Ten deals hit high-grade market following holiday; spreads flat; Eastman Chemical mixed

By Aleesia Forni and Cristal Cody

Virginia Beach, Nov. 12 – The investment-grade bond market roared back to life on Wednesday following the Veterans Day holiday.

Ten deals blitzed the primary market, bringing around $12.45 billion of supply.

Gilead Sciences Inc. sold $4 billion of senior notes in three parts in the session’s largest new issue.

A source noted that the deal’s orderbook was more than four times oversubscribed.

Also on Wednesday, Phillips 66 sold $2.5 billion of senior notes in 20- and 30-year tranches around 10 basis points tighter than the midpoint of guidance.

Volkswagen Group of America Finance, LLC came to market with $2 billion of senior notes in three tranches.

The primary also saw Canadian Natural Resources Ltd. sell $1.2 billion of senior notes in tranches due 2018 and 2025, while Sunoco Logistics Partners Operations LP priced $1 billion of notes in two parts.

Ally Financial Inc. was in the market on Wednesday, pricing $800 million of junk-rated bonds in line with talk, though the deal came off of the investment-grade desk.

The primary also hosted Duke Realty LP, Tanger Properties LP, Fulton Financial Corp. and AvalonBay Communities, Inc.

Meanwhile, Methanex Corp. launched a $600 million two-part offering senior notes on Wednesday after widening guidance for the 30-year tranche around 25 bps.

A source said that the deal is expected to price on Thursday.

In forward calendar news, KfW set price talk for a planned offering of 10-year bonds.

So far this week has seen more than $23 billion of new issuance, closing in on sources’ expectations of $25 billion to $30 billion, though the primary is not yet wrapped up for the week.

“Tomorrow could see even more [new issuance],” a market source said, adding that the week’s supply is “very likely” to top $30 billion.

Investment-grade bond spreads were mostly unchanged over the day, according to market sources.

The Markit CDX North American Investment Grade series 23 index was flat at a spread of 64 bps.

Eastman Chemical Co.’s senior notes (Baa2/BBB/BBB) priced on Monday were mixed in secondary trading, according to a market source.

Gilead brings $4 billion

Gilead Sciences sold $4 billion of senior notes (A3/A-/) in three tranches on Wednesday, according to a market source and a company news release.

Gilead sold a $500 million issue of 2.35% notes due Feb. 1, 2020 at Treasuries plus 75 bps. The notes priced at 99.772 to yield 2.396%.

A second tranche was $1.75 billion of 3.5% notes due Feb. 1, 2025 sold with a spread of Treasuries plus 115 bps. Pricing was at 99.906 to yield 3.51%.

There was also $1.75 billion of 4.5% notes due Feb. 1, 2045 priced at 99.413 to yield 4.535%, or Treasuries plus 145 bps.

All three tranches priced tighter than price talk.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays and HSBC Securities (USA) Inc. were the joint bookrunners.

Proceeds will be used for general corporate purposes.

The biopharmaceutical company is based in Foster City, Calif.

Phillips two-parter

Phillips 66 priced $2.5 billion of senior notes (A3/BBB/) on Wednesday in 20- and 30-year tranches, according to a market source.

The sale included $1 billion of 4.65% 20-year notes priced at 98.744 to yield 4.748%, or Treasuries plus 165 bps.

There was also $1.5 billion of 4.875% 30-year bonds priced at 98.099 to yield 4.998%, or Treasuries plus 190 bps.

Both tranches sold around 10 bps tighter than the midpoint of guidance.

MUFG, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and RBS Securities Inc. were the bookrunners.

Proceeds will be used to repay $800 million of the company’s outstanding 1.95% senior notes due 2015, for capital expenditures and for general corporate purposes.

The notes are guaranteed by Phillips 66 Co.

Phillips 66 is a Houston-based energy manufacturing and logistics company with midstream, chemicals, refining, and marketing and specialties businesses.

Volkswagen prices $2 billion

Volkswagen Group of America priced $2 billion of senior notes (A3/A/) in three tranches on Wednesday, according to a market source.

