Packed primary session sees Citigroup, CVS, Berkshire Hathaway price; bond spreads ease

By Cristal Cody and Aleesia Forni

Virginia Beach, Aug. 7 – The primary market was flooded with new deals on Thursday, with around $10 billion of high-grade paper pricing during the session.

The new-issue market saw Citigroup Inc. sell a $1.5 billion two-part offering of fixed- and floating-rate notes due 2017.

A source noted that the fixed-rate tranche sold at the tight end of talk, which had firmed slightly from earlier guidance.

CVS Caremark Corp. also issued $1.5 billion of senior notes, selling the two-part offering in tranches due 2019 and 2024.

Both tranches of the new deal priced at the tight end of talk.

In another two-part offering, Berkshire Hathaway Inc. sold $1.15 billion of senior notes in tranches due 2017 and 2019 tight of price guidance.

QVC Inc. also came to market on Thursday, selling $1 billion of crossover bonds at the tight end of talk.

The primary also saw Pacific Gas and Electric Co., HCP Inc. and Union Pacific Corp. sell upsized offerings on Thursday.

PG&E upsized its offering by $75 million, pricing a $575 million issue of senior notes in two tranches tight of guidance.

HCP’s new $800 million issue of 10-year notes was upsized by $200 million.

Meanwhile, Union Pacific sold a $700 million two-part issue of senior notes at the tight end of talk.

The deal was upsized from an original size of $600 million.

WellPoint Inc. was also in the market on Thursday, though details of the sale were unavailable at press time.

The day’s action brings the total supply for the week to roughly $24 billion, topping what sources had predicted to be a $15 billion week.

“Just very busy today,” one source said near the end of the session.

Investment-grade bonds softened on the large supply, according to market sources.

The Markit CDX North American Investment Grade series 22 index eased 2 basis points to a spread of 68 bps.

Union Pacific’s existing 4.75% bonds due 2043 were weaker following the company’s new deal, a source said.

Citigroup two-parter

Citigroup was in Thursday’s market with a $1.5 billion offering of three-year senior notes (Baa2/A-/A) in fixed- and floating-rate tranches at the tight end of talk, an informed source said.

The bank sold $250 million of three-year floaters at par to yield Libor plus 49 bps.

There was also a $1.25 billion tranche of 1.55% three-year notes sold at 99.86 to yield 1.598%, or Treasuries plus 72 bps.

The fixed-rate notes sold at the tight end of the Treasuries plus 75 bps area talk, which had firmed slightly from earlier guidance in the high-70 bps over Treasuries area.

Citigroup Global Markets Inc. was the bookrunner.

The bank is based in New York.

CVS prices tight

In other primary happenings, CVS Caremark sold a $1.5 billion two-part offering of senior notes (Baa1/BBB+/) on Thursday at the tight end of talk, according to a market source and an FWP filed with the Securities and Exchange Commission.

The company sold $850 million of 2.25% five-year notes at 99.944 to yield 2.262%, or Treasuries plus 65 bps.

There was also $650 million of 3.375% notes due 2024 priced with a spread of Treasuries plus 105 bps.

The notes sold at 99.078 to yield 3.485%.

Barclays, J.P. Morgan Securities LLC, BofA Merrill Lynch, BNY Capital Markets Corp. and Wells Fargo Securities LLC were the bookrunners for the offering.

Proceeds will be used to repay commercial paper and for general corporate purposes, which may include a tender offer.

The pharmacy retailer is based in Scarsdale, N.Y.

Berkshire Hathaway new issue

Berkshire Hathaway Inc. sold $1.15 billion of senior notes (Aa2/AA/) in two parts on Thursday, according to an informed source and two separate FWP filings with the SEC.

A $400 million tranche of three-year floaters, issued by Berkshire Hathaway Finance Corp., sold at par to yield Libor plus 12.5 bps.

Berkshire Hathaway Inc. issued $750 million of 2.1% five-year notes at Treasuries plus 50 bps.

Pricing was at 99.991 to yield 2.102%.

