Cliffs, St. Jude, Airgas, PartnerRe sell notes, Citi prices trust preferreds; deals trade well

By Andrea Heisinger and Cristal Cody

New York, March 10 - St. Jude Medical, Inc., Cliffs Natural Resources, Inc., Citigroup Capital XII, Airgas, Inc. and PartnerRe Finance B LLC each priced bonds on a Wednesday that was busy but seemed quiet after the two previous, hectic days.

Despite being rated as junk, there was a lot of interest in the pricing of trust preferred securities by Citigroup unit Citigroup Capital XII. It priced $2 billion, or 80 million shares, of 8.5% 30-year trust preferreds at par of $25.

St. Jude Medical was the first of the day to price, setting terms on its $450 million of bonds due 2013.

Cliffs Natural Resources soon followed with its upsized $400 million of 10-year notes that priced tight to talk. The size was increased by $50 million.

Airgas followed the trend of the day and upsized its $300 million of notes due 2013 slightly. The amount was increased from $250 million.

PartnerRe Finance B was the last to get its upsized offering of $500 million in 10-year notes done. The size was increased from a planned $400 million.

All of the day's sales priced at the tight end of guidance, and most were increased in size.

The market tone "felt good," a source said at the end of the day. Although that should hold up on Thursday, it's unlikely the heavy stream of new deals can continue, as potential supply from borrowers is likely to be low, he said.

Another around of new offerings kept interest up in secondary high-grade trading, according to sources.

New offerings from St. Jude Medical, PartnerRe Finance, Airgas and Cliffs Natural Resources all were seen tightening in the secondary, traders said.

Also, the financial sector is not lacking for fans.

In fact, it "seems like bank and finance [is] still hot, hot, hot," one source said.

For example, in trading on Wednesday, Citigroup Inc.'s 8.5% notes due 2019 tightened 12 bps to 250 bps over Treasuries, a source reported. Also, Citigroup's 6.375% notes due 2014 firmed 7 bps to 245 bps.

Elsewhere within the sector, Bank of America Corp.'s 7.375% notes due 2014 tightened 5 bps to 170 bps over Treasuries, according to a source.

Meanwhile on Wednesday, overall Trace volume increased 9% to about $13 billion, according to a source.

In addition, the "IG13's a tad tighter," one source noted.

Mostly, though, the CDX Series 13 North American high-grade index was unchanged for a second day at a mid bid-asked spread level of 83 bps, according to a source.

Elsewhere, Treasuries reversed course and weakened on Wednesday. The yield on the 10-year Treasury note eased 2 bps to 3.72%, and the yield on the 30-year bond moved out to 4.69% from 4.67%.

Cliffs Natural upsizes 10-year

Cliffs Natural Resources sold an upsized $400 million of 5.9% 10-year senior unsecured notes (Baa3/BBB-) to yield 225 basis points over Treasuries, a market source said.

This was much tighter than initial talk of the 275 bps area, a source said. The size was originally $350 million.

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

Proceeds are being used for general corporate purposes, including funding capital expenditures, repayment of some or all of a term loan, repayment of all or parts of a share of debt from the company's Ampa Project and funding other strategic transactions.

The mining and natural resources company serving the steel industry is based in Cleveland, Ohio.

Citigroup taps trust preferred market

Citigroup Capital XII priced $2 billion, or 80 million shares, of 8.5% 30-year trust preferred securities after the sale was announced the previous day, an informed source said.

The notes (Ba1/BB-) priced at a liquidation amount of $25 each. They were talked in the 8.875% area, initially, and priced in line with revised talk in the 8.5% area.

The securities are guaranteed by Citigroup Inc.

A market source said he perceived the issuance as going "really well" because it came in line with talk.

There was buzz for most of Wednesday that if the sale went successfully, it could crack open the market again for preferred securities as it has mostly been shut since the beginning of the financial meltdown.

Citigroup was also viewed as one of the riskiest names to tap that market, with the market source commenting that "if they can do it, that's a good thing."

