Barrick Gold, Altria, McDonald's, Colgate sell to high demand; new deals trade tighter in secondary

By Aleesia Forni and Andrea Heisinger

New York, April 29 - Issuers including Altria Group, Inc., Barrick Gold Corp. and Barrick North America Finance LLC, McDonald's Corp. and Colgate-Palmolive Co. came pouring into the high-grade bond market on Monday as earning blackouts eased.

The slate of issuers came to the market in part due to investor demand for high-quality paper.

Canada-based Barrick Gold sold $2.5 billion of bonds in three maturities under Rule 144A and Regulation S. The offering included maturities of 2018, 2023 and 2043.

There was roughly $12.1 billion of demand for the tranches, including $4.8 billion on the five-year notes, $4.5 billion for the 10-year tranche and $2.8 billion for the 30-year bonds, a source said.

Philip Morris USA Inc. subsidiary Altria Group priced $1 billion of notes due 2023 and 2043 with a guarantee from the parent company. Each tranche priced at or tighter than guidance, a source said.

McDonald's priced $500 million of 30-year bonds, while Colgate-Palmolive brought an $800 million trade in tranches due 2018 and 2023.

The fast-food chain saw about $1.4 billion of investor interest.

The size of the Colgate trade was increased from $700 million a source said, with about $2.9 billion on the books. Demand was around $1.7 billion for the five-year notes and $1.2 billion for the 10-year tranche.

"They're always popular with [investors]," the source added, referring to both Colgate and McDonald's, "can't go wrong with those ratings."

Other sales included Praxair, Inc., which tapped the market for $650 million of notes in two parts. The sale included $475 million of paper due 2018 and a reopening of 3.55% bonds due 2042 to add $175 million.

The industrial gas company had about $1.1 billion total on the books, including $700 million for the tranche due 2018 and $400 million for the reopened bonds due 2042.

Mack-Cali Realty LP priced $275 million of 10-year senior notes. The size was increased from $250 million, with about $800 billion of investor demand on the books.

A $500 million trade of 10-year senior notes came from TJX Cos., Inc., which last sold bonds in the U.S. market in 2009.

The primary preferred stock market was roaring to start off the week, and an expected deal from U.S. Bancorp was leading the way.

"That's been dominating the day," a trader said of the bank's proposed offering of series H noncumulative perpetual preferreds.

Initial price talk was around 5.25%, but was revised at midday to 5.15%.

Meanwhile, Saratoga Investment Corp. said it would sell up to $40.25 million of $25-par notes due May 31, 2020, and Tsakos Energy Navigation Ltd. intends to price a minimum of $50 million of series B cumulative redeemable perpetual preferreds.

Both issues were expected to price later in the week.

Overall, the preferred stock market was up as much as 10 cents on average for the day, though one market source said that "seems a little aggressive," suggesting that it was more like 7 cents. Volume was light, but not as light as Monday's typically tend to be.

The Markit CDX North American Investment Grade index was 2 basis points tighter at a spread of 76 bps on Monday.

The day's new issues traded mostly tighter during a strong session for the secondary market, according to a market source.

McDonald's new notes were trading 2 bps tighter later during the session, while Colgate-Palmolive's notes were quoted 1 bp to 4 bps better.

The source did not see any markets on Altria Group's new bonds.

Investment-grade bank and broker credit default swap costs were declined for the most part on Monday, according to a market source.

Bank of America Corp.'s CDS costs were 3 bps tighter at 116 bps bid, 121 bps offered. Citigroup Inc.'s CDS costs tightened 2 bps to 100 bps bid, 105 bps offered. JPMorgan Chase & Co.'s CDS costs were unchanged at 84 bps bid, 89 bps offered. Wells Fargo & Co.'s CDS costs decined 1 bp to 69 bps bid, 72 bps offered.

Merrill Lynch's CDS costs were unchanged at 107 bps bid, 117 bps offered. Morgan Stanley's CDS costs declined 2 bps to 138 bps bid, 143 bps offered. Goldman Sachs Group, Inc.'s CDS costs were 3 bps tighter at 119 bps bid, 124 bps offered.

Barrick's $3 billion deal

Barrick Gold and Barrick North America Finance were in the day's session with a $3 billion sale of senior notes (Baa2/BBB/) in three tranches, an informed source said.

There was $650 million of 2.5% five-year notes priced at a spread of Treasuries plus 185 bps. Initial talk was in the 225 bps area.

The second part was $1.5 billion of 4.1% 10-year notes sold at 245 bps over Treasuries. Initial guidance was in the 262.5 bps area.

Finally, Barrick North America priced $850 million of 5.75% 30-year bonds at Treasuries plus 285 bps. There was initial talk in the 300 bps area.

The 30-year tranche is guaranteed by Barrick Gold.

Pricing was done under Rule 144A and Regulation S.

Bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RBC Capital Markets LLC.

Proceeds will be used to repay debt outstanding under the company's revolving credit facility and for general corporate purposes, which could include repayment of the $500 million of notes maturing in September 2013.

Barrick - a Toronto-based gold mining company - was last in the U.S. bond market with a $2 billion offering in two parts on March 29, 2012. That trade included a 3.85% 10-year note priced at 170 bps over Treasuries and a 5.25% 30-year bond sold at Treasuries plus 200 bps.

