Potash brings $1 billion of seven- and 30-year notes; quiet week ahead; industrials firm

By Sheri Kasprzak and Cristal Cody

New York, Nov. 22 - Monday's light pricing action was headlined by a $1 billion offering of notes from Potash Corp. of Saskatchewan Inc. in two tranches.

Meanwhile, the consensus was that the market will be fairly quiet ahead of the Thanksgiving holiday.

"I'm sure there will be a few things coming up this week, but it should taper off substantially as the holiday approaches," said one sellsider reached in the afternoon.

Potash came to market to kick off the week with $500 million each of seven- and 30-year notes (Baa1/A-/), said a term sheet.

The seven-year 3.25% senior notes have a spread of Treasuries plus 122 basis points after being talked Monday at Treasuries plus 130 bps, and the 30-year 5.625% notes have a spread of Treasuries plus 152 bps after being talked at Treasuries plus 160 bps.

The seven-year notes, which feature a make-whole call at any time at Treasuries plus 20 bps, were priced at 99.652 to yield 3.306%.

The 30-year notes, which feature a make-whole call at Treasuries plus 25 bps, were priced at 98.602 to yield 5.723%.

The joint bookrunners for the sale were Bank of America Merrill Lynch, Goldman Sachs & Co., Morgan Stanley & Co. Inc. and Scotia Capital Inc.

Proceeds from the sale will be used to finance a planned $2 billion share buyback. News of the buyback came last week when BHP Billiton Ltd. scrapped its anticipated $39 billion hostile takeover of Potash.

Trading light

Both tranches that Potash sold firmed in the secondary market, while paper from Dow Chemical Co. and International Paper Co. also was stronger, sources said.

Trading in the high-grade market was light on Monday.

"Another low-volume day," a trader said.

Overall investment-grade Trace volume was up about 7% but still under $10 billon on Monday, a source said.

"Seems to be a bit quiet in corps," one trader said. "I imagine after tomorrow, it'll be really slow."

The bond markets are closed on Thursday for Thanksgiving Day and will close early on Friday.

The Markit CDX Series 14 North American investment-grade index eased 1 bp to a spread of 91 bps, according to Markit Group Ltd.

In government bonds, Treasuries were higher on Irish and European debt concerns.

The yield on the benchmark 10-year note fell to 2.8% from 2.87% on Friday. The yield on the 30-year bond ended 4 bps lower at 4.2%.

"Today we had some risk-aversion trades, which helped fixed income in general," said John Briggs, strategist at RBS Securities Inc. "Investors wanted some confidence the higher cascade in yields was over before they put some money to work."

Potash, industrials tighten

In the early afternoon, the 3.25% notes due 2017 from Potash firmed to 120 bps bid, 116 bps offered and then traded tighter at 119 bps bid, 115 bps offered, traders said.

The bonds due 2040 hovered tighter in the afternoon at 148 bps bid, 145 bps offered, according to the traders.

Elsewhere in secondary trading, industrial paper was active, with Midland, Mich.-based Dow Chemical's 4.25% notes due 2020 (Baa3/BBB-/BBB) tightening in trading to 173 bps on Monday from 181 bps on Thursday, a source said.

Memphis-based International Paper's 9.375% notes (Baa3/BBB/) due 2019 were quoted by one source trading at 132.77, compared with 130.65 on Friday.

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