BofA Merrill Lynch, Goldman Sachs & Co. and Wells Fargo Securities were the joint bookrunners.

Proceeds will be used to repay the company’s $750 million of senior notes due Aug. 15, 2014. Any remaining proceeds will be used for general corporate purposes.

Berkshire Hathaway is an Omaha-based holding company for various subsidiaries.

QVC sells crossovers

QVC sold a $1 billion split-rated offering of senior notes (Ba2/BBB-/BBB-) in two tranches on Thursday, according to a market source.

A $600 million tranche of 4.45% 10.5-year notes priced at Treasuries plus 205 bps, at the tight end of spread talk in the 210 bps area. The notes priced at 99.86 to yield 4.467%.

A $400 million tranche of 5.45% 20-year notes priced at Treasuries plus 225 bps, at the tight end of the Treasuries plus 230 bps area. The notes priced at 99.784 to yield 5.468%.

The deal was priced on the investment-grade desk.

Credit Agricole CIB, Morgan Stanley & Co. LLC and Wells Fargo Securities were the active bookrunners. Morgan Stanley will bill and deliver for the 20-year notes. Wells Fargo will bill and deliver for the 10.5-year notes.

The West Chester, Pa.-based company plans to use the proceeds to redeem its 7.5% senior secured notes due October 2019 as well as for working capital and other general corporate purposes.

QVC is a cable, satellite and broadcast television network specializing in televised home shopping.

HCP sells 10-years

Also on Thursday, HCP Inc. priced an upsized $800 million issue of 3.875% 10-year senior notes on Thursday at Treasuries plus 150 bps, according to a market source and a 424B5 filed with the SEC Commission.

The notes (Baa1/BBB+/BBB+) sold at 99.63 to yield 3.92%.

Pricing was at the tight end of talk.

BofA Merrill Lynch, Barclays, Morgan Stanley, RBC Capital Markets LLC and UBS Securities LLC were the joint bookrunners.

Proceeds will be used to repay $300 million under the company’s revolving line of credit.

Any remaining proceeds from the offering will be used for general corporate purposes.

The real estate investment trust for the health-care industry is based in Long Beach, Calif.

PG&E upsizes

In another upsized new issue, Pacific Gas and Electric sold $575 million of senior notes in two parts on Thursday, according to market source and an FWP filing with the SEC.

The deal was upsized from earlier thoughts of $500 million.

PG&E priced $350 million of 3.4% 10-year notes at 99.925 to yield 3.409%, or Treasuries plus 98 bps.

The company also priced a $225 million tap of its existing 4.75% senior notes due Feb. 15, 2044 with a spread of Treasuries plus 115 bps.

Pricing was at 106.042 to yield 4.38%.

The original $450 million issue priced at Treasuries plus 105 bps on Feb. 18.

The bookrunners were BofA Merrill Lynch, Goldman Sachs, RBC Capital Markets and Wells Fargo Securities.

Proceeds will be used for general corporate purposes.

The electric and natural gas utility is based in San Francisco.

Union Pacific’s $700 million

Thursday also saw Union Pacific sell an upsized $700 million issue of senior notes (A3/A/) in two parts, according to two separate FWP filings with the SEC.

A $350 million tranche of 3.25% 10.5-year bonds sold with a spread of 85 bps over Treasuries.

The notes sold at 99.669 to yield 3.288%.

There was also a $350 million tranche of 4.15% long 30-year bonds sold at 99.472 to yield 4.24%, or Treasuries plus 100 bps.

JPMorgan, BofA Merrill Lynch and Morgan Stanley were the bookrunners.

Proceeds will be used for general corporate purposes, including the repurchase of common stock.

The railroad transportation company is based in Omaha.

Union Pacific notes soften

Union Pacific’s existing 4.75% bonds due 2043 ended lower at 107.91 to yield 4.27% from where the notes last traded on Wednesday at 108.61 to yield 4.23%, a market source said.

The bonds remain better than issuance, according to the market source.

The railroad transportation company sold $500 million of the bonds on Oct. 22, 2013 at 99.958 to yield 4.752%.

Paul A. Harris contributed to this review.

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