Philip Morris, Monsanto, Praxair hit market amidst 'very strong' tone; bonds flat on day

By Cristal Cody and Aleesia Forni

Virginia Beach, Nov. 4 - The issuance spree in the high-grade primary market continued on Monday with more than $6 billion of new paper priced during the session.

The largest deal of the day came from Philip Morris International Inc., which priced $2 billion of senior notes in three tranches.

The company sold $750 million of 1.875% notes due 2019 at Treasuries plus 68 basis points and $500 million of 3.6% notes due 2023 at 108 bps over Treasuries.

There was also $750 million of 4.875% 30-year notes priced with a spread of Treasuries plus 118 bps.

In other primary action, Monsanto Co. sold a three-part $1 billion issue of senior notes.

A $400 million tranche of three-year floaters sold at par to yield Libor plus 20 bps, and a $300 million tranche of 1.85% notes due 2018 sold at Treasuries plus 53 bps.

A third tranche of $300 million of 4.65% 30-year notes sold at 93 bps over Treasuries.

U.S. Bancorp priced $1 billion of 1.95% five-year senior notes at Treasuries plus 62.5 bps, according to an FWP filing with the Securities and Exchange Commission.

Praxair Inc. hit the market with a $500 million issue of 1.9% long five-year notes priced with a spread of Treasuries plus 45 bps, according to an FWP filed with the SEC.

Meanwhile, Ryder System, Inc. sold $300 million of 2.45% five-year senior notes on Monday at Treasuries plus 115 bps, according to an informed source.

There were also two add-ons priced on Monday by Caterpillar Financial Services Corp.

The company reopened its existing 2.45% medium-term notes due Sept. 6, 2018 to price the add-on at Treasuries plus 65 bps.

It also tapped its issue of floating-rate medium-term notes due Feb. 26, 2016 to add $50 million.

There was also a $1.5 billion new issue from BP Capital Markets plc, though terms were not available at press time.

"Very strong tone today," one syndicate source noted after the session's close, adding that the issuance frenzy is "not likely" to slow down anytime soon.

Sources had predicted a busy November, with supply expected to reach between $80 billion to $100 billion for the month.

Investment-grade bonds opened the session on Monday moderately tighter but headed out flat following the new deal issuance, according to market sources.

"It's pretty much unchanged on the day," a trader said of bond spreads.

The Markit CDX North American Investment Grade series 21 index ended flat at a spread of 73 bps.

New issues from Philip Morris, Monsanto and Ryder System traded mostly wrapped around issuance, according to traders.

Praxair's notes were not seen in late afternoon trading by market sources.

Philip Morris prices tight

Philip Morris brought a $2 billion sale of senior notes (A2/A/A) in three parts to Monday's market, according to a market source.

All three tranches were priced at the tight end of talk.

The deal included $750 million of 1.875% notes due 2019 at Treasuries plus 68 bps.

A $500 million tranche of 3.6% notes due 2023 was sold with a spread of 108 bps over Treasuries.

The company also priced $750 million of 4.875% 30-year notes at Treasuries plus 118 bps.

Full terms were not available at press time.

Philip Morris' 1.875% notes tightened 1 bp to 67 bps bid, 66 bps offered in the secondary market, one trader said. Another trader saw the notes at 65 bps offered.

The tranche of 3.6% notes traded 1 bp better to 107 bps bid, 105 bps offered, a trader said. The 10-year notes were quoted wider at 110 bps bid, 107 bps offered by a trader at another desk.

The 4.875% bonds headed out at 117 bps bid, 115 bps offered, traders said.

Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC were the lead managers.

Proceeds will be added to the company's general funds.

The producer of cigarette and tobacco products is based in New York City.

U.S. Bancorp hits market

US Bancorp came to Monday's market with a $1 billion issue of 1.95% five-year senior medium-term notes (A1/A+/AA-/AA) priced with a spread of Treasuries plus 62.5 bps, according to an FWP filing with the SEC.

The notes were sold at 99.876 to yield 1.976%.

Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and U.S. Bancorp Investments, Inc. were the joint bookrunners.

