Verizon brings megadeal; Omnicom, Macquarie also price; Verizon paper mixed in aftermarket

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 22 – The high-grade primary bond market saw a flurry of new deals on Wednesday.

Verizon Communications Inc., Macquarie Bank Ltd. and Omnicom Group Inc. were among the issuers bringing more than $10 billion of supply to market.

Verizon’s new $6.5 billion megadeal saw solid demand from investors, pricing around 10 basis points to 15 bps tighter compared to initial talk.

A source noted that the deal’s order book was more than three times oversubscribed.

Omnicom Group’s $750 million offering was also well received on Wednesday, with its new issue pricing 15 bps tighter compared to guidance.

In other primary happenings, Macquarie Bank priced $1.75 billion of notes due 2017 in fixed- and floating-rate tranches during the session.

The fixed-rate portion of the bank’s new deal sold at the tight end of price talk.

FMS Wertmanagement also hit the day’s primary market, pricing $1.5 billion of three-year notes.

The session also saw WGL Holdings Inc. sell $225 million of notes in five- and 30-year tranches on Wednesday.

In the preferred market, Citigroup Inc. announced an offering of $1.5 billion 5.8% $1,000-par series N fixed-to-floating rate noncumulative preferreds.

Meanwhile on Wednesday, Federal Home Loan Bank System announced that it would not issue Global Notes this month.

Wednesday’s deluge of new issuance pushes the week’s total investment-grade bond supply to more than $20 billion.

The figure already tops what sources had predicted to be $15 billion to $20 billion of supply, and the primary is likely to see another lively session on Thursday.

“Should be busy again tomorrow,” one market source said.

Investment-grade credit spreads reversed the tightening trend and headed out about 2 bps wider, market sources said.

The Markit CDX North American Investment Grade series 23 index ended the day at a spread of 68 bps.

Verizon’s three-part offering of notes was flat to 2 bps weaker in secondary trading, a trader said.

Omnicom’s 3.65% notes due 2024 traded 4 bps better going out, according to a trader.

Macquarie Bank’s new paper and the two-tranche offering from WGL Holdings priced late in the day and were not seen in afternoon secondary action, a trader said.

Verizon megadeal prices

Verizon Communications priced $6.5 billion of senior notes (Baa1/BBB+/A-) in three tranches on Wednesday, according to a market source and an FWP filed with the Securities and Exchange Commission.

The sale included $2.5 billion of 3% seven-year notes priced at 99.699 to yield 3.048%, or Treasuries plus 115 bps.

There was also $2.5 billion of 3.5% 10-year notes priced at 99.34 to yield 3.579%, or Treasuries plus 135 bps.

Verizon also sold $1.5 billion of 4.4% 20-year bonds at 99.276 to yield 4.455%, or 145 bps over Treasuries.

All three tranches sold at the tight end of price talk, which had firmed 10 bps to 15 bps from initial guidance.

J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be used primarily to redeem existing notes maturing from 2015 to 2018, and any remaining net proceeds will be used for general corporate purposes.

In the secondary market, Verizon’s 3% notes due 2021 eased to 117 bps bid, 113 bps offered, a trader said.

The company’s 3.5% notes due 2024 firmed slightly to 134 bps bid, 129 bps offered.

The tranche of 4.4% notes due 2034 traded wrapped around issuance at 145 bps offered.

Verizon is a New York City-based telecommunications company.

Macquarie taps market

Macquarie Bank priced $1.75 billion of three-year notes (A2/A/A) in fixed- and floating-rate tranches on Wednesday, according to a market source.

A $750 million tranche of floating-rate notes sold at par to yield Libor plus 63 bps.

There was also $1 billion of 1.6% three-year notes priced at 99.939 to yield 1.621%, or Treasuries plus 85 bps.

The fixed-rate note sold at the tight end of price talk.

BofA Merrill Lynch, HSBC Securities, Macquarie and RBS Securities Inc. are the bookrunners for the Rule 144A and Regulation S deal.

The banking unit of Macquarie Group Ltd. is based in Sydney, Australia.

