Covidien, AGL Capital, Northern States, Consumers among sellers; Covidien, Perrigo notes firm

By Aleesia Forni and Andrea Heisinger

New York, May 13 - A handful of mostly benchmark-size or smaller trades priced on Monday in the investment-grade bond market.

Covidien International Finance SA had the day's largest trade, pricing an upsized $750 million of 10-year notes. The deal size was increased from $500 million, with proceeds being used to repay senior notes due in June. Pricing was at the tightest end of guidance.

There was a $500 million sale of 30-year bonds from AGL Capital Corp. The bonds are guaranteed by parent company AGL Resources, Inc.

Northern States Power Co. priced $400 million of 10-year mortgage bonds.

A $425 million sale of 30-year mortgage bonds was done by Consumers Energy Co. Two series of notes will be redeemed with the proceeds, along with cash on hand.

A source said there was about $16 billion of investment-grade bonds priced for the day, including an $11 billion trade from Brazil's Petróleo Brasileiro SA, or Petrobras, which garnered $45 billion to $50 billion of demand.

Between $20 billion and $25 billion of new supply is expected for the week, including at least two benchmark size trades of $500 million or more for Tuesday, a source said.

"We should be fairly active, but nothing too crazy," the source said.

New preferred stock offerings were announced by Fifth Third Bancorp, ING U.S., Inc. and AXIS Capital Holdings Ltd.

Fifth Third sold $600 million of $1,000-par perpetual preferreds after the size was increased from $550 million.

The shares were seen trading at an offer of 100.325 after the close, a trader said.

ING U.S. priced $750 million of 40-year fixed-to-floating rate junior subordinated notes. The sale was done privately.

A trader saw the notes offered at 101.25 after the close.

AXIS Capital priced $200 million of $25-par perpetual shares. The size was increased from $150 million, a source said.

A trader pegged the notes at $25.05 after the close.

Zions Bancorp also said it would sell $1,000-par fixed-to-floating-rate preferreds via an online auction.

One trader said the Markit CDX Series 20 North American Investment Grade index was "about 1 [bp] wider" on Monday at a spread of 73 bps.

In secondary trading, Covidien's notes were trading better late during the session, a market source said.

A source at another desk saw Perrigo Co.'s recent notes trade 7 bps tighter.

Investment-grade bank and brokerage credit default swaps costs mostly rose on Monday.

Bank of America's CDS costs were unchanged at 93 bps bid, 96 bps offered. Citi's CDS costs were 1 bp wider at 88 bps bid, 91 bps offered. J.P. Morgan's CDS costs roe 2 bps to 78 bps bid, 81 bps offered. Wells Fargo's CDS costs rose 1 bp to 63 bps bid, 67 bps offered.

Merrill Lynch's CDS costs were unchanged at 85 bps bid, 90 bps offered. Morgan Stanley's CDS costs rose 1 bp to 119 bps bid, 122 bps offered. Goldman Sachs' CDS costs were 1 bp wider at 104 bps bid, 108 bps offered.

Covidien upsizes

Covidien International Finance sold an upsized $750 million of 2.95%10-year senior notes (Baa1/A/A) to yield Treasuries plus 105 bps, an informed source said.

The sale was done at the tight end of guidance in the 105 bps to 110 bps range. The size was increased from a planned $500 million, the source said.

A source quoted the notes at 103 bps bid on Monday.

Barclays, BofA Merrill Lynch and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used to fund the repayment at maturity of $500 million of outstanding 1.875% senior notes due June 15 and for general corporate purposes.

The sale is guaranteed by Covidien plc and Covidien Ltd.

Covidien International was last in the U.S. market with a $1.25 billion offering in two tranches on May 22, 2012. That sale included a 3.2% 10-year note sold at 145 basis points over Treasuries.

The maker of health care products for clinical and home settings has its U.S. base in Mansfield, Mass.

AGL's $500 million

AGL Capital was in the day's session with a $500 million sale of 4.4% 30-year senior notes (Baa1/BBB+/BBB+) priced at Treasuries plus 130 bps, a market source said.

The notes are guaranteed by AGL Resources, Inc.

Active bookrunners were BofA Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC. Passives were Mitsubishi UFJ Securities (USA) Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes, including repayment of short-term debt incurred under a commercial paper program.

AGL Capital was last in the U.S. bond market with a $500 million sale in two tranches on Sept. 15, 2011. That trade included a reopening of 5.875% bonds due 20141 priced at Treasuries plus 165 basis points.

The energy services holding company is based in Atlanta.