Monsanto sells $1 billion

Monsanto priced $1 billion of senior notes (A1/A+/A+) in three tranches on Monday, according to a market source and an FWP filed with the SEC.

The notes priced tight of talk.

There was a $400 million tranche of three-year floating-rate notes sold at par to yield Libor plus 20 bps.

A $300 million tranche of 1.85% notes due 2018 was priced with a spread of Treasuries plus 53 bps, or 99.861 to yield 1.879%.

Finally, a $300 million part of 4.65% 30-year notes sold at 93 bps over Treasuries.

Pricing was at 99.951 to yield 4.653%.

In the secondary market, Monsanto's 1.85% notes traded flat at 53 bps bid, 51 bps offered, a trader said. The notes were quoted slightly tighter at 51 bps bid, 50 bps offered by another market source late afternoon.

The 4.65% bonds firmed to 92 bps bid, 91 bps offered, traders said.

BofA Merrill Lynch, Citigroup Global Markets, Goldman Sachs & Co., JPMorgan and Morgan Stanley were the joint bookrunners.

Proceeds will be used to finance the acquisition of Climate Corp. and for general corporate purposes.

The company provides agricultural products for farmers and is based in St. Louis.

Praxair new issue

Monday also saw Praxair sell $500 million of 1.9% notes due Feb. 28, 2019 with a spread of Treasuries plus 45 bps, according to an FWP filed with the SEC.

Pricing was at 99.94 to yield 1.911%.

Citigroup Global Markets was the bookrunner.

Proceeds will be used for general corporate purposes, including debt repayment and share repurchases under a repurchase program.

The industrial gas company is based in Danbury, Conn.

Ryder Systems prices

In other primary action, Ryder Systems sold a $300 million issue of 2.45% senior notes (Baa1/BBB/A-) due 2018 on Monday with a spread of Treasuries plus 115 bps, according to an informed source.

The notes sold at the tight end of talk.

Pricing was at 99.771 to yield 2.5%.

Ryder System's new notes traded flat at 115 bps bid, 114 bps offered, a trader said.

Mitsubishi UFJ Securities (USA) Inc., Morgan Stanley, RBS Securities Inc., U.S. Bancorp Investments and Wells Fargo Securities LLC were the joint bookrunners.

The transportation and logistics company is based in Miami.

Caterpillar adds on

Caterpillar Financial Services priced a $100 million add-on to its 2.45% medium-term notes, series G, due Sept. 6, 2018 at Treasuries plus 65 bps, according to an FWP filed with the SEC.

The add-on priced at 102.066 to yield 1.999%.

The original $300 million issue priced at 78 bps over Treasuries on Sept. 6.

SG Americas Securities LLC was the sole bookrunner.

The company also reopened its issue of floating-rate medium-term notes, series G, due Feb. 26, 2016 to add $50 million, according to a separate FWP filing with the SEC.

The notes have a coupon of Libor plus 24 bps, and the add-on was priced at 100.099.

Total issuance will be $650 million, including $300 million priced on Feb. 25, 2013, $150 million priced on June 26 and $150 million priced on Sept. 30.

Bookrunner was JPMorgan.

The funding arm of heavy equipment maker Caterpillar is based in Nashville.

Bank/brokerage CDS costs mixed

Investment-grade bank and brokerage CDS prices were unchanged to mixed on Monday, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 96 bps bid, 99 bps offered. Citigroup Inc.'s CDS costs eased 1 bp to 90 bps bid, 94 bps offered. JPMorgan Chase & Co.'s CDS costs tightened 1 bp to 83 bps bid, 86 bps offered. Wells Fargo & Co.'s CDS costs ended unchanged at 53 bps bid, 57 bps offered.

Merrill Lynch's CDS costs were flat at 96 bps bid, 101 bps offered. Morgan Stanley's CDS costs ended unchanged at 110 bps bid, 114 bps offered. Goldman Sachs Group, Inc.'s CDS costs closed flat at 115 bps bid, 118 bps offered.

Paul Deckelman contributed to this review.

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