Colgate upsizes

Colgate-Palmolive sold an upsized $800 million of notes (Aa3/AA-/AA-) in two parts, a source close to the trade said.

The total size was increased from $700 million.

There was $400 million of 0.9% five-year notes priced a spread of Treasuries plus 32 bps. Talk was in the mid 40 bps area.

A trader saw the notes at 28 bps bid later during the session.

The other tranche was $400 million of 2.1%10-year bonds sold at 60 bps over Treasuries. The notes were talked in the high 60 bps area, the source said.

The notes were quoted 1 bp tighter at 59 bps bid, 55 bps offered.

Bookrunners were BofA Merrill Lynch, BNP Paribas Securities Corp. and Citigroup Global Markets Inc.

The New York City-based consumer products company was last in the U.S. bond market with a $500 million offering of 1.95% notes due 2023 priced at 58 bps over Treasuries on July 27, 2012.

Altria sells at talk

Altria Group priced $1 billion of senior notes (Baa1/BBB/BBB+) in two tranches, an informed source said.

There was $350 million of 2.95% 10-year notes priced at Treasuries plus 130 bps. Guidance was in the 135 bps area, plus or minus 5 bps.

A $650 million tranche of 4.5% 30-year bonds sold at a spread of 165 bps over Treasuries. Talk was in the 165 bps area, plus or minus 5 bps.

Bookrunners were Barclays, Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

The sale is guaranteed by Richmond, Va.-based parent cigarette and smokeless tobacco product maker Philip Morris USA Inc.

Altria last tapped the U.S. bond market with a $2.8 billion sale of notes in two tranches on Aug. 6, 2012. That offering included a 2.85% 10-year note priced at 130 basis points over Treasuries and a 4.25% 30-year bond sold at Treasuries plus 168 bps.

McDonald's goes long

McDonald's was in the day's session with a $500 million sale of 3.625% 30-year bonds (A2/A/A) priced at Treasuries plus 83 bps, a source close to the sale said.

A market source quoted the notes at 81 bps bid during Monday's session.

Initial guidance was in the Treasuries plus 90 bps area.

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

McDonald's was last in the U.S. bond market with a $900 million sale of notes in two parts on May 23, 2012.

The fast food chain is based in Oak Brook, Ill.

Mack-Cali's 10-years

Mack-Cali Realty priced an upsized $275 million sale of 3.15% 10-year senior notes (Baa2/BBB/BBB) to yield Treasuries plus 175 bps, a market source said.

Initial price talk was in the Treasuries plus mid-190 bps area. The size was increased from $250 million.

Bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes and working capital including repayment of substantially all borrowings under a $600 million unsecured revolving credit facility and the possible purchase or retirement of some outstanding debt.

Mack-Cali was last in the U.S. bond market with a $250 million offering of five-year notes on Nov. 13, 2012.

The real estate company is based in Edison, N.J.

TJX sells $500 million

TJX Cos. tapped the market for $500 million of 2.5% 10-year senior notes (A3/A/) priced at 85 bps over Treasuries, a source close to the trade said.

Barclays, Deutsche Bank Securities Inc. and U.S. Bancorp Investments Inc. were bookrunners.

Proceeds are being used for working capital and general corporate purposes.

TJX was last in the market with a $400 million sale of six-year notes on July 20, 2009.

The retailer of off-price apparel and home fashions is based in Framingham, Mass.

Praxair does two tranches

Praxair sold $650 million of notes (A2/A/) in new and reopened tranches, an informed source said.

The sale includes $475 million of 1.25% notes due 2018 priced at a spread of Treasuries plus 58 bps. Guidance was in the low Treasuries plus 60 bps area.

There was also a reopening of 3.55% bonds due Nov. 7, 2042 to add $175 million. The new bonds priced at a spread of Treasuries plus 88 bps. The tranche was talked in the 90 bps area.

Total issuance of the notes due 2042 will be $475 million, including $300 million priced at 68 bps over Treasuries on Nov. 2, 2012.

Bookrunners were Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and RBS Securities Inc.

Proceeds are for general corporate purposes, including debt repayment and share repurchase under a repurchase program.

Praxair was last in the market with a $500 million sale of 1.2% five-year notes priced at 45 bps over Treasuries on Feb. 27.

The industrial gas company is based in Danbury, Conn.

U.S. Bank's preferreds

U.S. Bancorp announced and then priced a $500 million offering of 5.125% series H noncumulative perpetual preferreds on Monday.

Price talk was initially around 5.25%, but was revised to 5.15%.

A trader said ahead of the revision that the shares were being quoted at $24.93 bid, $24.97 offered in the gray market. He noted that the expected the change would "probably bring that in at little bit."

Still, even with the downward revision, he remarked that the deal "should still do fine.

"It's one of the few investment grade preferreds left out there," he said, especially given how many issues have been called of late. "This should be soaked up pretty quick."

After pricing, a market source said the deal was "doing quite well," seeing a par bid, $25.05 offered market.

Morgan Stanley & Co. Inc., BofA Merrill Lynch, UBS Securities LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the joint bookrunning managers.

The Minneapolis-based bank intends to use proceeds for general corporate purposes, which may include the redemption of the 7.875% series D noncumulative perpetual preferreds.

Stephanie N. Rotondo contributed to this review

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