Another source associated with the sale said that on Tuesday initial talk "started in the low 9[% dividend] area, and was ratcheted down quite a bit."

The deal was not a surprise to most in the high-grade market. "We've known about it for a while," a source said.

Citigroup Global Markets was the bookrunner.

The securities were sold to replenish capital after a repayment of bailout money to the government.

The financial services company is based in New York City.

Issuers upsize offerings

Nearly all of the sales in the investment-grade market were increased in size by $50 million or $100 million before they priced, sources said.

Demand was the likely culprit, as investors continue to look at cheap paper. Most of the sales fit the bill as they were lower rated.

"We had the interest, so most of the names figured they'd get more sold," a source who worked on one of the sales said.

Both the Cliffs Natural Resources and Airgas deals were increased by $50 million, while the PartnerRe sale was upped by $100 million.

A $450 million offering from St. Jude Medical did not change in size.

"They knew what they wanted to get done," a source said.

Fairly low new issue concessions have pushed many companies into the market this week, although issuance may finally slow on Thursday as "supply gets done," a syndicate source said.

"I wouldn't think there's much more [out there]," he said. "It should slow down."

St. Jude offers short bond

St. Jude Medical sold $450 million of 2.2% three-year senior notes (Baa1/A/A) by early afternoon at Treasuries plus 80 bps, a source close to the sale said.

They were priced at the tight end of guidance in the 85 bps area, he said. Demand on the books was about $1.34 billion.

Bank of America Merrill Lynch and Wells Fargo Securities were active bookrunners.

The proceeds are being used to repay a term loan facility in full and for general corporate purposes.

The cardiovascular medical devices maker is based in St. Paul, Minn.

Airgas sells upsized $300 million

Airgas sold an upsized $300 million of 2.85% senior unsecured notes (Baa3/BBB) due 2013 in the afternoon to yield 145 bps over Treasuries, a market source away from the deal said.

The size was announced in a prospectus as $250 million. The notes were sold at the tight end of talk in the 150 bps area.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital and Goldman Sachs & Co.

Proceeds will be used to repay part of an outstanding revolving credit facility.

The maker of industrial gases is based in Radnor, Pa.

PartnerRe prices $500 million

PartnerRe Finance B sold an upsized $500 million of 5.5% 10-year guaranteed senior unsecured notes (A2/A/A+) to yield Treasuries plus 180 bps, an informed source said.

The size was originally $400 million, the source said. The notes priced at the tight end of guidance that was set in the range of 180 to 185 bps.

The deal is guaranteed by parent company PartnerRe Ltd.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital and Credit Suisse Securities.

Proceeds are being lent to PartnerRe U.S. Holdings to use for general corporate purposes.

The reinsurance company has its U.S. operations based in Greenwich, Conn.

St. Jude firms

In secondary trading on Wednesday, St. Jude Medical's new 2.2% notes due 2013 firmed after pricing earlier in the day, according to a source.

The notes priced at Treasuries plus 80 bps.

In the late afternoon, a trader "saw the bonds offered at +75 earlier and more recently at +74."

PartnerRe tighter in secondary

Also firming were the new notes from PartnerRe Finance. It priced $500 million of 5.5% guaranteed notes due 2020 at Treasuries plus 180 bps.

The 10-year notes were seen late in the secondary market trading firmer at 173 bps bid, 171 bps offered, a trader said.

Airgas stronger

In addition on Wednesday, the new offering from Airgas saw activity in the secondary, one trader said.

Airgas priced $300 million of 2.85% notes due 2013 at Treasuries plus 145 bps earlier in the day.

The 3-year notes traded stronger at 141 bps, 139 bps offered near the market close, the trader said.

Cliffs Natural Resources tightens

Also in secondary trading, the new notes due 2020 from Cliffs Natural Resources were seen firmer.

Cliffs priced $400 million of 5.9% 10-year notes at Treasuries plus 225 bps.

Late in the day, the notes tightened to 195 bps bid, 185 bps offered, one trader said.

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