Issuance rush continues despite signs of fatigue; SoCal Gas firms; Kinder Morgan widens

By Aleesia Forni and Cristal Cody

Virginia Beach, Sept. 8 – Kinder Morgan Energy Partners LP, Brandywine Operating Partnership, LP, Paccar Financial Corp. and Starwood Hotels & Resorts Worldwide Inc. were among the issuers bringing new deals to the primary during another busy session for the high-grade market.

Kinder Morgan came to market with $1.2 billion of senior notes in two tranches.

The deal was upsized from initial thoughts of $1 billion and priced around 20 basis points tight of initial guidance, attracting an orderbook that was more than three times oversubscribed.

Starwood Hotels also sold an upsized offering of notes on Monday, pricing a $650 million two-part issue of senior notes.

In other primary happenings, Paccar Financial sold a $300 million offering of notes at the tight end of talk.

However, not all deals priced on Monday were met with strong demand from investors.

Following last week’s more than $56 billion of new issuance, the market was “certainly showing some signs of fatigue” to begin the week, a market source said.

Both tranches of Brandywine’s $500 million new issue of notes did not firm at all from initial guidance to pricing.

The session also saw new deals price from Southern California Gas Co., Credit Suisse AG, PECO Energy Co. and Valmont Industries Inc.

France’s BPCE SA was also in the market with a subordinated note offering, though details of the sale were unavailable at press time.

The primary also saw National Penn Bancshares Inc. join the forward calendar, announcing plans to bring to market a $100 million offering of 10-year notes.

Investment-grade credit spreads softened on Monday following another busy round of primary activity, according to market sources.

The Markit CDX North American Investment Grade series 22 index eased 1 bp to a spread of 57 bps.

Southern California Gas’ 3.15% mortgage bonds due 2024 headed out 5 bps better in the secondary market as the session closed, a trader said.

PECO Energy’s 4.15% mortgage bonds due 2044 traded about 1 bp tighter, a trader said.

Kinder Morgan’s two tranches of bonds widened 3 bps in aftermarket trading, according to a trader.

In other new issue trading, Valmont Industries’ two tranches of notes firmed 1 bp, a trader said.

Starwood Hotels’ 3.75% notes due 2025 narrowed on the offered side, a trader said.

The offering from Brandywine was not seen in late afternoon trading, a trader said.

Kinder Morgan upsizes

Kinder Morgan Energy Partners sold an upsized $1.2 billion of senior notes (Baa2/BBB/BBB) in two tranches on Monday, according to a market source and an FWP filed with the Securities and Exchange Commission.

Both tranches sold at the tight end of talk, which had firmed around 20 bps from initial guidance.

The sale included $650 million of 4.25% 10-year notes priced at 99.832 to yield 4.271%, or Treasuries plus 180 bps.

A $550 million tranche of 5.4% 30-year bonds sold at 99.604 to yield 5.427%, or Treasuries plus 220 bps.

Kinder Morgan’s 4.25% notes due 2024 eased to 183 bps bid, 181 bps offered in the secondary market, according to a trader.

The company’s 5.4% notes due 2044 widened to 223 bps bid, 221 bps offered in aftermarket trading.

The bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, DNB Markets, Mizuho Securities, SunTrust Robinson Humphrey Inc. and UBS Securities LLC.

Proceeds will be used to repay commercial paper debt and for general corporate purposes.

Kinder Morgan is a Houston-based pipeline operator.

Credit Suisse brings floaters

Also on Monday, Credit Suisse AG, acting through its New York branch, priced $779.5 million of floating-rate notes due March 11, 2016 at par to yield Libor plus 30 bps, according to an FWP filing with the SEC.

Credit Suisse Securities was the bookrunner.

Proceeds will be used for general corporate purposes, according to a 424B2 filed with the SEC.

The financial services company is based in Zurich.

Starwood upsizes

Starwood Hotels & Resorts priced an upsized $650 million of senior notes in two parts, according to an FWP filed with the SEC.

A $350 million tranche of 3.75% 10.5-year notes priced at 98.913 to yield 3.877%.

The notes sold with a spread of Treasuries plus 140 bps.

There was also a $300 million tranche of 4.5% notes due 2034 priced at 97.09 to yield 4.726%, or Treasuries plus 150 bps.

In the secondary market, Starwood Hotels’ 3.75% notes due 2025 firmed to 137 bps offered, a trader said.

The tranche of 4.5% notes due 2034 was not seen in aftermarket trading.

The bookrunners were Citigroup Global Markets and JPMorgan.

Proceeds will be used for general corporate purposes, which may include the repayment of commercial paper, repurchases of common stock or the payment of special dividends to stockholders.

Starwood is a Stamford, Conn.-based hotel and leisure company.

Valmont new issue

The primary also saw Valmont Industries sell $500 million of senior notes (Baa2/BBB+/) in tranches due 2044 and 2054, according to a market source.

There was $250 million of 5% 30-year bonds priced at Treasuries plus 180 bps.

A second $250 million tranche of 5.25% notes due 2054 priced with a spread of Treasuries plus 210 bps.

