HP sale struggles; Honda arm, Stryker, CIBC price paper; HP deal sends tech paper wider

By Andrea Heisinger and Cristal Cody

New York, Sept. 13 - The flow of issuance got off to a slow start in the high-grade bond market on Tuesday, but by mid-afternoon there was a full calendar of deals to be priced.

Hewlett-Packard Co. had a late addition to the market with its $4.5 billion offering in five tranches. The company sold debt to help pay for an acquisition.

Medical technology company Stryker Corp. sold $750 million of five-year senior notes in a deal that had a do-not-grow clause on it.

There was a $1.4 billion sale from American Honda Finance Corp. that was done in three parts in the Rule 144A market.

The smallest offering of the day was from Western Massachusetts Electric Co. with $100 million of 10-year paper.

There was a $2 billion sale of three-year covered bonds from Canadian Imperial Bank of Commerce. The paper was sold under Rule 144A.

Qwest Corp. announced a sale of $25-par senior notes. Pricing for the $250 million 40-year offering is expected on Wednesday.

Pebblebrook Hotel Trust is planning a sale of $25-par preferred shares. The size is talked at $75 million.

Issuers slowly trickled into the market throughout the morning after Hewlett-Packard announced its sale. As it struggled to find investors, some braved the market while others again chose to stand down and see what Wednesday looks like.

"Because HP didn't do as well as everyone thought it would, a lot of people are nervous," a syndicate source said. "They're going to be slow to announce [on Wednesday]. Everybody's going to see who the first to announce is and then decide."

The deal from Hewlett-Packard sent the whole sector down in secondary trading, sources said.

"On the back of the Hewlett-Packard new deal, the tech space was probably 10 to 30 basis points wider," a trader said.

HP's existing bonds traded wider in the secondary market before the new deal priced. Dell Inc.'s new bonds also moved out in trading.

Overall trading volume jumped to more than $12.5 billion from $8 billion on Monday.

Financial paper was stronger in trading. Bank of America Corp.'s paper traded "anywhere from 5 [bps] to 20 [bps] better," a trader said. Toronto-Dominion Bank's paper also was active in the secondary market.

A trader saw bank credit default swaps costs drop on Tuesday. Bank of America was down 25 bps to 345 bps, 360 bps, and JPMorgan's CDS costs dropped 7 bps to 125 bps, 133 bps.

Brokerage firm/investment bank CDS costs were lower. Merrill Lynch's CDS costs dropped 20 bps to 385 bps, 405 bps. Morgan Stanley's CDS costs fell 13 bps to 330 bps, 340 bps. Goldman Sachs' CDS costs fell 18 bps to 245 bps, 255 bps.

The Markit CDX Series 16 North American Investment Grade index firmed 5 bps to a spread of 131 bps on Tuesday.

Treasuries fell as stocks improved. The benchmark 10-year Treasury note yield rose 4 bps to 1.99%. The 30-year bond yield closed up 8 bps at 3.33%.

HP's $4.5 billion deal

Hewlett-Packard sold $4.5 billion of global notes (A2/A/A+) in five tranches late in the day, an informed source said.

The sale was announced early but took until after the market close to get priced.

"I heard it wasn't too well received," said a source away from the sale. "It priced at whispers."

Despite this, a tranche of floating-rate notes was added to the sale on reverse inquiry.

A $350 million tranche of three-year floaters sold at par to yield Libor plus 155 bps.

There was a $750 million tranche of 2.35% notes due 2015 priced at a spread of 200 bps over Treasuries.

A third part was $1.2 billion of 3% five-year notes sold at Treasuries plus 215 bps.

The $1 billion of 4.375% 10-year notes priced at a spread of 240 bps over Treasuries.

Finally, there was $1.2 billion of 6% 30-year bonds sold at Treasuries plus 270 bps.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Barclays Capital Inc. were active bookrunners.

Proceeds are being used to fund the pending $11 billion acquisition of British software company Autonomy.

The 10-year-and 30-year tranches each have a mandatory redemption at 101 if the acquisition is not done on or prior to Oct. 1, 2012.

HP last sold notes in a $5 billion deal in five parts on May 25.

The company's existing bonds traded wider in the secondary market before the new deal priced, a trader said.

One standout was HP's 4.3% notes due 2021, which widened 30 bps on Tuesday to 215 bps bid, 205 bps offered, the trader said.

The information technology company is based in Palo Alto, Calif.

Honda arm sells three tranches

American Honda Finance priced $1.4 billion of notes (A1/A+) in three tranches, a source close to the trade said.