There was $500 million of three-year floaters priced at par to yield Libor plus 44 bps.

A $750 million tranche of 1.6% notes due 2017 priced at 99.933 to yield 1.623%, or Treasuries plus 65 bps.

Finally, $750 million of 2.45% notes due 2019 priced at 99.776 to yield 2.498%, or Treasuries plus 85 bps.

The bookrunners for the Rule 144A and Regulation S deal were Barclays, HSBC Securities, JPMorgan and Mizuho Securities.

The company is a subsidiary of Volkswagen AG, a Wolfsburg, Germany-based automaker.

Sunoco two-parter

Sunoco Logistics Partners Operations priced $1 billion of senior notes (Baa3/BBB/) in tranches due 2024 and 2045, according to an informed source.

The sale included a $200 million tap of the company’s existing 4.25% notes due 2024 priced at 101.772 to yield 4.016%, or Treasuries plus 165 bps.

The original $300 million tranche of 4.25% notes due 2024 sold at Treasuries plus 155 bps on March 31, 2014.

A second tranche was $800 million of 5.35% notes due 2045 priced at 99.331 to yield 5.395%, or Treasuries plus 230 bps.

Both tranches sold tight of guidance.

Wells Fargo Securities LLC, RBC Capital Markets LLC and U.S. Bancorp Investments Inc. were the bookrunners.

The company will use net proceeds from the offering to repay outstanding borrowings under its $1.5 billion revolving credit facility and for general partnership purposes.

The notes are guaranteed by Sunoco Logistics Partners LP.

The crude oil transportation, storage and sales company is based in Philadelphia.

Canadian Natural new issue

Canadian Natural Resources priced $1.2 billion of senior notes (Baa1/BBB+/) in two tranches on Wednesday, according to an FWP filed with the Securities and Exchange Commission.

There was $600 million of 1.75% notes due Jan. 15, 2018 priced at 99.921 to yield 1.776%, or Treasuries plus 80 bps.

A second tranche was $600 million of 3.9% notes due 2025 priced at 99.871 to yield 3.916%.

Citigroup Global Markets, Barclays, JPMorgan, MUFG and RBS Securities were the bookrunners.

The company intends to use the net proceeds of this offering to repay borrowings under its credit facilities.

Based in Calgary, Alta., Canadian Natural is a natural gas and crude oil exploration, production, acquisition and marketing company.

Ally new issue

Ally Financial priced $800 million of 3.75% five-year senior notes (B1/BB/BB+) on Wednesday at 99.1 to yield 3.95% with a spread of Treasuries plus 229.9 bps, according to a market source.

Price talk was set in the 3.95% area, tightened from initial guidance set in the 4% area.

Barclays, Citigroup Global Markets, JPMorgan and RBC Capital Markets were the bookrunners.

The Detroit-based auto financing company plans to use proceeds for general corporate purposes.

AvalonBay 10-years

AvalonBay Communities sold $300 million of 3.5% 10-year medium-term notes (Baa1/BBB+/) on Wednesday at 99.251, according to an FWP filed with the SEC.

Morgan Stanley & Co. LLC and UBS Securities LLC were the joint bookrunners.

Proceeds will be used for working capital, capital expenditures and other general corporate purposes.

The manager and developer of apartment communities is based in Arlington, Va.

Duke Realty prices tight

Duke Realty priced $300 million of 3.75% 10-year senior notes (Baa2/BBB/) on Wednesday with a spread of Treasuries plus 153 bps, according to a market source and an FWP filing with the SEC.

Pricing was at the tight end of talk, which had firmed around 15 bps compared to initial guidance.

The notes priced at 98.795 to yield 3.896%.

Bookrunners were Barclays, Citigroup Global Markets, RBC Capital Markets, U.S Bancorp Investments and Regions Securities LLC.

Proceeds will be used to repay borrowings under the company’s revolving credit facility, repay $250 million of its 7.375% senior notes due Feb. 15, 2015, redeem all of the remaining outstanding shares of its 6.6% series L cumulative redeemable preferred shares and fund a development pipeline.

