CVS, FPL, PNC price notes, primary spreads remain tight; new deals up; Goldman better, BP not

By Andrea Heisinger and Cristal Cody

New York, May 13 - CVS Caremark Corp., FPL Group Capital Inc. and PNC Funding Corp. priced bonds on a Thursday that was flush with new deals.

Pharmacy and health services chain CVS Caremark sold $1 billion in tranches due 2015 and 2020.

FPL sold $250 million of debentures due in 2013 that are guaranteed by parent company FPL Group Inc.

On the financial side there was a $500 million sale of four-year senior notes by PNC Funding. The notes were guaranteed by PNC Financial Services Group Inc.

There wasn't much change in the high-grade market's tone for the day. One source noted that all of the issues got done "at pretty good levels." Two of the three were priced in line with or at the tight end of price guidance.

No new issues have been announced for Friday, and it's expected to be a quiet day.

Several new offerings were seen trading tighter in the secondary, including those from CVS Caremark, FPL Group Capital, PNC Funding and Cigna Corp., according to sources.

"It is nice to see we're getting new issues in the market. We went through a real dry spell," a trader said.

Also in secondary trading, paper from Goldman Sachs Group Inc. tightened but still is considerably weaker than a month ago, while BP plc's debt continues to move out, according to a trader.

"We did a ton of agencies today and some buyers in BP paper and some step-up on Goldman paper," the trader said. "They're getting a little more comfortable now that yields widened out on some of the stuff about buying it."

Overall Trace volume in the investment-grade market dipped about 5% to just under $13 billion, according to a source.

The CDX Series 14 North American high-grade index eased 2 bps to a mid bid-asked spread level of 100 bps, according to a market source.

"Spreads were pretty much unchanged today," a source said.

Treasuries were tighter on Thursday even after the government paid a higher than expected yield on its auction of $16 billion in 30-year bonds.

Yields on the 5-year notes were 4 bps tighter at 2.24%, while yields on the 10-year benchmark Treasury note firmed to 3.53% from 3.57%. Yields on 30-year bonds were 5 bps tighter at 4.43%.

"The auction was a little bit weaker than what they were looking for, but by no stretch of the imagination was it a bad auction," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co.

"It was just a little bit weaker, and I don't find that surprising on 30-year debt."

The Treasury sold $16 billion in 30-year bonds at a yield of 4.49%, which was slightly higher than expected.

Coming up on Friday, the retail sales numbers are expected to be a "market mover," one trader said.

CVS prices two tranches

CVS Caremark priced $1 billion of senior unsecured notes (Baa2/BBB+/BBB+) in two tranches by early afternoon, a source close to the deal said.

The $550 million tranche of 3.25% five-year notes priced at a spread of 100 bps over Treasuries. They came in at the tight end of guidance in the 105 bps area, the source said.

A $450 million tranche of 4.75% 10-year notes priced at a125 bps spread over Treasuries. The notes were priced in line with talk in the 125 bps area.

Active bookrunners were Barclays Capital and Bank of America Merrill Lynch. Bank of New York Mellon Capital Markets LLC, J.P. Morgan Securities Inc. and Wells Fargo Securities were passive bookrunners.

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

The pharmacy health care chain is based in Woonsocket, R.I.

New issue spreads continue move tighter

Spreads on "all but the worst" new issues have been pricing at tight levels, a source said late in the day. A couple of the highest spreads in recent days came from the Citigroup Inc. and Morgan Stanley sales from earlier in the week.

"That's not surprising," a syndicate source away from both deals said. "Look how jumpy everyone is [on financials] lately."

He noted that the CVS deal got done at "really nice" spreads.

Issuance has been strong for much of the week on renewed confidence after two weeks of fear on Greece and financials kept many deals out of the market.

FPL sells guaranteed bonds

FPL Group Capital sold $250 million of 2.55% debentures due in 2013 (Baa1/BBB+/A-) to yield Treasuries plus 115 bps, an informed source said.

They were priced in line with guidance in the 115 bps area.

