Bank of America, Philip Morris, Ventas keep primary flow alive; CVS weak; Gap 30 bps wider

By Andrea Heisinger and Cristal Cody

New York, May 10 - The pace slowed in the high-grade primary Tuesday. Deals appeared from Philip Morris International Inc., Bank of America Corp. and Ventas Inc. units.

There were also trades from utilities Pacific Gas & Electric Co. and Entergy Mississippi Inc.

Bank of America announced its sale of 10-year notes later in the day and then added a reopening of a floating-rate note due 2014. The sale totaled $2.3 billion including $1 billion of the 10-year notes and $300 million added to an existing $1.5 billion issue of floaters due in January 2014.

Philip Morris had the second-largest deal of the day at $1 billion in two parts. There was $650 million of five-year notes and $350 million of 10-year notes. The tranche due 2021 sold at the wide end of guidance.

Entergy Mississippi sold $125 million of five-year first mortgage bonds.

The day's other utility, PG&E, sold $300 million of 10-year senior notes.

Two units of real estate investment trust Ventas sold $700 million of 10-year guaranteed notes.

Issuance isn't done for the week despite the more than $12.77 billion of bonds sold in its first two days.

"We should have one or two for tomorrow," a syndicate source said.

Another source said he didn't have any trades upcoming but knew of a couple "floating around that are possible."

Corporates have come back out of the woodwork after being mostly absent due to earnings season and volatility. A portion of the week's deals were held over from the previous week when conditions were worse.

Overall investment-grade Trace volume rose from less than $10 billion to about $12.5 billion, but secondary activity remained light, sources said.

"Pretty slow the last two days," a trader said. "Things picked up yesterday with the new issues in the afternoon, but there wasn't a ton of volume going through in secondary, at least."

The series 14 Markit CDX North American Investment Grade index was unchanged from Monday's spread of 89 basis points, according to Markit Group Ltd.

In secondary trading, both tranches from Philip Morris narrowed, and Bank of America's notes firmed about 3 bps, traders said.

PG&E's new notes traded "a couple basis points better," one trader said.

International Business Machines Corp.'s notes sold on Monday were trading around issue price, a trader said.

Prudential Financial Inc.'s new tranches traded marginally tighter, a source said.

"About a half basis point better on the five-year and a basis point better on the 30-year."

But bonds in the retail sector haven't fared as well, a source said. The new 10-year notes from CVS Caremark Corp. remained wider in the secondary market since they priced Monday afternoon.

"It got priced too aggressively," the source said. "A lot of the other new deals in the retail space have also gone wider. Gap paper traded as much as 15 wider earlier today."

Gap Inc.'s bonds sold last month have moved out 30 bps in trading. The retailer sold $1.25 billion of 5.95% split-rated notes due 2021 (Baa3/BB+/BBB-) on April 7 at a spread of Treasuries plus 245 bps.

"It's now trading around 275," the source said.

Treasuries slumped as equities rallied on Tuesday. The yield on the 10-year benchmark Treasury note rose to 3.21% from 3.15%. The 30-year bond yield rose 4 bps to 4.35%.

Philip Morris' $1 billion deal

Philip Morris International sold $1 billion of senior notes (A2/A/A) in two parts, said a source away from the deal.

The $650 million of 2.5% five-year notes were priced at a spread of Treasuries plus 75 bps. They were sold in line with talk in the 75 bps area.

A second tranche was $350 million of 4.125% 10-year notes sold at 100 bps over Treasuries. Guidance was in the range of 95 bps to 100 bps.

The bookrunners were Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and RBS Securities Inc.

Proceeds are being added to general funds and used for general corporate purposes.

In secondary trading, the five-year notes firmed 5 bps on the bid side to 70 bps, a trader said. The tranche of 10-year notes tightened in trading to 94 bps bid, the trader said.

The holding company for cigarette and tobacco subsidiaries is based in New York.

BofA's $2.3 billion

Bank of America sold $2.3 billion of notes (A2/A/A+) in two parts including a reopening of floating-rate notes that was added, a market source said.

