Cisco prices $8 billion megadeal; Delphi upsizes; CNA, PG&E also price; CMS Energy notes firm

By Cristal Cody and Aleesia Forni

Virginia Beach, Feb. 24 - Cisco Systems, Inc. led a busy start to the week for the high-grade primary market on Monday.

The company brought to market the year's largest deal so far, selling $8 billion in seven tranches.

The deal's shortest maturity was $850 million of 18-month floating-rate notes priced to yield Libor plus 5 basis points, and its longest maturity was $1 billion of 3.625% 10-year notes with a spread of 90 bps over Treasuries.

"Definitely saw demand," a market source said of the Cisco deal, adding that the deal's order book was nearly three times oversubscribed.

All fixed-rate tranches of the company's new issue sold at the tight end of talk, which had tightened by up to 15 bps from original guidance.

Also on Monday, Delphi Corp. priced an upsized $700 million issue of 10-year 4.15% senior notes at Treasuries plus 145 bps.

The issue was upsized from original plans for a $500 million offering.

CMS Energy Corp. brought $550 million of senior notes to market in two tranches.

A $250 million tranche of 3.875% 10-year notes sold with a spread of Treasuries plus 113 bps, while a $300 million tranche of 4.875% notes due 2044 priced at Treasuries plus 118 bps.

Both tranches priced at the tight end of talk.

Meanwhile, CNA Financial Corp. was also in the day's session pricing a $550 million issue of 3.95% senior notes due 2024. Pricing was at 120 bps over Treasuries.

PG&E Corp. came to market with a $350 million issue of 2.4% five-year senior notes priced at Treasuries plus 88 bps. Pricing was at the tight end of talk.

In the preferred market, Allstate Corp. sold $650 million of 6.6.25% series E fixed-rate noncumulative perpetual preferred stock during the session. Price talk was originally at 6.75% but was revised to 6.625% to 6.75%, according to a trader.

Due largely to the Cisco deal, supply hit $10.15 billion for the first session of what is expected to be a packed week for the primary market.

"We knew it was going to be busy," one market source said.

Issuers are expected to flock to the new issue market as the week moves on, with one syndicate source noting there are "a couple of trades on tap" for Tuesday's session.

Sources are predicting issuance could reach $30 billion for the week.

The Markit CDX North American Investment Grade series 21 index firmed 1 bp to a spread of 64 bps on Monday.

New issues, including Cisco's notes, were active in aftermarket trading, according to sources.

CMS Energy's 3.875% notes due 2024 traded 5 bps better, and the tranche of 4.875% bonds due 2044 tightened 2 bps, a trader said.

Delphi's 4.15% notes due 2024 eased 1 bp on the bid side late afternoon, according to a trader.

PG&E's 2.4% notes due 2019 headed out wrapped around issuance, a trader said.

CNA Financial's 3.95% notes due 2024 traded flat in aftermarket trading, according to a trader.

Cisco prices $8 billion

Cisco Systems came to Monday's market with $8 billion of senior notes (/AA-/) in seven tranches, according to a market source.

The company priced $850 million of 18-month floating-rate notes to yield Libor plus 5 bps.

A $1 billion tranche of three-year floaters sold to yield Libor plus 28 bps.

There was also $2.4 billion of 1.1% three-year notes sold at 40 bps over Treasuries.

A fourth tranche was $500 million of five-year notes sold at par to yield Libor plus 50 bps.

Cisco sold $1.75 billion of 2.125% notes due 2019 at 60 bps over Treasuries.

There was a $500 million tranche of 2.9% seven-year notes priced with a spread of 75 bps over Treasuries.

Finally, $1 billion of 3.625% 10-year notes priced at Treasuries plus 90 bps.

All fixed-rate tranches priced at the tight end of talk.

In the secondary market, the notes due 2017 traded at 40 bps bid, a trader said.

The notes due 2019 were seen at 58 bps bid.

The notes due 2024 were not immediately active in the secondary market, the trader said.

The joint bookrunners were BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) LLC, J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds will be used for general corporate purposes, including the repayment of the company's 1.625% notes and floating-rate notes due March 14, 2014 and 2.9% notes maturing on Nov. 17, 2014.

The company also plans to use proceeds to return capital to shareholders through the repurchase of shares of common stock and cash dividends.

Based in San Jose, Calif., Cisco produces internet protocol-based networking and other communications and information technology products.

Delphi upsizes

Delphi was in Monday's market with an upsized $700 million issue of 4.15% senior notes (Baa3/BBB-/BBB-) due 2024 priced at 99.649 to yield 4.193%, or Treasuries plus 145 bps, according to a market source and an FWP filing with the Securities and Exchange Commission.

The notes eased on the bid side to 146 bps bid, 141 bps offered in aftermarket trading, a source said.

JPMorgan, BofA Merrill Lynch, Deutsche Bank and Goldman Sachs & Co. were the joint bookrunners.

