EMC, Beam, Aflac among primary issuers; secondary spreads rebound slightly following weak open

By Aleesia Forni and Andrea Heisinger

New York, June 3 - Issuers poured into the high-grade bond market Monday after the previous short week showed volatility.

Although many of the day's sales were benchmark size or less, there were some in multiple tranches.

Cloud computing company EMC Corp. priced $5.5 billion of bonds in three parts. The sale contained maturities of 2018, 2020 and 2023.

The sale was slightly oversubscribed at about $7.7 billion total, an informed source said. The five-year notes saw about $3.6 billion of demand, while the seven-year tranche had about $2.6 billion on the books. The 10-year tranche had about $1.5 billion of investor interest.

Beam Inc. was in the market with a $500 million trade in two parts. There was a five-year maturity and a 10-year note.

Buckeye Partners, LP sold $500 million of 10-year senior notes, while Aflac Inc. priced $700 million of 10-year senior paper after the size was increased from $500 million.

PacifiCorp sold a $300 million offering of 10-year mortgage bonds. The size had a do-not-grow provision, a source said. Terms were not available at press time.

Meanwhile, NextEra Energy Capital Holdings Inc. priced $250 million of 10-year debentures.

A private $250 million trade of 10-year notes was conducted by Lexington Realty Trust. Terms were not available at press time.

There was a crossover sale of 10-year subordinated Tier 2 notes totaling $1 billion from the Royal Bank of Scotland Group plc. The trade was done on the high-grade syndicate desk.

London-based Petrofac Ltd. announced an offering of notes due 2018 and 2023, to be priced under Rule 144A and Regulation S. It could not be confirmed at press time if the issue had been priced.

Although there was a healthy slate of new bonds in the market, the tone was "not that great" from the outset, a market source said.

"Most of these [issuers] needed to get funding done," he said.

At least a couple of the day's sales priced wider than guidance, which has been a rarity in recent weeks when investors clamored for any investment-grade paper they could get their hands on.

The day's amount of issuance got a week that's expected to see between $15 billion and $20 billion of supply off to a good start.

The preferred stock market saw a duo of new offerings announced.

Safe Bulkers Inc. announced a sale of series B cumulative redeemable preferred stock.

Price talk was around 8%, a trader said at midday, though he had not seen any markets for the Incapital LLC-led deal.

"Usually these things are done in a best-efforts kind of way," he said.

AmTrust Financial Services Inc. also said it would price a deal, at least $100 million of series A noncumulative perpetual preferreds.

Price talk was around 6.75%, and the size was expected to grow, the trader said.

Shortly after the market close, a market source noted that AmTrust had yet to price, also remarking that Safe Bulkers was expected to come later in the week.

"The market was [so bad] today, I don't think anything got done in the primary," the source said.

The Markit CDX Series 20 North American Investment Grade index was 1 basis point tighter at a spread of 79 bps.

Meanwhile, spreads in the high-grade secondary bond market opened mostly wider on Monday, one trader said.

"Weak tone to start today," the source said at midday.

However, spreads rebounded later during the day's trading, a source at another desk said.

Next Era's new issue was quoted 1 bp wider near Monday's close, while Roper Industries Inc.'s notes traded tighter on the day.

Investment-grade bank and brokerage credit default swap costs rose on Monday, according to a market source.

Bank of America Corp.'s CDS costs were 3 bps wider at 99 bps bid, 103 bps offered. Citigroup Inc.'s CDS costs were 2 bps wider at 92 bps bid, 97 bps offered. JPMorgan Chase & Co.'s CDS costs rose 1 bp to 78 bps bid, 83 bps offered. Wells Fargo & Co.'s CDS costs were 2 bp wider at 66 bps bid, 71 bps offered.

Merrill Lynch's CDS costs rose 2 bps to 84 bps bid, 94 bps offered. Morgan Stanley's CDS costs rose 4 bps to 130 bps bid, 135 bps offered. Goldman Sachs Group, Inc.'s CDS costs were 3 bps wider at 117 bps bid, 122 bps offered.

EMC prices wide

EMC priced $5.5 billion of bonds (A1/A/) in three tranches, an informed source said.

A $2.5 billion tranche of 1.875% five-year notes sold at a spread of Treasuries plus 85 bps. Guidance was in the 85 bps to 90 bps range.

The second part was $2 billion of 2.65% seven-year bonds priced 115 bps over Treasuries. Talk was in the 110 bps to 115 bps range.

Finally, there was $1 billion of 3.375% 10-year notes sold at a spread of Treasuries plus 125 bps. There was talk in the 115 bps to 120 bps range.

Active bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC. Passives were Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co., Morgan Stanley & Co. LLC, RBS Securities Inc., UBS Securities LLC and Wells Fargo Securities LLC.

Proceeds are being used to repay all outstanding 1.75% convertible notes due Dec. 1, 2013 and for general corporate purposes.

The hybrid cloud computing company is based in Hopkinton, Mass.

RBS does sub notes

Royal Bank of Scotland Group completed a $1 billion sale of 6.1% 10-year subordinated Tier 2 notes (Ba2/BB+/BBB-) at a spread of Treasuries plus 400 bps, an informed source said.

Guidance was in the high 300 bps area, around 380 bps, the source said.

Bookrunners were RBS Securities, Citigroup Global Markets and Deutsche Bank Securities.