Those floaters due 2014 were originally sold at a coupon of Libor plus 142 bps. The $300 million of reopened notes priced at 101.356 to yield Libor plus 92 bps.

The total issuance for the floating-rate notes is $1.8 billion including $1.5 billion sold on Jan. 26 at par.

There was also a $2 billion tranche of new 5% 10-year notes priced at a spread of 185 bps over Treasuries.

Bank of America Merrill Lynch was the bookrunner.

In the secondary market, the notes due 2021 traded 3 bps tighter at 182 bps, a trader said.

The financial services company is based in Charlotte, N.C.

Ventas units sell bonds

Ventas Realty and Ventas Capital priced $700 million of 4.25% 10-year senior notes (Baa3/BBB-) at a spread of 165 bps over Treasuries, said a source who worked on the sale.

They sold at the tight end of guidance in the 170 bps area plus or minus 5 bps.

There was about $2.25 billion on the books, the source said.

Proceeds will be used to fund the cash portion of the purchase price and transaction costs related to the upcoming acquisition of Atria Senior Living Group, Inc.'s portfolio of senior-living communities, to make a senior term loan to Nationwide Health Properties, Inc. and for general corporate purposes.

Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co. were the bookrunners.

The notes are guaranteed by Ventas Inc., which is a Chicago-based real estate investment trust for senior housing and health-care properties.

PG&E prices 10-year paper

Pacific Gas & Electric sold $300 million of 4.25% 10-year senior notes (A3/BBB+/A) to yield Treasuries plus 108 bps, according to an informed source and an FWP filing with the Securities and Exchange Commission.

Barclays Capital, Deutsche Bank Securities and J.P. Morgan Securities LLC were the bookrunners.

Proceeds are being used to repay a portion of outstanding commercial paper.

In secondary trading, the notes firmed to 106 bps bid, 104 bps offered, a trader said.

The electric and natural gas utility is based in San Francisco.

Entergy unit sells five-years

Entergy Mississippi sold $125 million of 3.25% five-year first mortgage bonds (Baa1/A-) to yield Treasuries plus 137.5 bps, according to an FWP filing with the SEC.

Credit Agricole Securities (USA) Inc., RBS Securities and Scotia Capital (USA) Inc. were the bookrunners.

Proceeds are being used to redeem $100 million of 5.92% debt due February 2016 prior to maturity and for general corporate purposes.

The electric utility is based in Jackson, Miss.

CVS widens

CVS Caremark's 10-year senior notes sold on Monday traded wider soon after pricing and stayed weak in trading on Tuesday, a source said.

The $550 million of 4.125% notes due 2021 priced at a spread of Treasuries plus 115 bps. The notes moved out to 123 bps bid, 120 bps offered, the source said.

CVS also sold a $950 million tranche of 5.75% bonds due 2041 at a spread of 155 bps over Treasuries. The notes traded late Tuesday at 155 bps bid, 153 bps offered.

"The 30-years are still hanging in there, but the 10-years are about 7 to 8 basis points wider," the source said.

The pharmacy retailer is based in Scarsdale, N.Y.

Prudential Financial better

Prudential Financial's notes traded about 0.5 bp to 1 bp better, a trader said Tuesday.

The company priced $800 million of notes (Baa2/A) in two parts on Monday.

The $500 million of 3% five-year notes priced at a spread of Treasuries plus 118 bps. The notes due 2016 traded Tuesday afternoon at 118 bps bid, 116 bps offered, a trader said.

A $300 million tranche of 5.625% 30-year bonds, which sold at Treasuries plus 138 bps, firmed to 137 bps bid, 135 bps offered.

The insurance and financial services company is based in Newark.

IBM flat

IBM sold $1 billion of 1.25% three-year notes (Aa3/A+/A+) to yield Treasuries plus 37 bps on Monday.

The notes traded late Tuesday at 37 bps bid, 35 bps offered, the trader said.

The technology and computer company is based in Armonk, N.Y.

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