Pfizer returns to market with $4 billion trade; Northrop, Agrium price; Pfizer notes firm

By Aleesia Forni and Andrea Heisinger

New York, May 28 - A small number of corporate issuers hit the high-grade market on Tuesday to start the shortened week, with Pfizer Inc. selling bonds for the first time since 2009.

The New York-based biopharmaceutical company priced $4 billion of notes in five parts. It was Pfizer's first sale in the U.S. bond market since it priced $13.5 billion in five tranches in March of 2009.

Demand was roughly $6.9 billion in total, a source close to the Pfizer sale said after the close.Elsewhere in the primary, Northrop Grumman Corp. sold $2.85 billion of bonds in three tranches. The sale included maturities of 2018, 2023 and 2043.

The sale saw about $6.75 billion of total demand from investors, including $2.5 billion on the five-year notes, $2.25 billion for the 10-year tranche and about $2 billion for the long bond.

Rounding out the day's supply was a $1 billion trade in two parts from Canada's Agrium Inc. The sale included tranches due 2023 and 2043.

In the preferred stock market, Entergy Arkansas Inc. and New York Mortgage Trust Inc. each announced offerings.

Entergy Arkansas priced $125 million of 4.75% $25-par 50-year first mortgage bonds.

At midday, a trader said he saw a $24.65 bid for the notes in the gray market. After the close, a source said the paper "kind of collapsed at the end of the day," seeing the issue at $24.60.

New York Mortgage sold $75 million of 7.75% series B cumulative redeemable perpetual preferreds.

A market source said that yields on bonds were up on the day, marking continued fallout from Federal Reserve chair Ben Bernanke's comments the previous week about possibly easing efforts in the coming months that have been used to aid the economy.

Between $15 billion and $20 billion of supply is expected for the week, with $7.85 billion coming to the market on Tuesday.

"It was pretty good out there," a source said late in the day. "We should see more tomorrow after these issues play out [in trading]."

In the secondary market, Pfizer's new notes traded better late during the session, one market source said.

Investment-grade bank and brokerage credit default swap costs were mostly unchanged to lower on Tuesday, according to a market source.

Bank of America Corp.'s CDS costs were flat at 90 bps bid, 95 bps offered. Citigroup Inc.'s CDS costs were also flat at 85 bps bid, 90 bps offered. JPMorgan Chase & Co.'s CDS costs declined 2 bps to 76 bps bid, 79 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 64 bps bid, 67 bps offered.

Merrill Lynch's CDS costs declined 2 bps to 75 bps bid, 85 bps offered. Morgan Stanley's CDS costs were flat at 120 bps bid, 125 bps offered. Goldman Sachs Group, Inc.'s CDS costs were 2 bps wider at 110 bps bid, 115 bps offered.

Pfizer's $4 billion trade

Pfizer priced $4 billion of notes (A1/AA/A+) in five tranches, a source close to the trade said.

The sale included $750 million of 0.9% notes due 2017 priced at a spread of Treasuries plus 45 bps. Initial guidance was in the high 40 bps area.

The notes were quoted 4 bps better at 41 bps bid, 38 bps offered.

There was $500 million of five-year floating-rate notes sold at par to yield Libor plus 30 bps.

The company also priced $1 billion of 1.5% five-year notes at a spread of Treasuries plus 50 bps. Talk was initially in the low 50 bps area.

A trader quoted the notes at 48 bps bid, 44 bps offered.

A $1 billion tranche of 3% 10-year notes sold at a spread of Treasuries plus 87.5 bps. Guidance was in the low 80 bps area.

Finally, there was $750 million of 4.3% 30-year bonds priced at a spread of 100 bps over Treasuries. Initial talk was in the 100 bps area.

The 30-year tranche traded 1 bp better at 99 bps bid, a trader said.

Investor demand on the notes due 2017 was about $1.2 billion, while the five-year tranche garnered about $1.8 billion of interest. The five-year floaters saw about $800 million of demand, the 10-year notes had roughly $1.7 billion of interest and the 30-year bond saw $1.4 billion on the books.

