Corporates re-enter primary; Kraft, UDR price, join Yankee names; Computer Sciences volatile

By Andrea Heisinger and Cristal Cody

New York, Jan. 5 - Corporate names reappeared in the investment-grade bond market on Thursday after two days of domination by financials.

Kraft Foods Inc., UDR, Inc., Pernod Ricard SA, Sumitomo Mitsui Banking Corp. and Bank of Nova Scotia all priced debt.

Germany's KfW priced $4.5 billion of three-year global notes.

Financials sold the largest deals of the day. Scotiabank priced $2.75 billion of paper in three parts while Sumitomo Mitsui Banking priced $1.5 billion divided equally among three maturities.

France's Pernod Ricard priced $2.5 billion of debt in three tranches in its first deal since October.

Kraft priced $800 million of floating-rate notes due 2013. The debt has a mandatory redemption when the company's grocery spinoff goes through.

Real estate investment trust UDR priced $400 million of 10-year paper. The sale is guaranteed by United Dominion Realty, LP.

Debt from Entergy Louisiana, LLC was announced, but it was unclear at day's end if the issue of first mortgage bonds had priced. The utility is planning to use proceeds to repay short-term debt under the Entergy system money pool and for general corporate purposes.

A syndicate source said that financials are likely going to be more of a presence in the coming weeks than they were at the end of 2011, partly because "they have a lot of maturities coming up this year and next."

"The market wasn't too constructive [for financials] the last couple of months, and they still need financing," he said.

Yankee names had, as predicted at the end of December, made their way back into the U.S. debt market after a hiatus due to unfavorable market conditions.

"I think we'll see more," one source who worked on the Sumitomo Mitsui Banking deal said.

"We may not see some of the big [European] banks, but Canada for sure."

Secondary mixed

Bonds were mixed in the secondary market. The Markit CDX Series 17 North American Investment Grade index eased 1 basis point to a spread of 120 bps.

Computer Sciences Corp.'s bonds continue to be volatile in trading, a source said on Thursday.

The company's credit default swaps "are 40 basis points tighter today going out at 505, 530," the trader said.

Overall trading volume stayed above $14 billion on Thursday.

In the secondary market, UDR's 10-year notes traded 13 bps tighter.

Sumitomo Mitsui Banking's three-year notes traded 1 bp tighter.

The new deal from Scotiabank traded wrapped around issuance in the U.S. secondary market.

Bank and financial paper was seen as a "mixed bag" on Thursday, a trader said.

Bank of America Corp.'s 5% notes due 2021 traded 10 bps better on the day, while the rest of the sector widened 5 bps to 10 bps.

Goldman Sachs Group Inc.'s paper widened about 10 bps.

Investment-grade bank and brokerage CDS costs fell over the day.

Bank paper CDS costs were down 2 bps to 15 bps. Brokerage company paper CDS costs declined 5 bps to 10 bps.

Also in trading, Canadian Pacific Railway Co.'s bonds were 25 bps better since issuance.

Treasuries traded lower, sending yields up 1 bp to 3 bps on the longer end of the curve. The 10-year note yield edged 1 bp higher to 1.99%. The 30-year bond yield rose 3 bps to 3.06%.

Scotiabank's $2.75 billion

Bank of Nova Scotia sold $2.75 billion of senior notes (Aa1/AA-) in three parts, a source away from the trade said.

There was about $4 billion in total on the books, a source who worked on the trade said.

A $500 million tranche of three-year floating-rate notes priced at par to yield Libor plus 104 bps.

There was also a $1 billion tranche of 1.85% three-year paper priced at a spread of Treasuries plus 147 bps. The notes priced at the tight end of talk in the 150 bps area.

Finally, there was $1.25 billion of 2.55% five-year debt sold at 172 bps over Treasuries. The paper was sold at the tight end of guidance in the 175 bps area.

Barclays Capital Inc. was active bookrunner.

Proceeds will be used for general business purposes.

In the secondary market, Scotiabank's tranche of 2.55% notes due 2017 traded flat at 172 bps bid, a trader said.

The bank is based in Halifax, N.S.

Sumitomo prices privately

Sumitomo Mitsui Banking priced $1.5 billion of debt (Aa3/A+) in three parts via Rule 144A and Regulation S, a syndicate source close to the deal said.

A $500 million tranche of 1.9% three-year notes sold at a spread of Treasuries plus 155 bps.

There was also a $500 million tranche of 2.65% five-year paper priced at 180 bps over Treasuries.

The third part was $500 million of 3.95% 10-year notes sold at Treasuries plus 200 bps.

Barclays Capital, Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC were bookrunners.

Proceeds are being used for general corporate purposes.

The bank was last in the market on July 18, 2011 with a $2 billion sale in three parts. The 1.9% three-year debt from that offering priced at 130 bps, and the 2.9% five-year notes sold at 150 bps.

Sumitomo Mitsui Banking's new three-year notes were quoted late in the day at 154 bps bid, 152 bps offered.

The subsidiary of Sumitomo Mitsui Financial Group is based in Tokyo.

Kraft offers floaters

Kraft Foods sold $800 million of floating-rate notes due 2013 at par to yield Libor plus 87.5 bps, an informed source said.

