Primary heats up ahead of FOMC minutes release; Realty Income, Humana firm in aftermarket

By Aleesia Forni and Cristal Cody

Virginia Beach, Sept. 16 – Issuers piled in to the high-grade primary market as the Federal Reserve kicked off its two-day policy meeting on Tuesday.

The session saw more than $7.4 billion of paper price from issuers including Humana Inc., WPP plc, Royal Bank of Canada and ANZ Bank New Zealand Ltd., with issuers attempting to “get in before the Fed [statement]”, a source said.

Humana came to market with a $1.75 billion offering of senior notes in tranches due 2019, 2024 and 2044.

The five-year notes sold on top of price talk, a source said, while the 10- and 30-year notes each sold at the tight end of talk.

Price talk on the three tranches firmed around 5 basis points to 15 bps from initial guidance.

WPP plc upsized its new issue by $150 million, pricing the $750 million 10-year offering in line with price talk.

Details of ANZ’s and RBC’s offerings were unavailable at press time.

There was also a new issue from Finland's Municipality Finance plc, which sold $1 billion of three-year notes at the tight end of talk.

NRW.Bank also came to market with a $1 billion offering sold at the tight end of price talk.

The session saw PennantPark Investment Corp., Realty Income Corp. and Gulf Power Co. come to market with smaller-sized deals.

In the preferred market, American Financial Group Inc. priced $150 million of 40-year $25-par subordinated debentures, according to a market source.

So far, this week has seen roughly $11.25 billion of investment-grade paper price.

Sources are expecting a quiet primary for Wednesday’s session, as the market focuses on the release of the Federal Open Market Committee’s statement.

Investment-grade bond spreads improved over the afternoon on Tuesday after widening in Monday’s session, sources said.

The Markit CDX North American Investment Grade series 22 index firmed 2 bps to a spread of 60 bps.

Realty Income’s 4.125% notes due 2026 tightened 3 bps in the secondary market, a trader said.

Humana’s three-part offering of notes traded 1 bp to 2 bps better over the afternoon, according to a trader.

In other trading, WPP Finance’s 3.75% notes due 2024 tightened 1 bp on the bid side, a trader said.

Gulf Power’s 4.55% notes due 2044 were seen going out 1 bp weaker in aftermarket trading.

New issues from PennantPark and American Financial were not active in the secondary market, a trader said.

Humana three-parter

Humana sold $1.75 billion of senior notes (Baa3/BBB+/) in tranches due 2019, 2024 and 2044, according to a market source and an FWP filed with the Securities and Exchange Commission.

The sale included $400 million of 2.625% notes due 2019 priced at Treasuries plus 85 bps.

The notes sold on top of talk, which had tightened from initial guidance set in the Treasuries plus 100 bps area.

Pricing was at 99.995 to yield 2.626%.

A $600 million tranche of notes due 2024 sold at 99.867 to yield 3.866% with a spread of Treasuries plus 127 bps

The notes sold at the tight end of the Treasuries plus 130 bps area talk, which tightened from guidance set in the Treasuries plus 135 bps area.

A third tranche was $750 million of 4.95% bonds due 2044 sold at 99.518 to yield 4.981%, or Treasuries plus 162 bps.

Pricing was at the tight end of talk, which was set in the 165 bps area over Treasuries.

Talk was tightened from earlier guidance set in the Treasuries plus 170 bps area.

Humana’s 2.625% notes due 2019 traded at 84 bps bid, 78 bps offered in the secondary market, a trader said.

The company’s offering of 3.85% notes due 2024 tightened to 125 bps bid, 123 bps offered in aftermarket trading.

The tranche of 4.95% notes due 2034 headed out firmer at 160 bps bid, 157 bps offered, the trader said.

Bookrunners were Barclays, BofA Merrill Lynch, J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds will be used to redeem the company’s $500 million of 6.45% senior notes due June 1, 2016, to repurchase shares of common stock and for general corporate purposes.

The health-care and insurance company is based in Louisville, Ky.

MuniFin prices tight

Finland's Municipality Finance sold $1 billion of 1.125% three-year notes (Aaa/AAA/) at mid-swaps minus 2 bps, an informed source said.

Pricing was at 99.677.

The notes sold at the tight end of the mid-swaps flat area talk.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., JPMorgan and Mizuho Securities were the bookrunners.

The credit institution for the municipal sector and state subsidized housing is based in Helsinki.

NRW sells five-years

NRW.Bank priced $1 billion of 2% five-year notes at 99.635 to yield mid-swaps plus 12 bps, according to an informed source.

Pricing was at the tight end of talk.

BofA Merrill Lynch, Barclays, Commerzbank and Credit Suisse Securities are the joint bookrunners.

The financial development products and services company is based in Dusseldorf, Germany.