Bookrunners were Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and RBS Securities Inc.

Proceeds are being used for general corporate purposes, including repayment at maturity of €1.85 billion 3.625% notes due in June, and to prefund repayment of a portion of outstanding 4.5% notes due in Feb. 2014 and 5.5% notes due in Feb. 2014.

The New York-based global biopharmaceutical company was last in the U.S. bond market with a $13.5 billion offering in five tranches on March 17, 2009.

Northrop prices tight

Northrop Grumman priced $2.85 billion of senior notes (Baa2/BBB/BBB+) in three parts, an informed source said.

An $850 million tranche of 1.75% five-year notes priced at 99.724 to yield 1.808% with a spread of Treasuries plus 80 basis points. Guidance was in the 90 bps area.

There is a make-whole call at Treasuries plus 15 bps on the notes.

The second part was $1.05 billion of 3.25% 10-year notes sold at 99.462 to yield 3.312% with a spread of 115 bps over Treasuries. Talk was in the 120 bps area.

The notes have a make-whole call at Treasuries plus 20 bps.

Finally, there was $950 million of 4.75% 30-year bonds priced at 99.904 to yield 4.756% with a spread of Treasuries plus 25 bps. Guidance was in the 150 bps area.

The bonds have a make-whole call at 25 bps over Treasuries.

Active bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC. Passives are Deutsche Bank Securities Inc. and Goldman Sachs & Co.

Proceeds are being used for general corporate purposes including debt repayment, share repurchase, pension plan funding, acquisitions and working capital.

Northrop last sold bonds in the U.S. market in a $1.5 billion offering in three parts on Nov. 1, 2010. That sale included a 1.85% five-year tranches priced at 70 basis points over Treasuries, a 3.5% note due 2021 priced at Treasuries plus 90 bps and a 5.05% 30-year bond sold at 105 bps over Treasuries.

The global security company is based in Falls Church, Va.

Agrium's $1 billion trade

Agrium was in the day's session with a $1 billion sale of senior debentures (Baa2/BBB/) in tranches due 2023 and 2043, according to an FWP with the Securities and Exchange Commission.

The $500 million of 3.5% 10-year notes priced at a spread of Treasuries plus 140 bps.

A $500 million tranche of 4.9% 30-year bonds sold at 170 bps over Treasuries.

BofA Merrill Lynch, RBC Capital Markets LLC and Scotia Capital (USA) Inc. were bookrunners.

Proceeds are being used to fund anticipated capital expenditures.

Agrium last tapped the U.S. bond market with a $500 million sale of 3.15% 10-year notes priced at 145 basis points over Treasuries on Sept. 24, 2012.

The retailer of agricultural products and services is based in Calgary, Alta.

Entergy's $25-pars

Entergy Arkansas priced $125 million of 4.75% $25-par first mortgage bonds due June 1, 2063 (Expected ratings: A3/A-), a market source said.

Price talk was 4.75% to 4.875%.

Wells Fargo Securities Inc. and Morgan Stanley & Co. Inc. were bookrunners.

Proceeds will be used along with other corporate funds to redeem $300 million of 5.4% first mortgage bonds due in August. Any remaining proceeds will be used for general corporate purposes.

Entergy Arkansas is a Little Rock, Ark.-based energy provider.

NY Mortgage's preferreds

New York Mortgage Trust sold $75 million of 7.75% $25-par series B cumulative redeemable perpetual preferred stock, according to a prospectus filed with the Securities and Exchange Commission.

Guidance was in the 7.875% area at midday, with a size of at least $50 million.

Citigroup Global Markets Inc. and Keefe, Bruyette & Woods are the joint bookrunning managers. The New York-based real estate investment trust intends to list the new series of preferreds on the Nasdaq under the ticker symbol "NYMTP."

Proceeds will be used to acquire primarily distressed residential mortgage loans and commercial mortgage-related debt investments. Proceeds might also be used for general working capital, including the repayment of outstanding debt.

Stephanie N. Rotondo contributed to this review

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