The $400 million of 1.85% three-year notes sold at a spread of Treasuries plus 153 bps. They were sold at the low end of guidance in the 155 bps area.

A $500 million tranche of 2.6% five-year notes priced at a spread of 173 bps over Treasuries. The notes were priced at the tight end of talk in the 175 bps area.

The third part was $500 million of 3.8% 10-year notes sold at Treasuries plus 185 bps. The tranche sold at the low end of talk in the 185 bps to 190 bps range.

The bonds were sold under Rule 144A and Regulation S.

The bookrunners were Bank of America Merrill Lynch, Barclays, Citigroup and Deutsche Bank Securities Inc.

Proceeds are being used to repay borrowings related to finance operations and for general corporate purposes.

American Honda last priced notes in a $450 million sale of floating-rate notes due 2012 on Feb. 23, 2011.

The U.S. financing arm of Honda Financial Services is based in Torrance, Calif.

Stryker's five-years

Stryker sold $750 million of 2% five-year senior notes (A3/A+) to yield 115 bps over Treasuries, an informed source said.

They sold at the tight end of guidance in the 120 bps area, plus or minus 5 bps. This was even tighter than the initial whispers in the 130 bps area, the source said.

"There was plenty of demand," she said. "It did phenomenal compared to HP. There was north of $3.5 billion [on the books]."

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

Proceeds are being used for working capital and general corporate purposes including acquisitions, stock repurchase and other business opportunities.

The notes were seen in the early afternoon at 110 bps bid, 108 bps offered in the secondary market, a trader said. Going out, the notes traded around 111 bps bid, 108 bps offered, another trader said.

The medical technology company is based in Kalamazoo, Mich.

Western Massachusetts prices

Western Massachusetts Electric priced $100 million of 3.5% 10-year senior notes, series F, (Baa2/BBB+/BBB+) to yield Treasuries plus 162.5 bps, according to an FWP filing with the Securities and Exchange Commission.

Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. were the bookrunners.

Proceeds are being used to refinance short-term debt outstanding to affiliates under a money pool arrangement and revolving credit facility. They will also be used for general working capital purposes, including to finance capital expenditures.

The subsidiary of Northeast Utilities is based in Springfield, Mass.

CIBC's covered bonds

Canadian Imperial Bank of Commerce sold $2 billion of 0.9% three-year covered bonds (Aaa/AAA/AAA) to yield Treasuries plus 58.7 bps, a market source said.

The deal was sold under Rule 144A and Regulation S.

The bookrunners were CIBC World Markets, HSBC Securities (USA) Inc., J.P. Morgan Securities LLC and RBS Securities Inc.

The chartered bank is based in Toronto.

Qwest preps $25 notes

Qwest is planning to issue $25-par senior notes (Baa3/BBB-/BBB-), according to a prospectus filed with the Securities and Exchange Commission.

The company is expected to issue $250 million of the 40-year notes.

Price talk is around 7.5%, according to a trader. A second trader said that the coupon could go as low as 7.375% and that the size of the deal is likely to grow.

Bank of America Merrill Lynch, Morgan Stanley, UBS Securities LLC and Wells Fargo are the joint bookrunning managers.

Proceeds will be used to redeem a portion of the company's $1.5 billion of outstanding 8.875% notes.

Qwest, a subsidiary of CenturyLink, Inc., is a Monroe, La.-based telecommunications provider.

Pebblebrook plans preferreds

Pebblebrook Hotel Trust announced a sale of $25-par series B cumulative redeemable preferred stock, according to a 424B5 filing with the SEC.

The $75 million deal is being talked in the 8% area.

The preferreds are callable starting in September 2016 at $25 plus accrued distributions.

Bank of America Merrill Lynch, Raymond James & Associates and Wells Fargo are the bookrunners.

The hotel investment company is based in Bethesda, Md.

Dell wider

Dell's bonds also traded wider along with other tech bonds in the secondary market on Tuesday.

The company's 5.4% bonds due 2040, sold earlier this month at Treasuries plus 175 bps, widened to 237 bps bid, 227 bps offered on Tuesday, a trader said.

"Those were 207, 197 going out yesterday," the trader said.

The technology and IT company is based in Round Rock, Texas.

Toronto-Dominion Bank trades

In other trading, Toronto-Dominion Bank's 2.5% senior medium-term notes due 2016 were seen early Tuesday at 115 bps bid, 105 bps offered, a trader said.

Toronto-Dominion Bank sold $1.25 billion of the notes on July 7 at Treasuries plus 85 bps.

The bank and financial services company is based in Toronto.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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