Boston Scientific, Caterpillar, American Transmission tap high-grade market; Citi tightens

By Andrea Heisinger and Paul Deckelman

New York, Dec. 10 - Boston Scientific Corp., Caterpillar Financial Services Corp. and American Transmission Systems Inc. priced small issues on an otherwise uneventful Thursday in the investment-grade primary market.

The Boston Scientific sale was split-rated, but run off the high-grade desk. It totaled $2 billion, and was upsized to include a tranche of 30-year bonds. The slightly oversubscribed sale was priced late in the day.

Caterpillar Financial Services sold $400 million in tranches of two-year floating-rate notes and three-year fixed-rate notes.

American Transmission flew mostly under the radar, pricing $400 million of notes due in 2022 via Rule 144A.

Syndicate sources said there aren't any deals expected for Friday. "It's been a slow week, but I don't think there's a calendar left," one source said.

The week has already been busier than expected, another source said.

Among established issues in the secondary arena on Thursday, a market source said the CDX Series13 North American high-grade index had narrowed by 2 basis points to a mid bid-asked spread level of 96 bps.

Advancing issues remained behind decliners for a second straight session, by about a 10-to-nine ratio.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year notes rose by 7 bps Thursday, to 3.50%.

Overall market activity, reflected in dollar-volume totals, rose 1% from Wednesday's pace.

The day's new deals from American Transmission Systems and Boston Scientific were seen to have tightened from their respective spreads where the bonds priced. Caterpillar Financial's new deal was only slightly tighter than issue.

Activity remained heavy in the recently priced new deals for Time Warner Cable Inc. and BlackRock Inc.

Citigroup Inc.'s bonds continued to tighten - even more robustly than they had on Wednesday when the name first moved on the news that the big bank plans to soon repay its TARP loans from the government.

Boston Scientific prices split-rated deal

Medical device maker Boston Scientific sold $2 billion of split-rated senior unsecured notes (Ba1/BBB-/BB+) in an upsized three tranches late in the day, a market source said.

The sale was slightly oversubscribed, with orders of about $3 billion, a source said.

The notes were priced off the high-grade syndicate desk, the market source said. The sale was upsized to include a 30-year bond.

An $850 million tranche of 4.5% five-year notes priced at Treasuries plus 237.5 bps.

The $850 million of 6% 10-year notes priced at a spread of 262.5 bps over Treasuries.

The final tranche of $300 million in 7.375% 30-year bonds priced at Treasuries plus 287.5 bps.

Bank of America Merrill Lynch, Deutsche Bank Securities and J.P. Morgan Securities ran the books.

Proceeds will be used by the Natick, Mass.-based company for general corporate purposes, including prepaying a portion of a bank term loan due in April 2011.

Caterpillar Financial sells short bonds

The financing arm of heavy equipment company Caterpillar Inc., Caterpillar Financial Services, priced $400 million of medium-term notes in two tranches, according to FWP filings with the Securities and Exchange Commission.

The $150 million of two-year floating-rate notes priced at par to yield three-month Libor plus 25 bps.

A $250 million tranche of 1.9% three-year notes priced at a spread of 73 bps over Treasuries.

Bank of America Merrill Lynch and J.P. Morgan Securities were bookrunners for the Nashville, Tenn.-based issuer.

American Transmission taps 144A market

FirstEnergy Corp. subsidiary American Transmission Systems priced $400 million of 5.25% senior unsecured notes due 2022 at Treasuries plus 180 bps, an informed source said.

The notes priced via Rule 144A.

Barclays Capital, Goldman Sachs & Co. and J.P. Morgan Securities ran the books for the electric utility based in Akron, Ohio.

Primary lags

New issues are not expected to ramp up much in the near future, two market sources said late in the day. Friday is expected to have little to new deals due to the start of the Jewish holiday.

"I can't think of anything that would [price]," a source said. "We'll maybe have one or two more big days of deals, but they'll be next week."

The Boston Scientific sale was the largest of the day by far at $2 billion total, and it was split-rated. The others were $400 million.

Multi-billion-dollar sales will likely be rare for the remainder of the year, one syndicate source said.

Although Citigroup would like to repay its Troubled Asset Relief Program funds to the government soon, it is partially funding it with an equity offering.

"It's looking pretty dull," a source said of the high-grade market.

Boston Scientific bid better

When the new Boston Scientific three-part deal was freed for secondary dealings, a trader saw the Natick, Mass.-based medical device maker's five-year issue quoted bid at 230 bps, in from the 237.5 bps spread at which the $850 million issue priced earlier in the session.

He also saw the company's 10-year tranche having tightened to 250 bps bid, versus 262.5 bps at the pricing, while its 30-year bonds were at 280 bps, in from 287.5 bps at the pricing.

However, the trader did not see an actual two-sided market in any of the tranches.

