ING, ILFC, Liberty Mutual, NYSE price; Amgen takes opportunity to go long; secondary softens

By Andrea Heisinger and Paul Deckelman

Omaha, May 21 - Issuers like ING USA Global Funding Trust 6, International Lease Finance Corp., Liberty Mutual Group Inc. and NYSE Euronext continued to take advantage of low new issue premiums Wednesday, as well as moving to get in ahead of a long holiday weekend.

The day seemed slower in pace in comparison to Monday's 11 issues, but the week is still on pace to total more than $30 billion in new issues, a source said.

One of Tuesday's issuers, biotechnology company Amgen, Inc., said its issue went well and was opportunistic.

Spokesperson David Polk said in an e-mail that the company was satisfied it raised $1 billion to repay its floating-rate notes.

The issue was twice oversubscribed, and could have been upsized although the company opted not to, Polk said.

Like many recent issuers, the company used current market conditions to its advantage.

"We were looking to opportunistically tap the market to refinance our floating-rate notes due in November 2008," he said. "We felt the current environment presented a reasonable opportunity for us to raise additional financing."

The company also had a strategy for choosing the longer 10- and 30-year tranches rather than the shorter term issues that have been popular lately.

"The nature of our business is that we have many long-term assets because it takes a long time to develop a molecule into a salable drug," Polk said. "We wanted to match our long-term assets with long-term liabilities, which we did by offering 10- and 30-year debt."

The issue was divided evenly between the two tranches, each of which priced at 240 basis points over Treasuries.

In the investment-grade secondary market Wednesday, advancing issues trailed decliners by a slight margin, while overall market activity, reflected in dollar volumes, rose about 10% from Tuesday's pace.

Spreads in general declined as Treasury yields rose, with the yield on the benchmark 10-year note, for instance, widening by 3 bps to 3.83%.

Wednesday's calendar deals

Back in the primary, about half of Wednesday's issues were announced at the beginning of the week or late last week.

Liberty Mutual was one of these, pricing a split-rated $1.25 billion of hybrid junior subordinated notes.

The 80-year notes have a fixed coupon of 10.75% until 2038, and then a floating rate of three-month Libor plus 712 bps.

They were sold under Rule 144A and Regulation S via Banc of America Securities LLC, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.

NYSE Euronext priced $750 million 4.8% five-year notes at 99.759 to yield 4.853% with a spread of Treasuries plus 178 bps.

This was at the tight end of price talk of 180 bps area.

Banc of America, Citigroup and Merrill Lynch, Pierce, Fenner & Smith Inc. ran the books.

International Lease Finance priced $750 million of 6.625% five-year medium-term notes at 99.597.

No official spread was listed on the issues FWP filed with the Securities and Exchange Commission, but a market source said there was whispered price talk of 340 to 345 bps, and the issue priced about 40 bps wider than that.

"There could be a couple of reasons," he said. "It's a unit of AIG, which dragged them down, and all they do is airline leasing which could have affected it with all of the negativity out there on that right now."

Barclays Capital Inc., BNP Paribas, Lehman Brothers Inc. and Merrill Lynch ran the books.

ING sells floaters

One of the larger issues of the day came from ING with its $1.25 billion of extendible floaters due 2013.

They have a coupon of three-month Libor plus 45 bps, which steps up 2 bps after and first year and each year until maturity.

Morgan Stanley, Goldman Sachs & Co., HSBC Securities and ING Securities were bookrunners.

An issue from French environmental services company Veolia Environnement priced late in the day Wednesday, sources said, and a term sheet was not available at press time.

The issue was in three tranches, with $700 million each of 5 and 10-year notes and $400 million of 30-year notes, a source said.

Banc of America, Credit Suisse Securities, Deutsche Bank Securities and Merrill Lynch were bookrunners.

A crossover issue from emerging markets came from OJSC Russian Agricultural Bank.

It priced $1.75 billion in two tranches, with $1 billion of 7.75% 10-year bonds pricing at Treasuries plus 391 bps and $750 million of 7.125% five-year bonds pricing at Treasuries plus 403 bps.

Both tranches came in at the tight end of price talk, a source close to the issue said.

ABN Amro, Citigroup and Goldman Sachs & Co. ran the books.

More deals expected

Although the volume of issuers for the week has been high, sources said there are still a few new deals to squeeze out before Friday, meaning they will likely come to the market tomorrow.

"I think we'll see a few things," a source said. "We're not done for the week, and no one's going to do anything Friday, so tomorrow's it."

The secondary market is softening with the influx of supply in the primary lately, a source said.

"I would imagine tomorrow is going to be light, or at least lighter than today," he said. "I'm just seeing the trend from the rest of the week and from what we're hearing there's not going to be another day like Monday this week."

Time Warner Cable widens out

One of the day's big losers was Time Warner Cable, whose 6.55% notes due 2037 were seen having jumped out to a spread over comparable Treasuries of 238 bps, a 36 bps widening; in dollar-price terms, the bonds lost more than 3 points on the day with the last round-lot trade down at 95.4 bid.

That slide followed the news that the New York-based Number-Two U.S. cable operator's corporate parent, Time Warner Inc., will formally split off its cable TV business, giving the media conglomerate a largely debt-funded $9.25 billion windfall, getting it out of the media distribution business - something it has aimed at for a while - and letting it focus on its cable content, entertainment and publishing operations.

Time Warner till now has had an 84% stake in Time Warner Cable, a public company.

Under terms of the deal announced Wednesday, Time Warner Cable will pay shareholders a total dividend of $10.27 per share, or $10.9 billion, with Time Warner getting $9.25 billion of that. Time Warner Cable will fund the dividend from its existing credit facility and a $9 billion two-year bridge loan, which will raise its total debt load to $24.2 billion.

New Starwoods trading wider

Other names seen widening notably include Vodafone's 7.875% notes due 2030, out some 20 bps to the 235 bps level, and the new Starwood Hotels & Resorts Worldwide 6.75% notes due 2018, which were seen trading around the 320 bps mark - a 15 bps widening on the day. That left the White Plains, N.Y.-based lodging giant's issue well out from the 296.6 bps level at which the $400 million issue priced on May 16. It also priced $200 million of 6.25% notes due 2013 that session at 300 bps over.

The Starwood bonds were one of the few recent new deals seen actively trading around Wednesday, a market source said, with the most-actives lists largely dominated by established issues.

Among the latter, Wells Fargo Bank's 7.55% notes due 2010 were seen 130 bps over, having tightened some 30 bps from where they ended up last week, while DaimlerChrysler Corp.'s 6.50% notes due 2013 were 15 bps better at 215 bps over.

Old Krafts widen out

On the downside, Kraft Foods Inc.'s 7% notes due 2037 had ballooned out to a spread of 235 bps over, a 20 bps widening, likely due to the Northfield, Ill.-based processed foods giant's having sold $2 billion of new bonds on Monday - $1.25 billion of 6.125% notes due 2018, which priced at 240 bps over and $750 million of 6.875% bonds due 2038, which priced at that same level.

CDS costs continue to widen out

In the credit-default swaps market, a trader saw debt-protection costs for big-bank bonds 1 bp to 4 bps wider, while Washington Mutual widened out by 10 bps to 330 bps bid, 345 bps offered.

He also saw CDS costs for major brokerage paper 3 bps to 10 bps wider, with Lehman Brothers Holdings' CDS cost 10 bps wider at 167 bps bid, 173 bps offered.

© 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.