Potash Corp., Vornado Realty, Arrow Electronics offer bonds; new deals trade actively

By Andrea Heisinger and Paul Deckelman

New York, Sept. 23 - Potash Corp. of Saskatchewan Inc., Vornado Realty, LP and Arrow Electronics, Inc. sold bonds on Wednesday as a meeting of the Federal Reserve slowed issuance.

Things are expected to pick back up for the remainder of the week, sources said late in the day.

Potash offered the largest sale of the session, pricing $1 billion in two tranches of senior notes due 2015 and 2020.

Arrow Electronics upsized its issue to $300 million from an original $250 million of senior notes due 2020.

One of the first sales to get done for the day was the $400 million of 30-year public income notes from Vornado Realty. The deal was announced late the previous day and went overnight. This is not unusual "for these kind of sales," a market source said, adding "it's pretty common, actually."

Among the established issues in the secondary arena on Wednesday, a market source said the CDX Series 12 North American high-grade index widened by 2 basis points to a mid bid-asked spread level of 93 bps.

Advancing issues were seen leading decliners Wednesday by a nearly five-to-four margin, improving somewhat on their advantage seen Tuesday.

Overall market activity, reflected in dollar-volume totals, fell 16% from Tuesday's pace.

Spreads in general were seen slightly wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year government note narrowed 2 bps on Wednesday to 3.42%.

With a busy new-deal market continuing to crank out deals, secondary activity was centered around trading in such new issues as Arrow Electronics, Vornado Realty and Potash Corp. of Saskatchewan. However none were seen having moved significantly from the spreads over comparable Treasuries at which those respective bond issues had priced.

Potash sells two tranches

Potash Corp. of Saskatchewan priced $1 billion of senior unsecured notes in two tranches.

The $500 million of 3.75% six-year notes priced at a spread of Treasuries plus 140 bps.

A $500 million tranche of 4.875% notes due 2020 priced at Treasuries plus 150 bps.

Bank of America Merrill Lynch, HSBC Securities and RBC Capital Markets were bookrunners.

Proceeds will be used to repay debt outstanding under a $1.85 billion revolving credit facility due May 28, 2010, a $750 million revolver due May 31, 2013 and a $180 million revolver due Dec. 21, 2010. Any remainder will be used for general corporate purposes.

The fertilizer, industrial and feed products maker is based in Saskatoon, Saskatchewan, Canada.

Vornado offers 30-years

Vornado Realty sold $400 million of 7.875% 30-year senior unsecured public income notes early in the day at $25 each, according to a press release.

The deal has an overallotment option of $60 million in notes, to be used within 30 days.

It was announced late Tuesday and went overnight, a source said.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets, Morgan Stanley & Co., UBS Investment Bank and Wells Fargo Securities.

Proceeds will be used for general corporate purposes, including repayment of debt and acquisitions.

The operating arm and issuer for real estate investment trust Vornado Realty Trust is based in New York City.

Arrow upsizes sale

Arrow Electronics priced an upsized $300 million of 6% senior unsecured notes due 2020 at Treasuries plus 250 bps.

The size was originally $250 million, a source said. The amount was increased early in the pricing process.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities ran the books.

Proceeds will be used to repurchase all or some of the outstanding $200 million of 9.15% senior notes due 2010.

The industrial and commercial electronic components company is based in Melville, N.Y.

Primary to pick up Thursday

An expected "off day" happened on Wednesday, due to the conclusion of a two-day meeting of the Federal Reserve. The Fed left key interest rates unchanged from their near-zero levels, and volume is expected to pick back up in the coming day or two.

"Really, not much changed," a source said.

Another syndicate source agreed that the conclusion of the Fed meeting did little to the investment-grade bond market, saying "not really. Things were a little softer today anyway."

This source said his desk has "a few things potentially lined up for tomorrow." Another source at a larger desk said that "volume is going to pick up."

"Today was a catch-up day," he said. "There really wasn't much going on."

New Potash bonds hang around issue

When the big deal of the day - Potash Corp.'s new $1 billion two-part offering - was freed for secondary dealings, a trader saw the chemical maker's 3.75% notes due 2015 offered at 135 bps, but with no bid level seen, in contrast to the 140 bps over level at which that $500 million of bonds had priced.

Meanwhile, Potash Corp.'s 4.875% notes due 2020 straddled their 150 bps over issue spread, with the $500 million issue quoted at 152 bps bid, 149 bps offered.

Arrow about unchanged

Another 2020 offering, Arrow Electronics' 6% notes, also hung right around their issue price of 250 bps. A trader saw the $300 million of bonds - upsized from $250 million originally - at 250 bps bid, 245 bps offered.

Vornado very modestly lower

Vornado Realty's $400 million of 7.875% of public income notes due 2039 were being quoted at $24.85 bid, $24.97 offered.

That was down slightly from the $25.00 pricing level for that paper.

Allegheny bonds widen slightly

Both tranches of Allegheny Energy's new bonds were seen trading wider than the spread at which they had been priced on Tuesday.

A trader saw its $350 million of 5.50% notes due 2019 at 242 bps bid, 235 bps offered, slightly wider than the 235 bps at which this issue had priced on Tuesday.

Meanwhile, its $250 million 6.75% bonds due 2039 were offered at 252 bps, with no bids seen, versus a 250 bps over pricing level.

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