Valmont Industries’ notes due 2044 headed out in secondary trading at 179 bps bid, 178 bps offered, a trader said.

The company’s tranche of notes due 2054 were quoted late afternoon trading at 209 bps offered.

The bookrunners were Goldman Sachs & Co., BofA Merrill Lynch, U.S. Bancorp Investments Inc., JPMorgan and Wells Fargo Securities LLC.

Proceeds will be used to fund a tender offer as well as for general corporate purposes.

The Omaha-based company designs and manufactures fabricated metal products.

Brandywine two-parter

Brandywine Operating Partnership priced $500 million of guaranteed notes (Baa3/BBB-/) in tranches due 2024 and 2029, according to a market source and an FWP filed with the SEC.

Both tranches sold in line with talk, which was unchanged from initial guidance.

There was $250 million of 4.1% 10-year notes priced at 99.388 to yield 4.175%, or Treasuries plus 170 bps.

A $250 million tranche of 4.55% notes due 2029 priced at 99.191 to yield 4.625%, or Treasuries plus 215 bps.

Bookrunners were Wells Fargo Securities, Barclays, Jefferies & Co. and RBC Capital Markets LLC.

Proceeds will be used to fund a tender offer and to repay borrowings under the company’s three-year unsecured term loan due 2015 and four-year unsecured term loan due 2016.

The notes are guaranteed by Brandywine Realty Trust.

The real estate investment trust for office and industrial properties is based in Radnor, Pa.

SoCal Gas mortgage bonds

Southern California Gas priced $500 million of 3.15% 10-year first mortgage bonds, series PP, at Treasuries plus 72 bps, according to a market source and an FWP filed with the SEC.

The bonds (Aa2/A+/AA-) sold at the tight end of talk.

Pricing was at 99.634 to yield 3.193%.

Southern California Gas’ 3.15% mortgage bonds due 2024 tightened to 67 bps bid, 66 bps offered in the secondary market, a trader said.

BNP Paribas Securities Corp., BofA Merrill Lynch, Ramirez & Co. Inc. and UBS Securities were the bookrunners.

Proceeds will be used to repay commercial paper and for general corporate purposes.

The natural gas distributor is based in Los Angeles.

PECO prices tight

In other primary happenings, PECO Energy sold $300 million of 4.15% first and refunding mortgage bonds (/A-/A/) due 2044 with a spread of 95 bps over Treasuries, according to a market source and an FWP filed with the SEC.

The notes sold tight of price guidance.

Pricing was at 99.657 to yield 4.17%.

PECO Energy’s 4.15% mortgage bonds due 2044 edged tighter to 94 bps bid, 93 bps offered in secondary trading, according to a trader.

The joint bookrunners were Mitsubishi UFJ Securities (USA), Inc., Mizuho Securities, RBS Securities Inc., BNY Mellon Capital Markets, LLC and TD Securities (USA) LLC.

Proceeds will be used to pay at maturity $250 million 5% first mortgage bonds due Oct. 1, 2014 and for other general corporate purposes. Any remaining proceeds are expected to be temporarily invested in short-term interest-bearing obligations.

The electric and natural gas transmission subsidiary of Exelon is based in Philadelphia.

Paccar brings $300 million

Paccar Financial priced $300 million of 2.2% notes (A1/A+/) due 2019 at Treasuries plus 50 bps, according to a market source and an FWP filed with the SEC.

The notes sold at the tight end of talk.

Pricing was at 99.943 to yield 2.212%.

The underwriters were MUFG, Barclays, Citigroup Global Markets, JPMorgan, Mizuho Securities, TD Securities and Williams Capital Group LP.

The provider of retail and commercial truck financing for Paccar Inc. is based in Bellevue, Wash.

National Penn on deck

National Penn Bancshares is in the market with a $100 million offering of senior notes due 2024, according to a market source and a 424B5 filed with the SEC.

The deal is expected to price on Tuesday.

Sandler O’Neill + Partners LP and Credit Suisse Securities are the bookrunners.

Proceeds will be used for general corporate purposes.

Located in Boyertown, Pa., National Penn Bancshares is the holding company for National Penn Bank.

Bank/brokerage CDS costs up

Investment-grade bank and brokerage CDS prices were higher on Monday, according to a market source.

Bank of America Corp.’s CDS costs were 2 bs wider at 66 bps bid, 69 bps offered. Citigroup Inc.’s CDS costs increased 1 bp to 65 bps bid, 68 bps offered. JPMorgan Chase & Co.’s CDS costs were 2 bps higher at 54 bps bid, 58 bps offered. Wells Fargo & Co.’s CDS costs ended 1 bp higher at 40 bps bid, 45 bps offered.

Merrill Lynch’s CDS costs increased 2 bps to 68 bps bid, 72 bps offered. Morgan Stanley’s CDS costs ended 1 bp higher at 74 bps bid, 77 bps offered. Goldman Sachs Group, Inc.’s CDS costs widened 2 bps to 77 bps bid, 80 bps offered.

Paul Deckelman contributed to this review.

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