Caterpillar quoted little changed

The trader also saw Caterpillar Finance's new 1.90% paper due 2012 at 70 bps bid, in slightly from a pricing spread of 73 bps earlier in the session, but there too saw no real two-sided markets in the Peoria, Ill.-based heavy equipment manufacturer's $250 million issue.

American Transmission trades tighter

There was, however, actual trading in American Transmission's $400 million of 5.25% notes due 2022. They came in to 170 bps bid, 165 bps offered, a trader said, versus the 180 bps over level at which the bonds had priced.

Time Warner Cable top trading name

There was no shortage of trades in Time Warner Cable, whose $2 billion two-part deal had priced on Tuesday.

A trader proclaimed its 5% notes due 2020 as the busiest high grade issue, with $308 million of the $1.5 billion issue changing hands. Those bonds were seen going home at 180 bps bid, 175 bps offered, a little tighter than its earlier levels around 180 bps offered.

The issue priced at 188 bps over on Tuesday, and had then tightened a little after that to around 184 bps bid, 175 bps offered.

The New York-based cable operator's $500 million of 3.50% notes due 2015 were meantime being quoted at 145 bps bid, 142 bps offered, in from the153 bps level at which the bonds had priced, though on considerably less activity versus the 2020 bonds.

Time Warner Cable's existing issues, such as its 6.75% bonds due 2039 and 6.75% notes due 2018 were also busily changing hands, leading the trader to note that "in the tech sector, four out of the five most active bonds are Time Warner Cable."

BlackRock still bouncing around

For the overall high-grade market, the trader said, while the Time Warner Cable 10-years were the busiest, Numbers Two and Three on the actives list belonged to Black Rock, where "definitely, there was a lot of flow."

BlackRock's 5% notes due 2019 were offered at 151 bps over, in from the 160 bps level at Monday's pricing of the New York-based investment company's $1 billion issue. Its $1 billion of 3.5% notes due 2014 were offered at 121 bps over, versus 135 bps at the pricing. Some $193 million and $150 million of the bonds, respectively, changed hands.

The best performing of the three issues which priced on Monday, the $500 million of 2.25% notes due 2012, were bid at 95 bps, well in from 110 bps over at their pricing.

Citi continues to soar on TARP news

Wednesday's news reports indicating that New York-based banking giant Citigroup is planning to soon repay the billions of dollars of government money borrowed under the Troubled Asset Recovery Program continued to boost its bonds for a second session on Thursday.

A trader said that Citi's 6.01% notes due 2015 were one of the most heavily traded issues on the day in the high-grade world, with some $147 million having changed hands by late afternoon, when the bonds were quoted offered at 282 bps over.

Earlier in the session, they were at 285 bps bid, 275 bps offered, and on Wednesday, the trader said, they had been at 290 bps bid, 280 bps offered, so "it was a tad better, and there was still a lot of activity in the issue.

At another desk, the 6.01s were being quoted as tight as 277 bps bid at one point.

A market source saw several of Citi's other issues having tightened substantially, with its 6.35% notes due 2014, its 5.5% notes due 2014 and its 8.5% notes due 2019 all having tightened up between 30 and 40 bps, gaining to levels around 260 bps over, from prior levels Wednesday in the 290s. Citi's 8.125% bonds due 2039 narrowed by 25 bps, all the way down to 252 bps.

A second source meantime said that Citi's 4.875% notes due 2015 had improved by nearly 30 bps, down to around the 340 bps area.

Citi was helped by analyst speculation that its moves to raise $20 billion by selling equity and then using that for TARP repayment will leave Citi - once seen as a possible financial basket case earlier in the year - in a strong position going forward.

J.P. Morgan Chase analyst Vivek Juneja, in a research note Thursday, said that Citi could emerge from the process with capital ratios among the highest of any major U.S. banking institution.

Other financials follow suit

With Citi leading the way, other financial issues were seen mostly tighter, with Bank of America Corp.'s 7.625% notes due 2019 in by 12 bps, to 190 bps over, B of A unit Merrill Lynch's 6.875% notes due 2018 15 bps tighter, at 195 bps over, and Morgan Stanley's 5.625% notes due 2019 trading 11 bps tighter on the day, at 191 bps.

Wells Fargo & Co. Inc.'s 5.5% notes due 2012 improved by nearly 20 bps, to the 105 level.

Petrobras bonds busy

On the international front, a trader saw "a lot of activity" in the 5.75% notes due 2020 of Petrobras International Finance, an arm of Brazil's state-run oil company Petroleo Brasileiros..

About $45 million of the bonds were seen on the Trace system as having traded during the session, with the trader noting the odd fact that on Tuesday and again on Thursday, there was "lots" of round-lot trading in the credit, while on Wednesday, busy trading had mostly taken place in smaller odd-lot transactions.

The bonds were quoted Thursday around a 200-201 bps over Treasuries context, "so they came in" from the levels seen Wednesday, when they were trading between 205 and 209 bps over.

A market source at another desk meantime said that at one point Thursday the bonds were being quoted as tight as 194 bps, or a dollar-price level of 1021/4.

© 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.