WPP upsizes

WPP priced an upsized $750 million of 3.75% senior notes due 2024 through its WPP Finance 2010 unit on Tuesday with a spread of Treasuries plus 140 bps, according to a market source and an FWP filed with the SEC.

The notes (Baa2/BBB/) sold in line with talk.

Pricing was at 98.029 to yield 3.991%.

WPP Finance’s 3.75% notes due 2024 firmed in aftermarket trading to 139 bps bid, 137 bps offered, according to a trader.

Citigroup Global Markets, Goldman Sachs & Co., HSBC Securities (USA) Inc., JPMorgan and Wells Fargo Securities were the bookrunners.

The notes are guaranteed by WPP plc and its subsidiaries, WPP Jubilee Ltd. and WPP 2005 Ltd.

Proceeds will be used for general corporate purposes.

The communication services company is based in London.

Gulf Power new issue

Gulf Power sold $200 million of 4.55% 2014A senior notes (A2/A/A) due 2044 at Treasuries plus 122 bps, according to a market source and an FWP filed with the SEC.

The notes sold at the tight end of the Treasuries plus 125 bps area talk.

Pricing was at 99.804 to yield 4.562%.

The bookrunners were Goldman Sachs, RBS Securities Inc. and Scotia Capital (USA) Inc.

Proceeds will be used to repay to the company’s series K 4.9% senior notes due Oct. 1, 2014, to repay short-term debt and for general corporate purposes.

Gulf Power is based in Pensacola, Fla.

PennantPark offering

PennantPark Investment priced $250 million of 4.5% notes due 2019 at Treasuries plus 275 bps, according to a market source and a 497AD filing with the SEC.

Pricing was at 99.905 to yield 4.521%.

The notes (/BBB-/BBB-) sold on top of talk, which came at the tight end of initial guidance set in the area of Treasuries plus 275 bps to 287.5 bps.

Proceeds will be used to repay debt under a credit facility.

The bookrunners were JPMorgan, Goldman Sachs, Morgan Stanley & Co. LLC and SunTrust Robinson Humphrey Inc.

The business development company, which principally invests in U.S. middle-market private companies in the form of senior secured loans, mezzanine debt, and equity investments, is based in New York.

Realty Income

Realty Income sold a $250 million issue of 4.125% senior notes (Baa1/BBB+/BBB+) due 2026 on Tuesday with a spread of Treasuries plus 160 bps, according to an FWP filing with the SEC.

Pricing was at 99.499 to yield 4.178%.

Realty Income’s 4.125% notes due 2026 tightened to 157 bps bid in secondary trading, a trader said.

The bookrunners were Citigroup Global Markets, BofA Merrill Lynch, BNY Mellon Capital Markets LLC, JPMorgan, RBC Capital Markets LLC, Regions Financial, U.S. Bancorp Investments Inc. and Wells Fargo Securities.

Proceeds also will be used to pay accrued but unpaid dividends on the company’s class E preferred stock and redeem all of its outstanding shares of class E preferred stock.

Proceeds will also be used to repay a portion of the borrowings outstanding under an acquisition credit facility and for other general corporate purposes and working capital, which may include acquisitions.

The real estate investment trust for retail and commercial properties is based in Escondido, Calif.

American Financial preferreds

American Financial Group priced $150 million of 6.25% $25-par subordinated debentures due Sept. 30, 2054 on Tuesday, according to a market source.

BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities are the joint bookrunners.

The notes become redeemable on or after Sept. 30, 2019 at par plus accrued interest. Additionally, the company can redeem the issue in whole within 90 days of a tax or rating agency event.

In the case of the rating agency event, the redemption price will equal the greater of the principal amount or a make-whole amount.

The company plans to list the new notes on the New York Stock Exchange.

Proceeds will be used for general corporate purposes, which may include stock repurchases or the redemption of some or all of the company’s $132 million of 7% senior notes due 2050, which become redeemable Sept. 30.

American Financial is a Cincinnati-based insurance company.

Bank/broker CDSs mostly flat

Investment-grade bank and brokerage CDS prices were mostly flat, according to a market source.

Bank of America Corp.’s CDS costs were flat at 66 bps bid, 69 bps offered. Citigroup Inc.’s CDS costs were flat at 65 bps bid, 68 bps offered. JPMorgan Chase & Co.’s CDS costs were also flat at 53 bps bid, 57 bps offered. Wells Fargo & Co.’s CDS costs ended unchanged at 40 bps bid, 45 bps offered.

Merrill Lynch’s CDS costs were flat at 68 bps bid, 72 bps offered. Morgan Stanley’s CDS costs ended 1 bp lower at 73 bps bid, 76 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 78 bps bid, 81 bps offered.

Paul Deckelman and Stephanie N. Rotondo contributed to this review.

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