GMAC deal draws interest; Eastman Chemical, Coca-Cola Amatil, FMR sell bonds; spreads widen

By Andrea Heisinger and Paul Deckelman

New York, Oct. 28 - GMAC Financial Services and Western Corporate Federal Credit Union each sold bonds backed by government programs on a busy Wednesday. Also selling notes were Eastman Chemical Co., Australia's Coca-Cola Amatil Ltd. and FMR LLC Fidelity.

The $2.9 billion GMAC offering of three-year notes backed by the Federal Deposit Insurance Corp. was done just ahead of the end of the Temporary Liquidity Guarantee Program. It finishes on Oct. 31, having allowed banks and other lenders to sell bonds at lower rates thanks to a government guarantee.

Western Corporate FCU's $1.5 billion sale of three-year notes was sold under a different program backed by the National Credit Union Administration.

Eastman Chemical priced a considerably smaller $250 million deal of 10-year notes. It was the only straight corporate of the day not sold via Rule 144A.

Coca-Cola Amatil priced a slightly larger deal of five-year notes totaling $400 million.

The FMR sale was done in tranches of 12- and 30-year notes totaling $700 million. It was also sold via Rule 144A and was one of the last to price for the day.

The focus in the primary market was scattered, sources said, but there was a lot of interest in the GMAC sale.

"It was interesting how that priced," a syndicate source said.

Among the established issues in the secondary arena on Wednesday, a market source said the CDX Series 13 North American high-grade index was 5 basis points wider versus Tuesday's level, at a mid bid-asked spread level of 109 bps.

Advancing issues were ahead of decliners for a second consecutive session, holding a four-to-three lead.

Overall market activity, reflected in dollar-volume totals, was down about 7% from Tuesday's pace.

Spreads in general were seen wider, in line with mostly lower Treasury yields; for instance, the yield on the benchmark 10-year notes tightened by 4 bps on Thursday to 3.41%.

GMAC sells FDIC-backed bonds

GMAC priced $2.9 billion of 1.75% three-year bonds backed by the FDIC on Wednesday at Treasuries plus 31.6 bps, an informed source said.

They were talked at mid-swaps minus 10 bps, a source said, or about 32 bps over Treasuries. The deal priced in line with this guidance.

The transaction comes ahead of talks with the government about a possible third bailout package. GMAC faces a stress test on its capital in the coming week.

It was also brought to market just ahead of the end of the Temporary Liquidity Guarantee Program through the FDIC that the bonds were sold under. The regular program ends on Oct. 31, with an extension of six months for emergencies only.

According to a press release from the company, the offering further strengthens GMAC's liquidity position, and supports the company's ability to extend credit to consumers and businesses.

By selling the bonds, GMAC has utilized its remaining capacity under the TLGP. The company received approval to participate in the TLGP in May 2009 for up to $7.4 billion.

The company did a previous $4.5 billion sale of FDIC-backed bonds in two tranches on June 3. The fixed-rate portion of the bonds, due in December of 2012, priced at a considerably higher 80.1 bps over Treasuries.

Citigroup Global Markets, Deutsche Bank Securities, Morgan Stanley and RBS Securities were tapped as bookrunners by the Detroit-based issuer for Wednesday's offering.

FMR prices two tranches

Boston-based financial services company and mutual fund operator FMR LLC Fidelity priced $700 million of notes in two tranches of 12- and 30-year notes, an informed source said.

A $300 million tranche of 5.35% 12-year notes priced at Treasuries plus 195 bps.

The $400 million of 6.45% 30-year bonds sold at 220 bps over Treasuries.

Full terms were not available at press time for the Rule 144A sale.

Barclays Capital and Citigroup Global Markets were bookrunners.

Coca-Cola bottler sells five-year

Coca-Cola Amatil sold $400 million of 3.25% five-year senior notes at Treasuries plus 95 bps, a source away from the deal said.

Goldman Sachs & Co. and HSBC Securities ran the books for the Rule 144A sale.

Proceeds are going to refinance maturing debt.

