Aetna, Liberty Mutual, Pearson among sellers in constructive primary; banks, telecom stronger

By Andrea Heisinger and Cristal Cody

New York, May 1 - Investment-grade issuance picked up on Tuesday as several high-quality corporate names jumped into the market.

Aetna Inc. sold $750 million of notes due 2017 and 2042. It was joined by another insurance name, Liberty Mutual Group, Inc., which sold $1 billion split evenly between 10-year notes and 30-year bonds.

Consumers Energy Co. priced $375 million of 10-year notes by early afternoon.

Semiconductor company Altera Corp. sold $500 million of five-year senior notes to repay amounts owed under a credit agreement.

Pearson Funding Four plc was in the market with a $500 million offering of 10-year notes sold privately under Rule 144A and Regulation S.

There are more deals expected in the primary on Wednesday, provided the tone remains constructive.

"We still have more in the pipeline," a source said at the end of the day. "Nothing huge, but we have more."

The day was a bright spot in recent weeks that have seen little in new deals from the corporate sector.

"It helped that [the bond market] was very flat; it was quiet and stable," a syndicate source said late in the day. "The market was relatively short on equities so that helped."

All of the day's deals saw huge demand, but none except for Aetna was upsized. A source said Aetna was announced at benchmark size of $500 million and grew to $750 million.

Investment-grade bonds ended tighter. The Markit CDX Series 18 North American investment-grade index firmed 1 basis point to a spread of 94 bps.

Secondary activity on Tuesday was "very light," a trader said. "Light volumes and a positive tone."

The new issues sold earlier in the day traded stronger. Altera's notes due 2017 firmed 10 bps, while Aetna's long bonds traded 8 bps tighter.

Consumers Energy's mortgage bonds due 2022 firmed 4 bps. Liberty Mutual's two tranches traded 2½ to 5 bps tighter.

Goldman Sachs Group Inc.'s paper traded about 10 bps better on the day, while Wells Fargo & Co.'s paper firmed 5 bps.

Investment-grade bank and brokerage credit default swaps ended lower. A trader said bank paper CDS costs traded 3 bps to 14 bps lower. Citi's CDS costs firmed 14 bps.

Brokerage CDS costs traded 11 bps to 12 bps lower on the day.

Bonds in the telecom and media sectors traded about 5 bps better.

"AT&T and Verizon are both very strong today," a trader said.

Nokia Corp.'s bonds gained a point in trading on Tuesday, a source said.

Treasuries ended lower after an early morning sell-off. The benchmark 10-year note climbed rose 3 bps to 1.94%. The 30-year bond yield rose to 3.14% from 3.11%.

Aetna prices two tranches

Aetna was in the market with a $750 million deal of senior notes (Baa1/A-/A-) in two tranches, a source close to the trade said.

The size of the trade grew from an initially announced $500 million, the source said.

The $250 million of 1.75% five-year notes sold at a spread of Treasuries plus 105 bps.

There was also a $500 million tranche of 4.5% 30-year bonds priced at Treasuries plus 160 bps.

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were bookrunners.

Proceeds will be used for general corporate purposes, including repayment of short-term debt, the redemption or repurchase of outstanding securities and funding of working capital.

Aetna was last in the market with a $500 million offering of 10-year notes on May 17, 2011.

Aetna's notes due 2017 were not seen in afternoon secondary trading. The tranche of 30-year bonds firmed to 152 bps bid, 148 bps offered, according to a trader.

The health insurance company is based in Hartford, Conn.

Liberty Mutual's $1 billion

Liberty Mutual Group priced $1 billion of notes (Baa2/BBB-/) in two maturities, a market source said.

The $500 million of 4.95% 10-year notes priced at a spread of Treasuries plus 305 bps.

There was also a $500 million tranche of 6.5% 30-year bonds priced 337.5 bps over Treasuries.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were bookrunners.

Liberty Mutual was last in the market with a $600 million trade of 5% 10-year paper priced at 210 bps over Treasuries.

Liberty Mutual's notes due 2022 traded at 300 bps bid, 295 bps offered, a trader said.

