Vodafone prices $6 billion, joins Kellogg, Airgas; Vodafone notes trade weaker, Airgas mixed

By Aleesia Forni and Andrea Heisinger

New York, Feb. 11 - There was a fair amount of activity in the investment-grade primary market on Monday as Vodafone Group plc, Airgas Inc. and Kellogg Co. each priced multi-tranche offerings.

Vodafone sold $6 billion of notes in four maturities, with the books roughly two times oversubscribed at $12 billion, a source said. The company was last in the U.S. bond market in September.

Airgas tapped the market for $600 million of notes due 2018 and 2020 after upsizing from $500 million. The company saw about $3.5 billion of demand for the bonds, a source who worked on the trade said.

Cereal and convenience food maker Kellogg's sold $650 million of bonds in two parts. The trade saw about $2.2 billion of investor interest, a source said.

A reopening of floating-rate notes due 2016 to add $50 million was done by Inter-American Investment Corp.

The preferred stock market jumped to life as PartnerRe Ltd. sold $250 million of $25-par noncumulative perpetual shares.

Issuance is expected to be tempered this week with between $10 billion and $15 billion of volume. Deals are expected to come prior to Friday, when some desks will be more thinly staffed ahead of the President's Day holiday weekend.

Also, there could be some waiting on the sidelines to see what comes out of president Barack Obama's State of the Union Address on Tuesday night, a source said. Vodafone may be the largest trade of the week, the source added.

A syndicate source who worked on two of Monday's trades said that there are "a couple of things lined up" for Tuesday.

The Markit CDX Series 18 North American Investment Grade index widened 1 basis point to a spread of 90 bps on Monday.

The secondary market saw Vodaphone's new notes close the session 3 bps to 5 bps weaker, one market source said.

Airgas's notes due 2018 were trading 2 bps wider near the end of the session, while the notes due 2020 firmed 1 bp.

Meanwhile, Kellogg's 10-year notes were seen a fraction of a basis point tighter.

Investment-grade bank and brokerage credit default swaps costs rose during Monday's session.

Bank of America's CDS costs widened 2 bps to 120 bps bid, 124 bps offered. Citi's CDS costs were 1 bp wider at 115 bps bid, 119 bps offered. J.P. Morgan's CDS costs were unchanged at 84 bps bid, 88 bps offered. Wells Fargo's CDS costs rose 1 bp to 75 bps bid, 78 bps offered.

Merrill Lynch's CDS costs were unchanged at 110 bps bid, 120 bps offered. Morgan Stanley's CDS costs rose 1 bp to 152 bps bid, 156 bps offered. Goldman Sachs' CDS costs widened 1 bp to 142 bps bid, 146 bps offered.

Vodafone's $6 billion trade

Vodafone Group was in the market with a $6 billion sale of notes (A3/A-/A-) in five tranches, an informed source said.

A $700 million tranche of three-year floating-rate notes priced at par to yield Libor plus 38.5 bps.

There was $900 million of 0.9% three-year notes sold at a spread of Treasuries plus 55 bps. Price talk was in the 60 bps area.

A $1.4 billion tranche of 1.5% five-year notes priced at a spread of 75 bps over Treasuries. There was guidance in the 80 bps area.

The notes were quoted at 78 bps bid, 73 bps offered.

The $1.6 billion of 2.95% 10-year notes sold at Treasuries plus 105 bps. Price talk was in the 110 bps area.

A trader saw the notes at 109 bps bid, 104 bps offered at the day's close.

Finally, a $1.4 billion tranche of 4.375% 30-year bonds was sold at Treasuries plus 130 bps. There was priced talk in the 130 bps to 135 bps range.

The notes traded at 135 bps bid, 130 bps offered late in the session.

Barclays, HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Mitsubishi UFJ Securities (USA) Inc. were bookrunners.

Proceeds are being used for general corporate purposes.

London-based telecommunications company Vodafone was last in the U.S. bond market with a $2 billion trade in two tranches on Sept. 19. That sale included a 1.25% five-year note priced at 62.5 basis points over Treasuries, and a 2.5% 10-year note sold at 87.5 bps over Treasuries.

Kellogg's does two tranches

Kellogg priced $650 million of senior notes (Baa1/BBB+/BBB+) in two tranches, according to a market source.

The size was initially talked at $750 million, a source said.

A $250 million tranche of two-year floating-rate notes were sold at par to yield Libor plus 23 bps. Pricing was at the low end of talk in the Libor plus 25 bps area, plus or minus 2 bps, the source said.

There was also $400 million of 2.75% 10-year notes priced at a spread of Treasuries plus 87.5 bps. Pricing was at the tight end of talk in the 90 bps area, plus or minus 2.5 bps.

The notes were seen trading at 87 bps bid, 83 bps offered.

Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used for general corporate purposes including, along with cash on hand, to repay $750 million of 4.25% senior notes due March 6.

Kellogg's was last in the U.S. bond market with a $1.45 billion sale in three tranches on May 14, 2012. That offering included a 3.125% 10-year note sold at 145 basis points over Treasuries.

The maker of cereal and convenience foods is based in Battle Creek, Mich.

Airgas upsizes

Airgas priced $600 million of notes (Baa2/BBB/) in two tranches, a source away from the trade said.

The size of the trade was increased from $500 million, split evenly between the two maturities.

There was a $325 million tranche of 1.65% five-year bonds sold at Treasuries plus 85 bps. Pricing was at the tight end of guidance in the 95 bps area, plus or minus 10 bps.

A $275 million tranche of 2.375% bonds due 2020 was sold at 105 bps over Treasuries. The notes were sold at the low end of talk in the 115 bps area, plus or minus 10 bps.

The five-year notes were quoted 2 bps wider at 87 bps bid, 84 bps offered.

A source saw the notes due 2020 trade at 104 bps bid, 105 bps offered near the end of the session.

Bookrunners were Bank of America Merrill Lynch, Goldman Sachs & Co. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes, including to fund acquisitions, for repayment of debt under a commercial paper program and to repurchase shares under a stock repurchase program.

Airgas last tapped the U.S. bond market in a $250 million offering of 10-year notes on Nov. 19, 2012.

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

IIC's reopening

Inter-American Investment reopened its floating-rate notes (Aa2/AA/AAA) due Nov. 2016 to add $50 million, a market source away from the trade said.

The notes priced at 100.139 with a coupon of Libor plus 35 bps.

Total outstanding issuance is $400 million, including $350 million priced on Nov. 8, 2012 at Libor plus 35 bps.

Mizuho Securities USA Inc. was bookrunner for the added notes.

The agency provides financing and technical assistance to businesses in Latin America and the Caribbean and is based in Washington, D.C.

PartnerRe's preferreds

PartnerRe priced $250 million 5.875% series F noncumulative redeemable perpetual preferred stock (Expected ratings: Baa2/BBB/BBB+), according to a market source.

The shares were priced at par of $25.

The deal was upsized from $150 million and pricing came at revised talk.

A trader saw a less 17-cent bid for paper in the gray market at midday.

After the bell, another trader said that the issue had been trading between $24.80 and $24.90 "all day long."

Joint bookrunners were UBS Securities LLC, BofA Merrill Lynch, Citigroup Global Markets Inc., Credit Suisse Securities (USA) Inc. and Wells Fargo Securities LLC.

Proceeds will be used for general corporate purposes, including the redemption of all outstanding series C preferreds.

PartnerRe is a Pembroke, Bermuda-based reinsurance company.

Stephanie N. Rotondo contributed to this review

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