The real estate investment trust is based in Indianapolis.

Tanger sells 10-years

Tanger Properties priced $250 million of 3.75% senior notes (Baa1/BBB+/) due 2024 at Treasuries plus 145 bps, according to a market source and an FWP filed with the SEC.

The notes sold at the tight end of price talk, which had firmed around 10 bps compared to guidance.

Pricing was at 99.429 to yield 3.819%.

Bookrunners were BofA Merrill Lynch, Jefferies & Co., SunTrust Robinson Humphrey Inc., U.S. Bancorp Investments, and Wells Fargo Securities.

The company plans to use the net proceeds from the offering to redeem its $250 million of 6.15% senior notes due November 2015.

The outlet center real estate investment trust is based in Greensboro, N.C.

Fulton sub notes

Fulton Financial sold $100 million of 4.5% tier 2 subordinated notes due 2024, according to a company press release.

Jefferies is the bookrunner.

Proceeds will be used to fund the repurchase of outstanding shares of the company’s common stock having an aggregate purchase price of up to $100 million under an accelerated share repurchase agreement.

Fulton Financial is a bank holding company based in Lancaster, Penn.

KfW plans deal

KfW (Aaa/AAA/AAA) set price talk for a planned offering of 10-year bonds on Wednesday in the area of mid-swaps plus 12 bps, according to a market source.

The bookrunners are Deutsche Bank Securities Inc., Goldman Sachs & Co. and RBC Capital Markets.

The German government-owned development bank is based in Frankfurt.

Methanex launches

Methanex launched $600 million of senior notes (Baa3/BBB-/BBB-/) in two tranches on Wednesday, according to a market source.

A $300 million 10-year tranche of notes launched at Treasuries plus 195 bps, and a $300 million tranche of 30-year bonds launched at 260 bps over Treasuries.

The 10-year notes launched on top of talk, which was unchanged from guidance.

The 30-year tranche launched in line with talk, which had widened around 25 bps compared to initial price thoughts.

The offering is expected to price on Thursday.

The notes have a change-of-control put at 101%.

BNP Paribas Securities Corp., JPMorgan and RBC Capital Markets are the bookrunners.

Proceeds will be used to repay debt, for capital expenditures and for working capital purposes.

The worldwide methanol supplier is based in Vancouver, B.C.

Eastman Chemical mixed

In the secondary market, Eastman Chemical’s 2.7% notes due 2020 traded lower at 99.75 on Wednesday, according to a market source.

Eastman Chemical priced $800 million of the notes at 99.791 to yield 2.734% on Monday.

The company’s 3.8% notes due 2025, brought in an $800 million offering at 99.506 to yield 3.859% on Monday, headed out better at 99.34, a source said.

Eastman Chemical’s tranche of 4.65% bonds due 2044 were quoted at 95.76 late Wednesday afternoon.

The company reopened the issue on Monday to price a $400 million add-on at 95.444 to yield 4.943%.

Eastman Chemical originally sold the notes on May 6 in a $500 million offering at 98.943 to yield 4.716%.

The global chemical company is based in Kingsport, Tenn.

Bank/brokerage CDS fall

Investment-grade bank and brokerage CDS prices fell, according to a market source.

Bank of America Corp.'s CDS costs tightened 1 bp to 66 bps bid, 69 bps offered. Citigroup's CDS costs firmed 1 bps to 66 bps bid, 69 bps offered. JPMorgan Chase & Co.'s CDS costs were flat at 58 bps bid, 61 bps offered. Wells Fargo & Co.'s CDS costs were also unchanged at 44 bps bid, 47 bps offered.

Merrill Lynch's CDS costs were unchanged at 69 bps bid, 72 bps offered. Morgan Stanley's CDS costs firmed 1 bp to 76 bps bid, 79 bps offered. Goldman Sachs Group, Inc.'s CDS costs tightened 1 bp to 79 bps bid, 82 bps offered.

Paul Deckelman contributed to this review.

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