Securities were passive bookrunners.

Proceeds are being used in part to finance the merger with Hewitt Associates, Inc. If the merger doesn't occur on or prior to March 31, 2011 or is terminated, the company is required to redeem the notes at 101. The proceeds may also be used to refinance existing Hewitt debt and pay for certain merger-related fees.

The company has no recent outstanding bonds.

The risk management and consulting company is based in Chicago.

International CCE sells $1 billion

International CCE priced $1 billion of notes (A3/BBB/BBB+) in two tranches late in the afternoon, a source close to the sale said.

A $475 million tranche of 2.125% five-year notes priced at a spread of Treasuries plus 80 bps. They priced in line with talk in the 80 bps area, the source said.

The second tranche of $525 million in 10-year notes priced at a spread of 100 bps over Treasuries. This tranche also priced in line with guidance in the 100 bps area.

The bookrunners were Bank of America Merrill Lynch, Barclays Capital, BNP Paribas Securities, Citigroup Global Markets, Credit Suisse Securities, Deutsche Bank Securities, HSBC Securities and RBS Securities.

Proceeds will be used to fund the company's Norway-Sweden acquisition, make loans to European subsidiaries of old CCE to repay inter-company debt, to refinance some third-party debt of one of old CCE's European subsidiaries and for general corporate purposes including share repurchase.

After the deal is closed, the company will be renamed Coca-Cola Enterprises.

Looking at the deal in the secondary market, the 3.5% notes due 2020 were not immediately seen trading, a source said.

The tranche of notes due 2015 priced at Treasuries tightened 1 point to 79 bps bid, a trader said.

The soft-drink bottler is based in Atlanta.

BNSF prices second deal in 2010

Burlington Northern Santa Fe sold an upsized $750 million of senior unsecured debentures (A3/BBB+) in two tranches, a source close to the sale said.

The size was announced in the morning at $500 million.

The $250 million of 3.6% 10-year notes priced at a spread of Treasuries plus 100 bps.

A $500 million tranche of 5.05% notes due 2041 were priced at a spread of 140 bps over Treasuries.

The bookrunners were Bank of America Merrill Lynch, Barclays Capital and Wells Fargo Securities.

Proceeds will be used for general corporate purposes.

Burlington Northern last priced a deal on May 12 when it sold $750 million of 5.75% 30-year notes at 128 bps over Treasuries. This was a slightly better spread than the new long 30-year bond got.

The holding company for railroad subsidiaries is based in Fort Worth.

CIBC offers $1.5 billion

Canadian Imperial Bank of Commerce sold $1.5 billion of 1.45% three-year unsecured notes (Aa2/A+/AA-) to yield Treasuries plus 75 bps, an informed source said.

Barclays Capital, Citigroup Global Markets, JPMorgan and CIBC were the bookrunners.

Proceeds will be added to the bank's funds and used for general corporate purposes.

In the secondary market, the notes due 2013 firmed to 69 bps offer, a trader said. Later in the afternoon, a source saw the notes trading at 71 bps bid, 70 bps offered.

The financial services company is based in Toronto.

Medco sells $1 billion

Medco Health Solutions sold $1 billion of unsecured notes (Baa3/BBB+) in two tranches late, a source confirmed.

The full terms were not available at press time due to the lateness of pricing.

A $500 million tranche of five-year notes priced at a spread of Treasuries plus 135 bps.

The $500 million tranche of 10-year notes priced at 155 bps over Treasuries.

Deutsche Bank Securities and Goldman Sachs were the bookrunners.

Proceeds will be used for general corporate purposes, including repayment of borrowings under a five-year senior unsecured revolving credit facility, and to partly pay for the $730 million acquisition of United BioSource.

The health-care company is based in Franklin Lakes, N.J.

Health Care's seven-years

Health Care REIT sold $450 million of 4.7% seven-year senior unsecured notes (Baa2/BBB-) by the market close at Treasuries plus 270 bps, a source away from the deal said late in the afternoon.

UBS Investment Bank, JPMorgan and Barclays Capital were the bookrunners.

Proceeds are being used for general corporate purposes, including investing in health-care and senior housing properties and repaying borrowings under an unsecured line of credit, and for other outstanding debt.

The senior housing and health-care real estate company is based in Toledo, Ohio.

France Telecom's five-years

France Telecom sold $750 million of 2.125% five-year unsecured notes (A3/A-/A-) by early afternoon at Treasuries plus 82 bps, a source close to the sale said.

The bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets, HSBC Securities and Morgan Stanley.

Proceeds will be used the repay debt.

The telecommunications company is based in Paris.

Parker-Hannifin sells 12-years

Parker-Hannifin sold $300 million of 3.5% 12-year senior unsecured medium-term notes (A2/A/A) by mid-afternoon to yield Treasuries plus 100 bps, according to an FWP filing with the Securities and Exchange Commission.

Bank of America Merrill Lynch, Barclays Capital and Morgan Stanley were the bookrunners.

Proceeds will be used to repay borrowings under a commercial paper program and for general corporate purposes.

In late afternoon secondary trading, the notes due 2022 tightened to 91 bps bid, one trader said.

The notes were seen widening out later to 94 bps bid, 91 bps offered, a second trader said.

The manufacturer of motion and control technologies is based in Cleveland.

Hospira's long bonds

Hospira priced its $500 million of 5.6% 30-year senior unsecured bonds (Baa3/BBB+) at 195 bps over Treasuries, an informed source who worked on the deal said.

Morgan Stanley, Citigroup Global Markets and RBS Securities ran the books.

Proceeds are being used to redeem $500 million in outstanding 5.55% notes due March, 2012 at their make-whole redemption price plus interest.

The specialty pharmaceutical and medical delivery company is based in Lake Forest, Ill.

Societe Generale's $2 billion

Societe Generale priced $2 billion of notes (Aa2/A+/A+) in two tranches, a source who worked on the sale said late in the day.

A $1 billion tranche of 2.2% three-year notes priced at Treasuries plus 150 bps.

The second tranche was $1 billion of 3.1% five-year notes priced at a spread of Treasuries plus 170 bps.

Both of the notes were sold under Rule 144A.

Bank of America Merrill Lynch, JPMorgan, Morgan Stanley and Societe Generale were the bookrunners.

The financial services company is based in Paris.

CDS costs rise

A trader saw the cost of credit default swap contracts protecting holders of bank paper against events of default unchanged to 8 bps higher on Tuesday.

Meanwhile, the brokerage/investment bank CDS costs were 5 bps to 8 bps higher.

Paul Deckelman contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.