Proceeds from the offering will be used for general corporate purposes, including the repayment of the company's $500 million 5.875% senior notes due 2019 and a portion of its term loan A.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

CMS two-parter

CMS Energy sold $550 million of senior notes (Baa2/BBB-/BBB-) in 10- and 30-year tranches on Monday, according to a syndicate source.

The deal included a $250 million tranche of 3.875% 10-year notes priced at 99.926 to yield 3.884%, or Treasuries plus 113 bps.

A second tranche was $300 million of 4.875% notes due 2044, which sold with a spread of Treasuries plus 118 bps.

Pricing was at 99.811 to yield 4.887%.

Both tranches sold at the tight end of talk.

CMS Energy's 3.875% notes due 2024 tightened to 108 bps bid, 107 bps offered in the secondary market, a trader said.

The tranche of 4.875% bonds due 2044 firmed to 116 bps bid, 113 bps offered.

BNP Paribas Securities Corp., BofA Merrill Lynch, Deutsche Bank, JPMorgan, RBS Securities Inc. and Mitsubishi UFJ Securities (USA) Inc. were the bookrunners.

The co-managers were Comerica Securities Inc., Fifth Third Securities Inc., KeyBanc Capital Markets LLC, SMBC Nikko and U.S. Bancorp Investments Inc.

Proceeds will be used to repay the company's 6.875% notes due 2015 and 4.25% notes due 2015 and for general corporate purposes.

The parent company of electric and gas utility subsidiaries is based in Jackson, Mich.

CNA prices 10-year notes

CNA Financial priced $550 million of 3.95% 10-year senior notes (Baa2/BBB/BBB) on Monday with a spread of Treasuries plus 120 bps, according to an FWP filing with the SEC.

Pricing was at 99.988 to yield 3.952%.

The notes traded wrapped around issuance at 120 bps bid, 118 bps offered late afternoon, a trader said.

The joint bookrunners were Barclays, Citigroup Global Markets Inc., JPMorgan, Wells Fargo and U.S. Bancorp Investments, Inc.

Williams Capital Group LP was the co-manager.

Proceeds will be used to repay the company's 5.85% senior notes due Dec. 15, 2014.

The insurance company is based in Chicago.

PG&E prices tight

PG&E priced $350 million of 2.4% senior notes due 2019 with a spread of 88 bps over Treasuries on Monday, according to a syndicate source.

The notes (Baa1/BBB-/BBB+) sold at the tight end of talk.

Pricing was at 99.831 to yield 2.436%.

PG&E's 2.4% notes due 2019 traded flat at 88 bps bid, 84 bps offered in the secondary market, a trader said.

Barclays, BNP Paribas Securities Corp. and Citigroup were the joint bookrunners.

The co-managers were Drexel Hamilton LLC and Great Pacific Securities.

Proceeds will be used to pay the company's 5.75% senior notes due April 1, 2014.

The company provides electric and natural gas services through its subsidiaries and is based in San Francisco.

Allstate preferreds

Allstate priced $650 million of 6.6.25% series E fixed-rate noncumulative perpetual preferred stock, according to a market source on Monday.

Price talk was originally around 6.75% but was later revised to 6.625% to 6.75%, a trader said.

Morgan Stanley & Co. Inc., BofA Merrill Lynch, Goldman Sachs, JPMorgan, UBS Securities LLC and Wells Fargo were the joint bookrunning managers.

When declared, dividends on the $25-par shares will be paid quarterly. The company cannot issue a dividend, except from proceeds from the sale of common stock during the 90 days prior to the declaration, if it fails to meet certain specified capital adequacy, net income or shareholders' equity levels.

Prior to April 15, 2019, Allstate can redeem the shares in whole within 90 days of a rating agency event at par plus a make-whole premium. Otherwise, the company can redeem the preferreds after April 15, 2019 at par.

The Northbrook, Ill.-based insurance company will apply to list the preferreds on the New York Stock Exchange under the ticker symbol "ALLPE."

Proceeds will be used for general corporate purposes.

CDS prices decline

Investment-grade bank and brokerage credit default swap prices declined, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 68 bps bid, 71 bps offered. Citigroup Inc.'s CDS costs declined 3 bps to 76 bps bid, 79 bps offered. JPMorgan Chase & Co.'s CDS costs firmed 2 bps to 59 bps bid, 62 bps offered. Wells Fargo & Co.'s CDS costs fell 1 bp to 39 bps bid, 42 bps offered.

Merrill Lynch's CDS costs fell 1 bp to 71 bps bid, 74 bps offered. Morgan Stanley's CDS costs firmed 2 bps to 84 bps bid, 87 bps offered. Goldman Sachs Group, Inc.'s CDS costs tightened 6 bps to 87 bps bid, 92 bps offered.

Paul Deckelman and Stephanie N. Rotondo contributed to this review

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