AIG, Toyota Motor Credit, Fluor tap primary as supply lingers; new issues edge tighter

By Andrea Heisinger and Cristal Cody

New York, Sept. 8 - The pace slowed considerably in the investment-grade market on Thursday following the previous day's onslaught of new deals, but there was still new paper to be had.

Toyota Motor Credit Corp. and American International Group, Inc. each priced large, multi-tranche offerings.

The Toyota sale marked the first time the U.S. financing arm of the company has been in the debt market since February. The company priced $2.5 billion of notes in five- and-10-year maturities.

AIG was in the market with a $2 billion deal in two parts. It was the first sale for the insurance holding company since November 2010, and this deal was about two times oversubscribed with $2 billion on the books for each tranche, said a source who worked on the trade.

A smaller sale came from Fluor Corp. with $500 million of 10-year notes.

Landwirtschaftliche Rentenbank sold $1.5 billion of seven-year notes by early afternoon. The notes were sold in line with price talk and are guaranteed by Germany.

There was also a reopening of notes announced by Associated Banc-Corp. The Wisconsin-based bank is reopening a five-year note with proceeds being used to help repurchase preferred stock sold under the Troubled Asset Relief Program.

The market retained its good tone, but many of the week's sales were priced on Wednesday and others decided to hold off as Federal Reserve Chairman Ben Bernanke gave a speech about the economy, and President Barack Obama was set to unveil a jobs plan, which includes tax cuts, in a televised address at night.

"There's still momentum, it just seemed like we didn't have as much [today] because of what priced [Wednesday]," a syndicate source said.

"September still looks busy."

There was roughly $17 billion of new corporate debt sold the previous day followed by the more than $5 billion of new corporates priced on Thursday.

"There's still supply - this isn't going to stop," a market source said. "[The market tone] was a little down today, but nothing major."

Overall trading volume was mostly flat at just under $11 billion.

Sentiment was weaker on Thursday. The Markit CDX Series 16 North American high-grade index eased 3 basis points to a spread of 125 bps.

Confidence in the financial sector also fell. A trader saw bank credit default swaps costs increase as Bank of America's CDS costs were up 15 bps at 333 bps/343 bps and J.P. Morgan's CDS costs rose 5 bps to 125 bps/130 bps.

He also saw the brokerage firm/investment bank CDS costs higher. Morgan Stanley's CDS costs rose 15 bps to 315 bps/325 bps, while Goldman Sachs' was up 8 bps to 228 bps/233 bps.

In the secondary market, Toyota Motor Credit notes traded moderately tighter. Fluor's notes firmed 2 bps late afternoon.

Treasuries were stronger on Thursday. The 10-year note yield fell to 1.97% from 2.05%. The 30-year bond yield dropped 5 bps to 3.31%.

AIG sells two tranches

American International Group sold $2 billion of notes (Baa1/A-) in two parts, according to a source close to the trade.

The $1.2 billion of 4.25% three-year notes was priced at a spread of Treasuries plus 412.5 bps. It was sold in line with guidance in the 412.5 bps area.

A second part was $800 million of 4.875% five-year notes sold at a spread of 425 bps over Treasuries. The tranche was priced in line with talk in the 425 bps area.

There was the possibility of a three-year floating-rate tranche being included in the sale, but it wasn't set in stone, the source said.

"It gave them some ability on the size, but they didn't need it," he said, referring to getting enough interest in the two fixed-rate tranches to scrap the floater.

The company decided on the split between the two maturities, with more on the three-year notes.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and U.S. Bancorp Investments Inc. were bookrunners.

Proceeds will be used to pay maturing notes issued by AIG to fund the AIG matched investment fund program.

The holding company for insurance subsidiaries last sold $2 billion of notes on Nov. 30, 2010. The 3.65% three-year notes from that sale priced at 295 bps over Treasuries while a 6.4% 10-year note priced at 362.5 bps over Treasuries.

AIG is based in New York City.

Toyota's $2.5 billion

Toyota Motor Credit priced $2.5 billion of notes (Aa3/AA-) in two parts, a source away from the sale said.

Full terms were not available at press time.

The $1.5 billion of five-year notes was priced at a spread of Treasuries plus 125 bps. The notes were priced at the low end of guidance in the 130 bps area, plus or minus 5 bps.

A second part was $1 billion of 10-year notes sold at a spread of 145 bps over Treasuries. These notes were also sold at the tight end of talk in the 150 bps area, plus or minus 5 bps.

Goldman Sachs & Co. was the bookrunner.

Toyota Motor Credit last sold bonds in a $100 million sale of two-year floating-rate notes on Feb. 15, 2011.

In trading, the notes due 2016 firmed to 124 bps bid, 114 bps offered. The tranche of notes due 2021 were quoted at 140 bps offered.

The U.S. financing arm of Toyota Financial Services is based in Torrance, Calif.

Fluor offers $500 million

Texas-based professional services company Fluor sold $500 million of 3.375% 10-year senior notes (A3/A-/A-) to yield 150 bps over Treasuries, according to an FWP with the Securities and Exchange Commission.

Bank of America Merrill Lynch and BNP Paribas Securities Corp. were bookrunners.

Proceeds are being used for general corporate purposes.

In the secondary market, the notes due 2021 traded tighter at 148 bps bid, 143 bps offered, a trader said.

The holding company for engineering, construction and maintenance subsidiaries is based in Irving, Texas.

Rentenbank's seven-years

Landwirtschaftliche Rentenbank priced $1.5 billion of 1.875% seven-year senior notes (Aaa/AAA/AAA) to yield mid-swaps plus 30 bps, according to a market source and FWP with the SEC.

The securities were priced in line with guidance in the mid-swaps plus 30 bps area. A market source said there was about $1.5 billion on the books at the launch.

The notes are guaranteed by Germany.

Bookrunners were Citigroup Global Markets Ltd., Daiwa Capital Markets Europe Ltd., HSBC Bank plc and J.P. Morgan Securities Ltd.

Proceeds are being used to finance lending activities.

The German development agency for agribusiness is based in Frankfurt.

Associated Bank's reopening

Associated Banc-Corp announced a reopening of its issue of 5.125% notes due 2016 (Baa1/BBB-/BBB-) on Thursday, according to a 424B3 filing with the SEC.

The size of the reopening is $130 million, a source said.

Total issuance will include the initial $300 million priced on March 21 at 320 bps over Treasuries.

Goldman Sachs & Co. is bookrunner.

Proceeds are being used to help repay the balance of $262.5 billion of fixed-rate cumulative perpetual preferred stock sold to the U.S. Treasury under the Troubled Asset Relief Program.

Associated also sold $65 million of perpetual preferred stock on Wednesday at par of $25.

The bank holding company is based in Green Bay, Wis.

Paul Deckelman contributed to this review

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