Proceeds are being used to fund the purchase of subordinated notes in a concurrent cash tender offer and for general corporate purposes.

The financial services company is based in Edinburgh.

Aflac upsizes

Aflac priced an upsized $700 million trade of 3.625% 10-year senior notes (A3/A-/) at par to yield 3.625%, according to a press release.

The size was increased from $500 million, a source said.

"This debt issuance allows us to take advantage of favorable market conditions to facilitate our repayment of outstanding debt over the next two years," Aflac president and chief financial officer Kriss Cloninger III said in the press release.

Bookrunners were Goldman Sachs, Mizuho Securities USA Inc., Morgan Stanley and JPMorgan.

Proceeds are being used to repay, redeem or repurchase one or more of ¥28.7 billion 1.47% Samurai notes due July 2014, ¥5.5 billion variable-rate Samurai notes due July 2014 and $300 million of 3.45% senior notes due August 2015 and for general corporate purposes.

Aflac last sold bonds in a $250 million reopening of 2.65% notes due 2017 on July 27, 2012.

The company provides supplemental health and life insurance company through its subsidiaries and is based in Columbus, Ga.

NextEra sells 10-year

NextEra Energy Capital Holdings was in the day's market with a $250 million offering of 3.625% 10-year debentures (Baa1/BBB+/A-) priced at a spread of Treasuries plus 150 bps, a source close to the sale said.

A trader quoted the notes at 151 bps bid on Monday.

BofA Merrill Lynch, JPMorgan, RBC Capital Markets LLC and RBS Securities were bookrunners.

Proceeds will be added to the company's general funds and used to repay at maturity Next Era Energy Capital's $250 million of 5.35% debentures due June 15, 2013.

The sale is guaranteed by NextEra Inc.

NextEra last priced bonds in a $500 million sale of 1.2% notes due 2015 on Sept. 18, 2012.

The energy company is based in Juno Beach, Fla.

Beam offers $500 million notes

Beam was in the day's session with a $500 million sale of notes (Baa2/BBB-/BBB) in two parts, a market source said.

A $250 million tranche of 1.75% five-year notes sold at a spread of Treasuries plus 75 bps.

The second part was $250 million of 3.25% 10-year notes priced at a spread of 115 bps over Treasuries.

Active bookrunners were BofA Merrill Lynch and Credit Suisse Securities (USA) LLC. Passives were Barclays, JPMorgan and RBS Securities.

Proceeds are being used to purchase $326 million of 6.275% notes due 2014 and an aggregate total of up to $175 million of 8.625% debentures due 2021, 7.875% notes due 2023, 6.625% debentures due 2028 and 5.875% notes due 2036 in cash tender offers.

Beam was last in the U.S. bond market with a $600 million offering of notes in two tranches on May 10, 2012. That sale included 1.875% five-year bonds priced at 115 bps over Treasuries and 3.25% 10-year notes priced at Treasuries plus 150 bps.

The maker and distributor of premium spirits is based in Deerfield, Ill.

Buckeye does 10-year notes

Buckeye Partners priced $500 million of 4.15% 10-year senior notes (Baa3/BBB-/) during the day's session to yield Treasuries plus 205 bps, a market source said.

Barclays, SunTrust Robinson Humphrey Inc. and Wells Fargo were bookrunners.

Proceeds are being used to repay amounts outstanding at maturity on $300 million of 4.625% notes due July 15, 2013 and for general corporate purposes.

Buckeye was last in the U.S. bond market with a $650 million trade of 4.875% 10-year notes priced at 160 bps over Treasuries on Jan. 4, 2011.

The master limited partnership owns a refined petroleum products pipeline system and is based in Houston.

AmTrust to price perpetuals

AmTrust Financial Services intends to price at least $100 million of series A noncumulative perpetual preferreds, the company said in a prospectus filed with the Securities and Exchange Commission.

Price talk was around 6.75%, according to a trader.

Morgan Stanley, UBS Securities, Goldman Sachs and JPMorgan are the joint bookrunning managers.

The New York-based reinsurance company intends to list the new series of preferreds on the New York Stock Exchange.

Proceeds will be used for general corporate purposes.

Safe Bulkers plans preferreds

Safe Bulkers is planning a public offering of series B cumulative redeemable preferred stock, according to a prospectus filed with the SEC.

The public offering is being done concurrently with a private placement of the same series of shares to Chalkoessa Maritime Inc., an entity associated with the company's chief executive officer.

Incapital LLC is the sole structuring agent and is also a bookrunner along with DNB Markets.

If the company experiences a covenant, cross or dividend payment default, or if the preferreds are not redeemed in whole by July 30, 2018, the dividend rate will increase 1.25 times.

The Athens-based provider of marine dry bulk transportation intends to list the shares on the New York Stock Exchange.

Proceeds will be used for vessel acquisitions, capital expenditures and other general corporate purposes, including the repayment of debt.

Roper firms

The secondary market saw Roper Industries, Inc.'s $800 million of 2.05% five-year senior notes trade at 80 bps bid, 75 bps offered on Monday.

A source at another desk had quoted the notes at 110 bps bid, 105 bps early Friday following Thursday's sale at a spread of Treasuries plus 110 bps.

The diversified industrial technology company is based in Sarasota, Fla.

Stephanie N. Rotondo contributed to this review.

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