The bottler and distributor of Coca-Cola products in Australian and Asian countries is based in Sydney, Australia.

Eastman offers $250 million

Eastman Chemical priced $250 million of 5.5% 10-year notes on at Treasuries plus 210 bps, according to an FWP filing with the Securities and Exchange Commission.

The sale "went well," a source close to it said.

"We had a lot of demand, but nothing too crazy," he said. "It was definitely oversubscribed."

Bookrunners were Citigroup Global Markets and J.P. Morgan Securities.

Proceeds will be used for general corporate purposes, including initial short-term investments.

The chemical manufacturer is based in Kingsport, Tenn.

Primary comes alive

After a couple of weeks of sluggish issuance in light of earnings blackouts, the high-grade market got a boost on Wednesday from an FDIC deal from GMAC and a couple of industrials.

When asked whether there would be more FDIC-backed deals on Thursday or Friday to squeeze in before the end of the TLGP, a syndicate source said "probably not."

"I think we probably saw the last one, unless some small bank comes out," he said.

"We already saw Citi, and they're about the only one left [to issue]," he said.

Citigroup sold $5 billion in bonds backed by the FDIC on Oct. 20, and sources said it was likely its final deal under the guarantee.

Sources have said it's considered a sign of weakness to sell under the program now, and banks are trying to avoid that stigma.

On the non-FDIC front, the Eastman Chemical sale could signal a return of non-foreign issuers to the market.

"We could see some more [domestic] industrials," a source said. "I don't think [there will be] a lot, but earnings are winding down."

Western Corporate FCU offers guaranteed issue

Western Corporate FCU sold $1.5 billion of 1.75% three-year notes backed by the National Credit Union Administration at 35.9 bps over Treasuries, a source away from the sale said.

The deal was done under the Temporary Corporate Credit Union Liquidity Guarantee Program.

Bank of America Merrill Lynch was bookrunner.

The multi-state credit union is based in Manhattan Beach, Calif.

Petrobras paper busy

A market source said that the new Petrobras International Finance Co. issue was heavily traded on the day, with nearly $120 million of the Brazilian state energy concern's new deal having changed hands by mid-afternoon, according to the Trace bond-tracking service.

The source quoted the 5.75% notes due 2020 at 241 bps bid, slightly wider than the 238 bps at which that $2.5 billion of paper priced last Friday.

It was also well out from the 219 bps level seen at mid-afternoon on Tuesday, on heavy volume of over $100 million.

The other half of that $4 billion, two-tranche offering, the 6.875% bonds due 2040, were meantime seen trading at 276 bps over, also slightly wider from the 270 bps over level at which the $1.5 billion of bonds priced last Friday. Nearly $30 million of the '40s had changed hands as of mid-afternoon.

The bonds had widened from around 258 bps on Tuesday afternoon, when nearly $100 million traded.

RBS widens slightly

A source said Royal Bank of Scotland's 6.40% notes due 2019 had widened out a little to around 268 bps over bid, from the 261 bps level the financial institution's bonds had traded at earlier in the week.

However, they continued to trade tighter than the 300 bps over level at which the $1.5 billion issue had priced back on Oct. 14.

The source said more than $30 million of the bonds traded Wednesday.

J.P. Morgan paper widens

Also among the financials, a trader said that the sector was "weaker across the board" Wednesday to the tune of 5 bps to 10 bps.

He said the recent J.P. Morgan Chase Capital XXVII 7% junior subordinated trust preferred securities due 2039 widened out to a spread over comparable Treasury issues of 273 bps bid, 270 bps offered, versus a 268 bps bid, 263 bps offered level earlier in the session.

However, the New York-based banking giant's $1 billion issue continues to trade well in from the 287.5 bps spread at which the mega-deal priced on Oct. 20.

Bank, broker CDS costs seen wider

A trader who tracks the credit default swaps market said that the cost of insuring holders of big-bank bonds against an event of default widened out between 6 bps and 8 bps from Tuesday's levels.

He also saw the CDS costs for major investment-bank paper 4 bps to 6 bps wider.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.