The deal is guaranteed by parent company FPL Group, Inc.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital, Citigroup Global Markets and J.P. Morgan Securities.

Proceeds are being added to the company's general funds to repay a portion of outstanding commercial paper.

The utility is based in Juno Beach, Fla.

PNC offers $500 million

PNC Funding priced $500 million in 3% four-year senior unsecured notes on Thursday to yield Treasuries plus 112.5 basis points, according to an FWP filing with the Securities and Exchange Commission.

The notes (A3/A/A+) priced at 99.821 to yield 3.048%. They are non-callable.

The deal is guaranteed by PNC Financial Services Group Inc.

J.P. Morgan Securities and Morgan Stanley & Co. were bookrunners.

Proceeds are being used for general corporate purposes.

The diversified financial company is based in Pittsburgh.

Cigna considers sale successful

The $300 million of 5.125% 10-year notes priced on Wednesday by health services provider Cigna Corp. went well as far as the company was concerned.

"The company considers the coupon on the new debt of 5.125% to be an attractive rate for a 10-year note," Christopher Curran, a corporate communications person at Cigna, said in an e-mail message on Thursday.

"This coupon represents the lowest coupon in the company's debt portfolio."

Cigna intends to use the proceeds for general corporate purposes, which could include paying off debt maturing in Jan., 2011.

The company is based in Philadelphia.

CVS Caremark firms

CVS Caremark's two new tranches of five- and 10-year notes sold on Thursday tightened in the secondary, according to a trader.

CVS sold $1 billion of notes, with $550 million of 3.25% notes due 2015 priced at Treasuries plus 100 bps.

The five-year notes were seen soon after trading at 89 bps bid, 84 bps offered, according to one trader. Later, the notes were quoted at 89 bps bid, 87 bps offered, another trader said.

In addition, the $450 million of 4.75% notes due 2020 priced at Treasuries plus 125 bps.

The 10-year notes first widened out in the secondary to 130 bps bid, 123 bps offered, but later firmed, according to sources.

"I saw that at 126, 124, and more recently at 130, 123," a trader said. "Looks like pretty decent flows on both of them."

FPL tighter on offer

FPL Group Capital's debentures firmed on the offer side after pricing earlier on Thursday, according to a trader.

FPL Group priced $250 million in 2.55% debentures due 2013 at Treasuries plus 115 bps.

"I saw the bonds offered at 110 bps," the trader said.

PNC Funding stronger

PNC Funding's new offering of $500 million in 3% senior notes due 2014 firmed on the bid side in secondary trading after pricing at Treasuries plus 112.5 bps, a trader said.

"There's a 110 bid," the trader said.

Cigna firms

The latest offering from Cigna, which sold 5.125% senior unsecured notes (Baa2/BBB/BBB) on Wednesday, was stronger in next-day trading, a source said.

The notes due 2020 priced at 162.5 bps over Treasuries and traded tighter Thursday at 154 bps bid, 151 bps offered.

Cigna is a Philadelphia-based health services company.

BP moves out

BP's high-grade debt has moved out considerably as the company faces hundreds of millions of dollars in costs to try to repair the damage caused by the oil leak in the Gulf of Mexico, a trader said.

"They've gotten slammed since this thing started. Pretty wide."

The 5.25% notes due 2013 "right before this happened were trading at 95 bps and earlier today there was a quote at 135, 125," the trader said. "Some of the other issues have widened more than that."

BP is a London-based oil company.

Goldman comes in

Goldman Sachs' benchmark notes due 2020 came in about 10 bps in trading on Thursday, but the notes are still weak, according to a trader.

The notes were seen late in the day at 243 bps bid, 230 bps offered.

"From what I saw yesterday, they were 240 bps and I saw the bonds offered today at 230, so they came in a little bit but they're still pretty wide," the trader said. "In April, they were trading at 167 on the offer side."

New York-based Goldman Sachs is under the gun for fraud charges by the Securities and Exchange Commission and is embroiled in a criminal investigation by the Justice Department into its role in subprime mortgage securities investments. It denies wrongdoing.

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