Niagara Mohawk, Avnet join KfW, Nordic Investment Bank in primary; HP bonds weaken

By Aleesia Forni and Andrea Heisinger

New York, Nov. 20 - Issuers were more reluctant to price bonds on Tuesday as some earnings and world news caused unease.

Sales were done by Niagara Mohawk Power Corp. and Avnet, Inc., along with some sovereign names.

Niagara Mohawk sold $700 million of notes with 10-year and 30-year maturities. Avnet priced $350 million of 10-year notes after increasing the size from $300 million.

German development bank KfW sold an upsized $1.5 billion of two-year floating-rate notes after the offering went overnight from Monday.

They were joined by sovereign issuer Nordic Investment Bank, which sold $1 billion of five-year global notes in line with guidance.

Terms of a $100 million sale of $25-par 10-year notes from Pitney Bowes Inc. were given. Pricing was done late on Monday.

The continuing conflict in the Middle East also didn't necessarily stop anyone from issuing bonds.

The pipeline for after Thanksgiving is seen as robust.

"We should be really busy," a syndicate source said. "Starting right off on Monday."

Wednesday is expected to have a mostly empty primary.

Hewlett-Packard Co. reported earnings that included an $8.8 billion accounting write-down due to an acquisition gone wrong. The company it acquired, Autonomy, is being investigated by a British fraud investigation agency for covering up the actual state of its finances. HP lost $6.9 billion in the last quarter compared with its $200 million profit in the quarter before that.

The market tone was "not really" affected by the HP news, a market source said.

A number of HP's bonds were trading actively on Tuesday, with most spreads trading 20 bps to 40 bps wider during session, another market source said.

Bonds from Citigroup and Bank of Nova Scotia were also among the day's most actively traded paper.

Citigroup's 8.5% notes due 2019 were 3 bps better, while Bank of Nova Scotia's 2.55% notes due 2017 widened 7 bps.

In recent deals, DCP Midstream Operating, LP's notes were trading weaker during Tuesday's session.

Niagara Mohawk prices tight

Niagara Mohawk Power sold $700 million of senior notes (A3/A-/) in two maturities after a 30-year bond was added, a market source said.

Initially the sale was a single tranche of 10-year notes.

That $300 million of 2.721% 10-year notes sold at a spread of Treasuries plus 107 bps. The notes were sold at the tight end of guidance in the 110 bps area.

A $400 million tranche of 4.119% 30-year bonds priced at 132 bps over Treasuries. This tranche also priced at the low end of talk in the 135 bps area.

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

Active bookrunners were J.P. Morgan Securities LLC, Mitsubishi UFJ Securities (USA) Inc. and Wells Fargo Securities LLC.

Niagara Mohawk was last in the market with a $500 million sale of five-year notes on Sept. 21, 2009.

The electric utility subsidiary of National Grid is based in Syracuse, N.Y.

Avnet upsizes to $350 million

Phoenix-based industrial distributor Avnet was in the market with an upsized $350 million sale of 4.875% 10-year notes (Baa3/BBB-/BBB-/) priced to yield Treasuries plus 325 bps, according to an FWP with the Securities and Exchange Commission.

The size of the trade was increased from $300 million, a source said.

Bank of America Merrill Lynch and RBS Securities Inc. were bookrunners.

Proceeds are being used to repay amounts owed under a senior unsecured revolving credit facility and accounts receivable securitization program.

Avnet was last in the bond market with a $300 million sale of 5.875% 10-year notes sold at Treasuries plus 275 basis points over Treasuries on June 17, 2010.

The industrial distributor is based in Phoenix.

NIB's five-years

Nordic Investment Bank priced $1 billion of 0.75% five-year global notes (Aaa/AAA/) to yield mid-swaps plus 0 bps, or Treasuries plus 17.05 bps, a market source said.

Bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and Nomura Securities International Inc.

NIB was last in the U.S. bond market with a $1.25 billion sale of five-year notes on Jan. 31.

The financier for five Nordic countries is based in Helsinki, Finland.

KfW sells floaters

KfW priced an upsized $1.5 billion of two-year floating-rate notes (Aaa/AAA/AAA) at par to yield one-month Libor plus 8 bps, a market source said.

The size was increased from $1 billion.

Pricing was tighter than talk on Monday in the one-month Libor plus 9 bps area.

Bookrunners were BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and Goldman Sachs & Co.

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

Pitney Bowes' $25-par sale

Pitney Bowes is issuing $100 million of 5.25% $25-par 10-year senior notes, according to an FWP filed with the SEC.

At midday Tuesday, the issue was pegged at $24.75 by a trader.

After the market closed, another source said there were late-day trades at par.

"Somebody was driving it up at the end," he said.

Still, the issue closed at the $24.75 mark.

The deal came late Monday, upsized from $75 million and at the low end of price talk.

Morgan Stanley & Co. Inc. and Bank of America Merrill Lynch are bookrunners.

Proceeds will be used for general corporate purposes. The securities are expected to be listed on the New York Stock Exchange.

The office supply manufacturer is based in Stamford, Conn.

Citigroup active

Citigroup's 8.5% 10-year notes were active in the secondary market on Tuesday, tightening 3 bps to 128 bps bid during the session.

The bank priced $1 billion notes due 2019 at Treasuries plus 437.5 bps on June 11, 2009.

Bank Nova weakens

Meanwhile, Bank of Nova Scotia's 2.55% notes due 2017 were also active on the day.

The notes were seen 7 bps wider at 53 bps bid near the day's close. The notes sold with a spread of 172 bps over Treasuries on Jan. 5.

DCP notes wider

DCP Midstream's 2.5% five-year notes were quoted 13 basis points wider, trading at 198 bps bid, 194 bps offered, one trader said.

DCP priced the $500 million guaranteed senior notes to yield Treasuries plus 185 bps on Monday.

The unit of DCP Midstream LLC is a Denver-based joint venture between Spectra Energy and ConocoPhillips.

Stephanie N. Rotondo contributed to this review

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