The notes (Baa2/BBB-/BBB-) have a mandatory redemption at par plus accrued interest at the public announcement of the record date for the proposed spinoff of its grocery business to shareholders.

Citigroup and RBS Securities were bookrunners.

Proceeds are being used for general corporate purposes, including debt repayment.

Kraft last sold debt in a $9.5 billion offering in four tranches on Feb. 4, 2010.

The food company is based in Northfield, Ill.

UDR prices 10-years

UDR sold $400 million of 4.675% medium-term notes, series A, (Baa2/BBB) to yield Treasuries plus 275 bps, a source close to the deal said.

The paper was priced at the tight end of guidance in the 280 bps area, plus or minus 5 bps, the source said.

Citigroup and JPMorgan were bookrunners.

Proceeds will be used for general corporate purposes.

The paper is guaranteed by United Dominion Realty.

UDR's 10-year notes firmed to 262 bps bid, 257 bps offered in the secondary market, a trader said.

The real estate investment trust for apartment communities is based in Highlands Ranch, Colo.

Pernod sells three tranches

Pernod Ricard priced $2.5 billion of senior notes (Baa3/BBB-) in three tranches, a market source said.

There was an $850 million tranche of five-year notes priced at Treasuries plus 210 bps.

A second tranche was $800 million of 10-year debt sold at 230 bps over Treasuries.

Finally, there was $850 million of 30-year bonds priced at 255 bps over Treasuries.

All of the tranches were sold at the low end of price guidance, which was 5 bps wider across the board, the source said.

The deal was done under Rule 144A and Regulation S. Full terms were not available at press time Thursday.

JPMorgan and RBS Securities were bookrunners.

Pernod Ricard last priced debt in a $1.5 billion sale of 4.5% notes due 2022 on Oct. 20 at 230 bps over Treasuries.

The wine and spirits maker is based in Paris.

KfW's three-year debt

KfW priced $4.5 billion of 1% three-year global notes (Aaa/AAA/AAA) at 99.785, according to an FWP filing with the Securities and Exchange Commission.

Barclays Capital, Goldman Sachs and JPMorgan were bookrunners.

The German government-owned development bank is based in Frankfurt.

First preferred deal of 2012

Public Storage priced a $400 million offering of 5.9% series S cumulative perpetual preferred shares, market sources said.

The deal was "much larger" than the $50 million that had originally been expected, a market source said.

Price talk had originally been around 5.95% but was revised Wednesday to 5.9%.

The source quoted the new issue at $24.82 bid, $24.92 offered in the gray market.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC were the joint book-running managers.

The preferreds were sold as depositary shares each representing a 1/1,000th interest in a cumulative preferred share of beneficial interest, series S, according to the prospectus.

Proceeds will be used to make investments in self-storage facilities and in entities that own self-storage facilities, to redeem preferred securities and for other general corporate purposes.

The Glendale, Calif.-based REIT intends to list the preferreds on the New York Stock Exchange.

Computer Sciences volatile

Fitch Ratings placed Computer Sciences' BBB+ rating on negative watch on Tuesday following similar action by Moody's Investors Service and Standard & Poor's over concerns with the company's health information contract with the U.K. government.

Computer Sciences said it may have to write off $1.5 billion related to the contract and will have to readjust its 2012 forecast.

Moody's placed the company's Baa1 investment-grade rating on review for possible downgrade on Dec. 27. Standard & Poor's cut the company by one notch to BBB+ a day later.

"The bonds and CDS are very volatile the last three trading sessions," a trader said.

The company's 6.5% notes due 2018 closed Thursday at 96.75 bid, 97.50 offered, up a point on the day.

The 5.5% notes due 2013 traded at 100.125, 100.375.

Computer Sciences priced both tranches in February 2008 in a $1.7 billion private offering of senior notes.

The $700 million of 5.5% due 2013 notes and the $1 billion of 6.5% notes due 2018 both priced at par.

The information technology and services company is based in Falls Church, Va.

Bank of America firms

Bank of America's 5% notes due 2021 firmed 10 bps to 425 bps bid, 415 bps offered in Thursday's session, a trader said.

The notes were sold on May 10, 2011 at a spread of 185 bps over Treasuries.

The financial services company is based in Charlotte, N.C.

Goldman Sachs widens

Goldman Sachs' 5.25% notes due 2021 traded at 385 bps bid, 375 bps offered, 10 bps wider on the day, a trader said.

Goldman Sachs reopened the notes (A1/A/A+) to yield Treasuries plus 295 bps on Oct. 25.

The financial services company is based in New York.

Canadian Pacific Railway better

In other trading, Canadian Pacific Railway's 4.5% notes due 2021 were seen early on Thursday at 250 bps bid, 240 bps offered, a trader said.

"No change on the day," the trader said.

Canadian Pacific Railway sold the 10-year notes as part of a $500 million two-tranche offering (Baa3/BBB-/) on Nov. 28. The notes priced at a spread of Treasuries plus 275 bps.

The railroad operator is based in Calgary, Alta.

Paul Deckelman and Stephanie N. Rotondo contributed to this report

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