IBM snags record-low rate; Loews, TD Bank price; new paper unchanged to tighter in secondary

By Aleesia Forni and Andrea Heisinger

New York, May 2 - A handful of sales hit the investment-grade primary Thursday including those from International Business Machines Corp., Loews Corp. and Toronto-Dominion Bank.

IBM sold $2.25 billion of bonds in two maturities. The trade included $1 billion of three-year notes and $1.25 billion of seven-year notes. The Armonk, N.Y.-based company last priced bonds in February.

A source close to the trade said that the seven-year maturity snagged a record-low borrowing rate. The 1.625% coupon bested a 1.65% seven-year maturity sold by Texas Instruments, Inc. as part of a similar $1.5 billion, two-tranche trade on July 30, 2012. The Texas Instruments trade also included a three-year note with a 0.45% borrowing rate.

Loews came to the market with a $1 billion offering of senior notes in two tranches - its first in several years. The sale was evenly split between maturities of 2023 and 2043.

Canada's TD Bank sold $3 billion of two-year floating-rate notes a little more than a week after pricing $2.25 billion in two tranches.

A $155.32 million sale of floating-rate equipment trust certificates due 2025 was priced by KE Export Leasing (2013-B) LLC. The sale is guaranteed by the Export-Import Bank of the United States.

The terms of the TD Bank and KE Export deals were not available at press time.

PNC Financial Services Group Inc. and Gamco Global Gold, Natural Resources & Income Trust by Gabelli each announced trades in the preferred stock market.

PNC priced $500 million of $1,000-par fixed-to-floating-rate noncumulative shares.

A trader quoted the issue at 99.75 bid, 100.5 offered in the midday gray market.

The trader also noted that PNC is planning a $25-par deal, but details on that have not yet been published.

Gamco Global Gold's upcoming issue was on a lesser scale than PNC.

"It'll be a small deal," a trader said. "Probably 4 to 5 million shares."

The trader said the preferreds were already at par in the gray market.

Issuance likely done

High-grade issuers jumped into the market Thursday before a jobs report for April is released Friday, a source said.

Issuance is likely done for the week, the source said, adding that "we've been pounding them out and probably need a breather."

Roughly $28 billion of bonds had already been priced for the week prior to Thursday, a syndicate source said, with the day's haul adding about another $6.25 billion.

The Markit CDX North American Investment Grade index was 4 basis points tighter at a spread of 74 bps.

There was a "very strong bid to the market again today" on Thursday, according to one trader.

The source added that spreads in the telecommunications and technology sector traded 3 bps to 5 bps tighter on the day.

The secondary market saw the day's new issues from IBM and Loews trading mostly tighter.

IBM's three-year notes traded unchanged, while the notes due 2020 were quoted 2 bps tighter.

Meanwhile, Loews' new 10-year paper was quoted 3 bps tighter by a trader late during the session, while the company's new 30-year bond also firmed 3 bps.

Investment-grade bank and broker credit default swap costs declined on the day, according to a market source.

Bank of America Corp.'s CDS costs were 4 bps tighter at 113 bps bid, 117 bps offered. Citigroup Inc.'s CDS costs firmed 3 bps to 98 bps bid, 102 bps offered. JPMorgan Chase & Co.'s CDS costs were 3 bps tighter at 84 bps bid, 87 bps offered. Wells Fargo & Co.'s CDS costs declined 2 bps to 68 bps bid, 72 bps offered.

Merrill Lynch's CDS costs were 3 bps tighter at 103 bps bid, 108 bps offered. Morgan Stanley's CDS costs declined 3 bps to 134 bps bid, 138 bps offered. Goldman Sachs Group, Inc.'s CDS costs were 4 bps tighter at 116 bps bid, 120 bps offered.

IBM does $2.25 billion

International Business Machines was in the day's session with a $2.25 billion sale of notes (Aa3/AA-/A+) in two maturities, a market source said.

The $1 billion of 0.45% three-year notes priced at a spread of Treasuries plus 25 bps. Talk was initially in the high 20 bps to 30 bps area and was revised to 25 bps to 27 bps.

The notes were quoted unchanged at 25 bps bid, 22 bps offered near the session's close.

A $1.25 billion tranche of 1.625% seven-year notes sold at a spread of 67 bps over Treasuries. Guidance was initially in the low 70 bps area and later shifted to the 70 bps area.

A trader saw the notes 2 bps tighter at 65 bps bid, 63 bps offered.

The bookrunners were BofA Merrill Lynch, BNP Paribas Securities Corp., RBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

IBM last tapped the U.S. bond market with a $2 billion offering in two tranches on Feb. 5.

The information technology and computer company is based in Armonk, N.Y.

Loews' two tranches

Loews tapped the market for $1 billion of senior notes (A2/A+/A+) in two tranches, an informed source said.

A $500 million tranche of 2.625% 10-year notes sold at a spread of Treasuries plus 105 bps. Guidance was in the 110 bps area, plus or minus 5 bps.

The notes traded 3 bps better at 102 bps bid, 99 bps offered late Thursday.

The $500 million of 4.125% 30-year bonds priced at a spread of 135 bps over Treasuries. Talk was in the 140 bps area, plus or minus 5 bps.

The bonds were quoted 3 bps tighter at 132 bps bid, 129 bps offered by a trader.

Barclays and J.P. Morgan Securities LLC were active bookrunners. Passives were BofA Merrill Lynch, Citigroup Global Markets Inc. and Wells Fargo.

Proceeds are being used for general corporate purposes.

Loews is a New York-based holding company for diversified subsidiaries including insurance, hotels, oil drilling and pipeline transportation.

KE Export's trade

KE Export Leasing (2013-B) sold $155,318,000 of floating-rate equipment trust certificates due 2025 at par at a spread over Libor, an informed source said.

The rate was not available at press time.

The notes have an average life of 6.08 years.

The bookrunners were BofA Merrill Lynch and Citigroup.

There is a guarantee by the Export-Import Bank of the United States.

Proceeds are being used to acquire a bank note, which will be used to finance a portion of the purchase price of aircraft leased to Korean Airlines Ltd., along with the premium charged by the Ex-Im Bank.

One new Boeing aircraft was delivered to Korean Airlines on Feb. 28.

PNC's $1,000-par issue

PNC Financial Services Group priced $500 million of 4.85% $1,000-par series R fixed-to-floating-rate noncumulative perpetual preferred stock (expected ratings: Baa3/BBB/BBB-), according to an FWP filing with the Securities and Exchange Commission.

Price talk was around 4.9%, a trader said.

JPMorgan, Citigroup and PNC Capital Markets LLC were the joint bookrunning managers.

Beginning June 1, 2023, the dividend rate will begin to float at Libor plus 304 bps.

Proceeds will be used for general corporate purposes, which may include advances to subsidiaries, paying down debt and repurchases or redemptions of outstanding securities.

PNC Financial is a Pittsburgh-based financial services company.

Gamco's preferreds

Gamco Global Gold, Natural Resources & Income Trust intends to sell series B cumulative preferreds, the company said in a prospectus filed with the SEC.

Price talk is around 5.125%, according to a trader.

Citigroup, G. Research Inc. and BofA Merrill Lynch are the joint bookrunning managers.

The fund has applied to list the shares on the New York Stock Exchange.

Proceeds will be used to redeem series A preferred shares, of which there are about $48.89 million outstanding. Any remaining funds will be used to invest in high-quality short-term debt securities and instruments.

Gamco is a Rye, N.Y.-based non-diversified, closed-end management investment company.

Stephanie N. Rotondo contributed to this review

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