The tranche of 30-year bonds were seen at 335 bps bid, 330 bps offered.

The property and casualty insurance company is based in Boston.

Pearson prices privately

Pearson Funding Four priced $500 million of 3.75% 10-year senior notes (Baa1/BBB+/) at a spread of Treasuries plus 187.5 bps, an informed source said.

The paper was priced tighter than initial guidance in the low 200 bps area, the source said, which was considered in the 200 bps to 210 bps range and at the low end of revised talk in the 190 bps area, plus or minus 2.5 bps.

The company "hasn't done a U.S. dollar bond for a while," the source said.

There was about a 2.5 bps concession on the deal. The books had a slow build as people did their research since the name isn't in the market much.

Because there weren't any outstanding bonds with the same maturity from the company, the syndicates used similar issues, like the recent one from Omnicom Group. They also used Pearson's outstanding 6.25% notes due 2018 for guidance.

"There were about $500 million in drops, but we ended up at about $2.7 billion [on the books]," the source said.

The deal was priced under Rule 144A and Regulation S.

BNP Paribas Securities Corp., Citigroup Global Markets Inc. and RBS Securities Inc. were bookrunners.

In the secondary market, a source said the 3.75% notes due 2022 traded tighter at 184 bps bid, 181 bps offered late afternoon.

The diversified media company is based in London.

Consumers Energy's 10-years

Consumers Energy priced $375 million of 2.85% 10-year first mortgage bonds (A3/BBB+/A-) at a spread of 90 bps over Treasuries, a syndicate source said.

The deal sold at the tight end of initial talk in the low 100 bps area and revised guidance in the 95 bps area.

"They really didn't have any outstanding bonds," a source close to the deal said. "They had an old 2020 bond. It went great, though - came about 5 [bps] back from higher-rated names like PPL and some other single As."

The books had between $2.5 billion and $3 billion in interest.

Active bookrunners were Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co.

Proceeds are being used to redeem a portion of 5.375% first mortgage bonds due in 2013, of which there is $375 million outstanding.

Consumers Energy's mortgage bonds due 2022 traded tighter at 86 bps bid, 83 bps offered, a trader said.

The electric and natural gas subsidiary of CMS Energy Corp. is based in Jackson, Mich.

Altera prices $500 million

Altera priced $500 million of 1.75% five-year senior notes (A2/A-/) to yield Treasuries plus 95 bps, an informed source said.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC ran the books.

Proceeds are being used to repay amounts owed under a credit agreement dated Aug. 31, 2007, and to terminate that agreement.

Altera's notes due 2017 traded 10 bps better at 85 bps bid, 80 bps offered, a trader said.

The semiconductor company is based in San Jose, Calif.

Wells Fargo firms

Wells Fargo's 3.5% medium-term notes due 2022 firmed 5 bps to 143 bps bid, 138 bps offered, a trader said.

Wells Fargo sold $2.5 billion of the notes (A2/A+/AA-) on March 1 at a spread of Treasuries plus 150 bps.

The financial services company is based in San Francisco.

AT&T tightens

AT&T, Inc.'s 3% notes due 2022 traded about 5 bps better at 97 bps bid, 92 bps offered on Tuesday, a trader said.

AT&T sold $1 billion of the 10-year notes (A2/A-/A) at a spread of Treasuries plus 105 bps on Feb. 8.

The communications company is based in Dallas.

Nokia rises

Nokia's 5.375% notes due 2019 traded up a point on Tuesday to 87.00 bid, 87.75 offered, a trader said on Tuesday afternoon.

The bonds have dropped in secondary trading on the downgrades in April by Moody's Investors Service, Fitch Ratings and Standard & Poor's.

S&P lowered Nokia's long-term credit rating to BB+ from BBB- and its short-term credit rating to B from A-3. Fitch dropped Nokia's long-term issuer default and senior unsecured ratings to BB+ from BBB-, and Moody's downgraded the company to Baa3 from Baa2.

Nokia sold $1 billion of the seven-year notes on April 30, 2009 at 99.075.

The mobile phone manufacturer and internet services provider is based in Espoo, Finland.

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