Phillips 66 prices debut; HP, RBC among other deals; new bonds improve; bank paper tighter

By Andrea Heisinger

New York, March 7 - Issuers once again bombarded the high-grade bond market with deals on Wednesday following a breather the previous day when the tone was depressed.

Large multi-tranche deals from Phillips 66 and Hewlett-Packard Co. mingled with smaller sales from Kinder Morgan Energy Partners LP, Marsh & McLennan Companies Inc., Royal Bank of Canada, Domtar Corp. and split-rated American Tower Corp.

KfW sold the $1 billion of three-year floating-rate notes announced on Tuesday. The paper priced in line with talk.

"Issuers were just waiting for [the tone] to recover," a source said after the close. "Some were looking to go yesterday but couldn't."

There were only a couple of sales in the market on Tuesday after news out of Europe overnight, combined with a drop in equities, left the market in a condition that most companies didn't want to chance.

Phillips 66 had the largest sale of $5.8 billion in four parts, which priced late in the day. The company is a future spin-off of ConocoPhillips Co.

Hewlett-Packard priced $2 billion of paper in two tranches, following up on a $3 billion offering in December.

RBC priced $1.25 billion of three-year notes.

Houston-based Kinder Morgan Energy sold $1 billion of 10-year notes in line with price talk.

Consultants Marsh & McLennan priced $250 million of five-year notes in a deal with a do-not-grow provision.

Canadian paper and fiber producer Domtar sold an upsized $300 million of 10-year notes. The size was increased by $50 million.

Split-rated American Tower priced an upsized $700 million of 10-year notes. The deal size was increased from $500 million.

The day was summed up by a syndicate source after the market close.

"It was exhausting today, but after the breather yesterday, we were ready," he said.

More deals are expected on Thursday, although likely none as large as Phillips 66 or Hewlett-Packard, sources said.

Volume steady in trading

New bonds didn't make huge gains once hitting the secondary market, sources said.

HP's two new bonds moved between 5 bps and 8 bps better, a source said.

The new Kinder Morgan 10-year was seen moving wider by 1 basis point while Marsh & McLennan was about 5 bps tighter.

RBC was quoted at first relatively unchanged but then moving about 3 bps tighter.

American Tower was seen mostly unchanged.

Phillips 66 was seen improving between 2 bps and 5 bps overall in the gray market, a trader said.

Tuesday's five-year note from Japan's ORIX Corp. was quoted in the morning about 2 bps better.

Overall trading volume was on level with the end of the previous day. A trader said there was $11.5 billion in volume by the end of the day compared with about $11.8 billion at the close on Tuesday.

Treasuries yields were seen wider than the previous day at the close, a source said. The five-year note was out 3 bps to 0.83% while the 10-year note also moved 3 bps wider to 1.97%. The 30-year bond was quoted 5 bps worse at 3.12%.

Credit default swaps for bank and brokerage names were tighter across the board, after widening in a sell-off of bank bonds on Tuesday.

Phillips 66 has huge debut

Phillips 66 priced its first bond offering (Baa1/BBB/) totaling $5.8 billion in four parts late in the day, an informed source said.

The size was slightly larger than the $5 billion amount predicted, the source said. There was about $22 billion on the order books.

The inaugural bonds were priced off of "a bunch of stuff," but particularly outstanding paper from Valero Energy Corp. and Marathon Oil Corp., said a source who worked on the trade.

The $800 million of 1.95% three-year notes sold at Treasuries plus 155 bps. The notes were sold significantly tighter than talk in the 170 bps area.

A $1.5 billion tranche of 2.95% five-year paper priced at a spread of 210 bps over Treasuries. The tranche sold tighter than guidance in the 220 bps area.

The $2 billion tranche of 4.3% 10-year notes was offered at 235 bps over Treasuries. These notes also were priced tighter than guidance in the 250 bps area.

Finally, there was $1.5 billion of 5.875% 30-year bonds priced at Treasuries plus 275 bps. The bonds sold tighter than guidance in the 285 bps area.

The deal was done under Rule 144A and Regulation S.

Active bookrunners were Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and RBS Securities Inc.

The refiner is set to be spun off from ConocoPhillips Co. in the second half of 2012, with proceeds from this deal being used to fund a distribution to that parent company.

ConocoPhillips was last in the market with a $3 billion offering in three tranches on May 18, 2009. A 4.6% long five-year note from that deal priced at 250 bps over Treasuries while a 6% long 10-year note sold at 285 bps. A 6.5% 30-year bond from the same deal priced at 287.5 bps.

The refinery is based in Houston.

HP sells $2 billion

Hewlett-Packard priced $2 billion of senior notes (A3/BBB+/A) in two parts, a source who worked on the trade said.

The $1.5 billion of 2.6% notes due 2017 were sold at a spread of Treasuries plus 175 bps. The tranche was sold tighter than talk in the 185 bps area.

A second tranche of $500 million in 4.05%10-year notes were priced at 210 bps over Treasuries. These notes also were sold at the low end of guidance in the 215 bps area.

Bank of America Merrill Lynch, BNP Paribas Securities Corp., Citigroup Global Markets Inc. and HSBC Securities (USA) LLC were bookrunners.

Proceeds are being used for general corporate purposes including repayment of commercial paper.

HP last priced $3 billion of notes in three tranches on Dec. 6, 2011. The 3.3% five-year notes from that offering priced at 240 bps over Treasuries while a 4.65% 10-year note sold at 260 bps over Treasuries.