Northern States' 10-years

Northern States Power tapped the market for a $400 million trade of 2.6% 10-year first-mortgage bonds (A1/A/A+) at Treasuries plus 70 bps, according to an FWP with the Securities and Exchange Commission.

Bookrunners were BNY Mellon Capital Markets LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC.

Proceeds are being added to the company's general corporate funds and used for repayment of short-term borrowings.

Northern States last sold bonds in a $100 million sale of 30-year maturity on Oct. 2, 2012.

The electric and natural gas utility is based in Minneapolis.

Consumers' long bond

Consumers Energy sold $425 million of 3.95% 30-year first mortgage bonds (A2/A-/A-) to yield Treasuries plus 85 bps, a market source said.

Bookrunners were Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co., RBS Securities Inc., UBS Securities LLC and Wells Fargo Securities LLC.

Proceeds, along with cash on hand, will be used to redeem $200 million of outstanding 6% mortgage bonds due in 2014 and $250 million of 5% mortgage bonds due in 2015.

The natural gas and electric subsidiary of CMS Energy Corp. is based in Jackson, Mich.

Fifth Third's preferreds

Fifth Third Bank priced $600 million of 5.1% series H perpetual fixed-to-floating-rate noncumulative preferreds, an informed source said.

Price talk was in the 5.125% to 5.25% range at midday.

The shares (Ba1/BB+/BB) will represent 1/25th ownership interest in the preferreds.

The price per share is par of $1,000.

Dividends will be paid at a fixed rate until June 30, 2023. On and after that date, there will be a floating-rate at 303.3 bps over Libor.

Bookrunners were Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC.

The company does not intend to list the shares on any exchange.

Proceeds are being used for general corporate purposes, possibly including the repurchase of common stock shares.

The financial services company is based in Cincinnati.

ING sells hybrid

ING U.S. priced $750 million of 5.65% $1,000-par 40-year fixed-to-floating rate junior subordinated notes, according to a market source and press release.

There will be a fixed rate of 5.65% until May 15, 2023 and a floating rate after that date at Libor plus 358 bps.

The sale was done under Rule 144A and Regulation S.

BofA Merrill Lynch, Barclays and J.P. Morgan Securities LLC were bookrunners.

The notes will be guaranteed on an unsecured, junior subordinated basis by Lion Connecticut Holdings Inc., a subsidiary of ING U.S.

Proceeds will be used for the repayment of all amounts outstanding on an existing term loan agreement under a syndicated bank facility entered into in April of 2012 and the partial payment of amounts owed to ING Verzekeringen N.V., a subsidiary of ING Groep N.V.

The U.S. unit of ING Groep is based in New York City.

AXIS does $25-pars

AXIS Capital Holdings priced $200 million of 5.5% series D noncumulative perpetual shares of preferred stock, a market source said.

Price guidance at midday was in the 5.75% area, a trader said.

The shares were sold at par of $25.

Bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc. and Wells Fargo Securities LLC.

Proceeds are being used to redeem outstanding series A preferreds and for general corporate purposes, possibly including repurchase of common stock shares.

The Bermuda-based holding company for specialty reinsurance intends to list the shares on the New York Stock Exchange under the ticker "AXSprD" within 30 days of distribution.

Zions' auction

Zions Bancorporation is planning a sale of up to 250,000 shares of series I fixed-to-floating rate noncumulative perpetual preferred stock via an online auction, according to a 424B3 filing with the SEC.

The shares will be sold at par of $1,000.

The size will be a minimum of 100,000 shares, or $100 million, and maximum of 250,000 shares, or $250 million.

There will be a fixed rate until June 15, 2023. After that there is a floating rate of three-month Libor plus a spread, payable on March 15, June 15, Sept. 15 and Dec. 15.

Minimum bids for the dividend will be at 5.45% up to a maximum of 5.95% with increments of 0.05%.

Bookrunners are Deutsche Bank Securities Inc., Goldman Sachs & Co., Keefe, Bruyette & Woods, Macquarie Capital and Zions Direct, Inc.

The company does not intend to list the shares on any exchange.

Proceeds will be used for general corporate purposes, including possible redemption of certain securities.

The financial holding company is based in Salt Lake City.

The investment-grade secondary bond market saw Perrigo's recent notes trade 7 bps tighter on Monday, one trader said.

The notes were quoted at 116 bps bid, 112 bps offered at midday.

Perrigo sold the upsized $600 million of 2.95% 10-year senior notes to yield Treasuries plus 125 bps on Thursday.

The health care company and maker of generic and over-the-counter pharmaceuticals is based in Allegan, Mich.

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