FMS brings $1.5 billion

FMS Wertmanagement sold $1.5 billion of 0.625% notes due 2017 (Aaa/AAA/AAA) at mid-swaps minus 5 bps, or Treasuries plus 30.4 bps, according to a market source and an FWP filed with the SEC.

Pricing was at 99.891 to yield 0.674%.

Barclays, BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC were the bookrunners.

Proceeds from the sale will be used to refinance existing liabilities in order to replace short-term with long-term funding, and any remaining proceeds will be used for general corporate purposes.

The financial services company is based in Munich.

Omnicom prices tight

Omnicom Group and Omnicom Capital Inc. sold $750 million of senior notes (Baa1/BBB+/) due 2024 on Wednesday at Treasuries plus 145 bps, according to a market source and an FWP filed with the SEC.

The notes sold at the tight end of price talk.

Pricing was at 99.684 to yield 3.688%.

JPMorgan, Citigroup Global Markets Inc., HSBC Securities (USA) Inc., Wells Fargo Securities LLC and BNP Paribas Securities Corp. were the bookrunners.

The portion of notes issued by Omnicom Capital is guaranteed by Omnicom Group.

Proceeds will be used for general corporate purposes, which could include working capital expenditures, fixed asset expenditures, acquisitions, refinancing of other debt, repurchases of common stock or other capital transactions.

Omnicom’s 3.65% notes due 2024 tightened to 141 bps bid, 139 bps offered in aftermarket trading, a trader said.

The global marketing and corporate communications company is based in New York City.

WGL two-parter prices

WGL Holdings priced $225 million of senior notes (A3//A/) in tranches due 2019 and 2044 on Wednesday, a market source said.

A $100 million tranche of 2.25% notes due 2019 priced at 99.792 to yield 2.294%, or Treasuries plus 85 bps.

The company also priced $125 million of 4.6% 30-year bonds at 99.226 to yield 4.648%, or Treasuries plus 165 bps.

Both tranches sold in line with price guidance.

The bookrunners were Wells Fargo, BB&T Capital Markets and TD Securities.

Proceeds will be used for general corporate purposes.

WGL is a Washington, D.C.-based utility.

Citigroup sells preferreds

Citigroup priced $1.5 billion of 5.8% $1,000-par series N fixed-to-floating rate noncumulative perpetual preferred stock on Wednesday, according to a market source.

The dividend will be fixed until Nov. 15, 2019, at which point it will begin floating at Libor plus 409.3 bps.

Citigroup is running the books, according to a prospectus filed with the SEC.

The preferreds will be issued as depositary shares representing a 1/25th interest.

While fixed, dividends will be paid semiannually in May and November. Beginning November 2019, the dividend will be payable on a quarterly basis.

The New York-based financial institution can redeem the preferreds on or after Nov. 15, 2019 at par plus accrued dividends. Additionally, the preferreds can be redeemed in whole upon a regulatory capital treatment event, also at par plus accrued dividends.

The new preferreds will not be listed on any exchange.

Proceeds will be used for general corporate purposes, which may include funding its operating units and subsidiaries, financing acquisitions or expansions and/or refinancing or extending the maturities of existing debt.

Post-pricing, a source said he was seeing a 100.125 bid for the preferreds, adding that the paper was “maybe an eighth to a quarter [point] higher” earlier in the session.

FHLB passes

The Federal Home Loan Bank System said it would not issue Global Notes on its Oct. 22 announcement date, according to a company news release.

The government-sponsored banks for financial institutions are based in Washington, D.C.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices were higher on Wednesday, according to a market source.

Bank of America Corp.’s CDS costs rose 3 bps to 71 bps bid, 74 bps offered. Citigroup Inc.’s CDS costs were also 3 bps higher at 71 bps bid, 74 bps offered. JPMorgan Chase & Co.’s CDS costs were 5 bps higher at 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs increased 1 bp to 46 bps bid, 49 bps offered.

Merrill Lynch’s CDS costs were 3 bps higher at 74 bps bid, 77 bps offered. Morgan Stanley’s CDS costs ended 3 bps higher at 79 bps bid, 82 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 2 bps higher at 83 bps bid, 86 bps offered.

Stephanie N. Rotondo and Paul Deckelman contributed to this review

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