The new notes due 2017 were at first quoted 2 bps better in the gray market at 173 bps bid, 169 bps offered. A second trader later saw them trading at 167 bps bid.

The notes due 2022 made a similar move, quoted at 203 bps bid, which was about 7 bps tighter than the 210 bps price.

The computer and technology company is based in Palo Alto, Calif.

Kinder Morgan's $1 billion

Kinder Morgan Energy Partners sold $1 billion of 3.95% senior notes due 2022 (Baa2/BBB/BBB) to yield 200 bps over Treasuries, an informed source said.

The notes were priced in line with talk in the 200 bps area, the source said.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC were active bookrunners

Proceeds are being used to repay at maturity $450 million of 7.125% notes due on March 15, with any remainder for commercial paper repayment and general corporate purposes.

Kinder Morgan last priced debt in a $750 million deal of notes in two tranches on Aug. 3, 2011.

The new bonds due 2022 were quoted unchanged to slightly wider in the secondary. A trader quoted them at a 201 bps bid and offer of 196 bps.

The pipeline is based in Houston.

American Tower oversubscribed

American Tower sold an upsized $700 million of 4.7% 10-year split-rated senior notes (Baa3/BB+/BBB-) at a spread of Treasuries plus 275 bps, a source close to the trade said.

The size of the trade was increased from $500 million, and the paper sold at the tight end of guidance in the 280 bps area. There was about $1.6 billion on the order books making the deal more than two times oversubscribed.

Bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC and TD Securities (USA) LLC.

Proceeds are being used to refinance debt under credit facilities used to fund a recent acquisition and for general corporate purposes.

In the secondary market, the new 10-year notes were seen unchanged at 275 bps bid, and offered at 260 bps.

The real estate investment trust for broadcast and communication sites is based in Boston.

Marsh & McLennan five-years

Marsh & McLennan Companies sold $250 million of 2.3% five-year senior notes (Baa2/BBB-/BBB) at a spread of Treasuries plus 148 bps, an informed source said.

Barclays Capital Inc. and HSBC Securities (USA) Inc. were bookrunners.

Proceeds are being used to repay $250 million of 6.25% senior notes due in March.

The company last priced $500 million of 10-year notes on July 12, 2011.

The new notes due 2017 moved about 5 bps tighter in trading to 143 bps bid, 138 bps offered, a trader said.

The risk advisement and consulting firm is based in New York City.

RBC sells short bond

Royal Bank of Canada sold $1.25 billion of 1.15% three-year global notes (Aa1/AA-/AA) to yield Treasuries plus 75 bps, a market source said.

Bookrunner was RBC Capital Markets LLC.

RBC last priced notes in the U.S. in a $1.25 billion deal of 1.45% three-year paper to yield Treasuries plus 105 bps on Oct. 26, 2011.

The new three-year notes were at first quoted at 73 bps bid, 70 bps offered and later slightly better at a bid of 72 bps, a trader said.

The financial services company is based in Toronto.

Domtar upsizes

Domtar sold an upsized $300 million of 4.4% 10-year senior notes (Baa3/BBB-/) to yield Treasuries plus 245 bps, a source away from the trade said.

The deal size was increased from $250 million.

Deutsche Bank Securities Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC were bookrunners.

Proceeds are being used to fund all or a substantial portion of the purchase price of a tender offer including payment of accrued interest and any applicable early tender premium. Any remainder will be used for general corporate purposes.

The new 10-year notes were seen in trading, but only a few basis points better on the offer side at 239 bps, a source said.

The paper products maker is based in Montreal.

KfW's floaters

Germany's KfW priced a $1 billion deal of three-year floating-rate notes at par to yield Libor plus 7 bps, an informed source said.

The notes (Aaa/AAA/AAA) were priced in line with guidance in the Libor plus 7 bps area. Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were bookrunners.

The government-owned development bank is based in Frankfurt.

Phillips tightens in gray

Although Phillips 66's four-tranche deal priced too late to be traded in the secondary market, the new bonds did move tighter in the gray market, sources said.

A trader quoted the 2.95% five-year notes about 8 bps better at 202 bps bid and the 4.3% 10-year notes in 3 bps at 232 bps bid.

The tranche of 5.875% 30-year bonds was seen about 4 bps tighter at a bid of 271 bps, the trader said.

ORIX tighter

The $500 million of 3.75% notes due 2017 sold on Tuesday by ORIX were seen slightly better at the open on Wednesday than where they priced, a trader said.

The bonds were quoted at a bid of 293 bps and offer of 288 bps, which was better than the price of 295 bps over Treasuries.

The financial services company is based in Tokyo.

Bank, broker CDS improve

The levels of credit default swaps for banks and brokerages were between 3 bps and 15 bps better than they were quoted the previous day, a source in that sector said, showing improved investor confidence.

Bank names were tighter overall with Bank of America Corp. 14 bps tighter at 265 bps bid, 275 bps offered, the source said. JPMorgan Chase & Co. also moved in, by a more modest 3 bps to 110 bps bid, 115 bps offered.

Brokerages were "all tighter" with CDS costs tightening by 15 bps in the case of Goldman Sachs Group Inc., which was quoted at 240 bps bid, 250 bps offered. Merrill Lynch's costs also came in by 15 bps to 285 bps bid, 300 bps offered. Morgan Stanley's CDS costs were quoted at 7 bps better, landing at 328 bps bid, 338 bps offered.

Stephanie N. Rotondo contributed to this review

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