Plains All American upsizes sale, Westpac, Canada announce deals; Republic gives back a little

By Andrea Heisinger and Paul Deckelman

New York, Sept. 1 - Plains All American Pipeline, LP and PAA Finance Corp. was the solitary issuer in Tuesday's high-grade primary despite a decent market tone.

The natural gas and petroleum company upsized its sale to $500 million from $350 million of notes due 2020, in part due to healthy investor demand because of lack of competing deals.

There are two upcoming sales on the burner from foreign issuers. Westpac Banking Corp. and Canada announced sales Tuesday. Westpac is expected to go overnight and price Wednesday, while Canada could sell as late as Thursday, sources said.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 12 North American high-grade index widened by 3 basis points to a mid bid-asked spread level of 122 bps.

Advancing issues - which remained ahead of decliners for a fifth straight day on Monday, continued to hold a nine-to-eight advantage on Tuesday.

Overall market activity, reflected in dollar-volume totals, rose about 3% from Tuesday's pace.

Spreads in general were seen slightly wider, in line with somewhat lower Treasury yields; for instance, the yield on the benchmark 10-year note fell by 4 bps Tuesday to 3.36%.

The new Plains All-American Pipeline bonds were seen having made little headway when they were freed for secondary dealings.

Meanwhile, the new Republic Services Inc. bonds which priced on Monday were seen a tad wider on Tuesday than they had traded late Monday - but the bonds were still being quoted well inside of the level at which they had priced earlier Monday

Plains sells upsized $500 million

Plains All American Pipeline and PAA Finance priced an upsized $500 million of 5.75% senior notes due 2020 early in the day at Treasuries plus 245 bps, an informed source said.

The size was originally $350 million, the source said. The deal is guaranteed by subsidiaries.

It was increased due to demand, with about $2 billion on the books through more than 150 accounts. This was "more guys than we were expecting in the deal," the source said.

The bonds sold at the tight end of talk in the 250 bps area, he said.

Investors were "surprisingly receptive" to the sale, the informed source said. He said "demand was amazing and I was surprised people were still around."

The notes ended mostly unchanged in trading from their pricing spread, a source close to the deal said.

The deal "went swimmingly," a source close to the deal said.

Citigroup Global Markets, SunTrust Robinson Humphrey, UBS Securities and Wells Fargo Securities were bookrunners.

Proceeds will be used to repay all or a portion of outstanding borrowings under a credit facility incurred to fund the cash requirement of the remaining 50% interest for the acquisition of PAA/Vulcan Gas Storage LLC. They may also be used to redeem outstanding senior notes due 2014 and for general partnership purposes.

The petroleum and natural gas company is based in Houston.

Issuance could spike mid-week

Any issuers thinking of pricing bonds will likely go Wednesday or not go at all until after Labor Day, a market source said late Tuesday.

"I think there will be a lot of go, no go calls tomorrow morning," he said. "Tomorrow is the last day we're going to see anything. Thursday and Friday are looking pretty dead."

The lack of offerings in the market aided Tuesday's lone deal from Plains All American, helping the books become about four times oversubscribed.

"It helps when there isn't a competing issue," an informed source said.

There are two upcoming sales on tap for the remainder of the week, both from foreign issuers.

The market tone was "fine" at the end of Tuesday, a source said, which could bode well for those companies on the fence about issuing come Wednesday morning.

"It should be OK tomorrow," the source said.

Westpac plans government-backed bonds

Westpac Banking is selling five-year notes, a market source said Tuesday.

The notes will be guaranteed by the Australian government and priced via Rule 144A.

Pricing is expected Wednesday, the market source said.

Bookrunners are Bank of America Merrill Lynch and Goldman Sachs & Co.

The banking and financial services company is based in Sydney, Australia.

Canada to offer $3 billion in notes

Canada is selling $3 billion in five-year bonds, according to a 424B2 filing with the Securities and Exchange Commission.

The notes are non-callable, and expected to price Wednesday or Thursday, a source away from the sale said.

Bookrunners are Bank of America Merrill Lynch, BNP Paribas Securities, J.P. Morgan Securities and RBC Capital Markets.

The issuer is based in Ottawa, Ont.

No pop for new Plains bonds

A trader said that the new Plains All-American Pipeline 5.75% notes due 2020 were being offered at242 bps over comparable Treasuries, seeing no bid side.

However, another trader quoted the bonds as having widened a little to 250 bps bid, 242 bps offered, versus the 245 bps spread over Treasuries at which the bonds had priced earlier in the day.

A market source meantime said that the bonds had been quoted in the gray market before being freed at as tight as 238 bps, but then went back to 245 bps over when they were freed. The source further heard that the bonds then gyrated slightly, coming in a little to 244 bps, but "when last I heard, a couple of small dealers had taken them back up to 245 bps.

Republic Services hold gains

A trader said that Republic Services' 5.50% notes due 2019 were trading at 207 bps bid, 205 bps offered. That was a slight bit wider than the 206 bid, 201 offered level at which the bonds had traded on Monday after having been freed for secondary activity.

But it remained well inside the 220 bps over level at which the Phoenix-based solid waste disposal company had priced its $650 million of bonds - upsized from the originally planned $500 million -- earlier in Monday's session.

Power names better

Among the more established names, bonds of some electricity producers were seen having powered up on the session.

A market source said that Duke Energy Carolina's 6¼% notes due 2012 was one of the more notable gainers on the day, with the bonds having firmed more than 70 bps on the session to a closing level of under 50 bps.

Meanwhile, Alabama Power's 5.50% notes due 2017 tightened more than 50 bps to just under the 90 bps level.

AIG bonds slide as stock swoons

On the downside, American International Group Inc.'s 8¼% notes due 2018 were seen having widened out by nearly 50 bps to around the 920 bps area, in line with a sharp fall in the New York-based insurance giant's shares, which nosedived $9.33, or 20.58%, to end at $36, on volume of 86.9 million shares, more than three times the norm.

The stock swooned, and took the bonds along for the downside ride, after Sanford C. Bernstein & Co. urged investors to sell the shares, downgrading them to "underperform." Bernstein analyst Todd Bault cautioned in a research note that its current stock price - which had risen sharply over the past two weeks on investor optimism that new CEO Robert Benmosche will be able to turn things around - "allows very little chance for uncertainty and fails to incorporate considerable downside risk."

The analyst also warned of "a very real possibility that the government [which gave the company over $70 billion in several dollops as part to its financial industry bailout] reduces support once AIG is no longer deemed a systemic risk."

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