Avon, Progress Energy sell in 'fatigued' primary; new issues trade better during strong session

By Aleesia Forni and Andrea Heisinger

New York, March 7 - The pace of sales slowed slightly in the high-grade bond market on Thursday. Offerings came from Avon Products, Inc., Progress Energy Carolinas, Inc. and Allergan Inc.

Avon sold $1.5 billion of notes in four parts. The sale had initially been announced on Tuesday and had a 30-year bond added after price talk began on Thursday.

There was about $13.15 billion of investor demand for the Avon trade, a source who worked on it said.

"It's a big name that doesn't come to market that often," the source added.

Allergan priced $600 million of bonds due 2018 and 2023.

There was also a $500 million sale of 30-year bonds from Progress Energy Carolinas.

A $650 million sale of $25-par 40-year junior subordinated notes was done by Prudential Financial Inc. The size of the sale was increased substantially from $250 million.

The high-grade primary was "a little bit fatigued" by day's end after four days of constant issuance, a market source said.

"I really don't think we're going to see much tomorrow, but if we do it will be smaller," the source said.

Unemployment numbers will be released Friday, the source added, which will likely lead potential issuers to hold off until next week.

New issues were trading tighter late Thursday, one trader said.

One trader quoted Allergen's 10-year notes 7 basis points tighter near the end of the session, while Avon's 10-year notes were trading 27 bps better.

"[The secondary market] looked good today," another trader said after the session's close. "It was a pretty strong day."

Avon's crossover trade

Avon Products priced a $1.5 billion offering of notes (Baa2/BBB-/BB+) in four tranches, a market source said.

The sale had been announced on Tuesday.

A $250 million tranche of 2.375% three-year bonds priced at a spread of Treasuries plus 200 bps. Guidance was whispered in the 3% yield area.

The $500 million of 4.6% seven-year notes sold at a spread of 325 bps over Treasuries. Pricing was at the low end of talk in the high 4% to 5% area.

There was $500 million of 5% 10-year notes priced at Treasuries plus 312.5 bps. The notes sold in line with talk in the low to mid 5% area.

The notes were quoted at 285 bps bid, 175 bps offered.

A $250 million tranche of 6.95% 30-year bonds sold at a spread of Treasuries plus 375 bps. The 30-year bonds were talked in the high 6% area.

The 30-year bond was added "on inquiry," the source said.

A breakdown of investor demand showed the most for the seven-year notes at about $5.1 billion. There was about $3 billion of demand for the three-year tranche, $4.3 billion for the 10-year notes and about $750 million for the added 30-year bonds.

The bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc. and Goldman Sachs & Co.

Proceeds, along with cash on hand, will be used to repay debt and for general corporate purposes.

The New York-based beauty products company was last in the U.S. bond market with an $850 million sale in two tranches on Feb. 26, 2009.

Allergan sells $600 million

Allergan was in the day's session with a $600 million sale of notes (A3/A+/A+) in two maturities, an informed source said.

A $250 million tranche of 1.35% five-year notes was priced at a spread of Treasuries plus 55 bps.

There was also $350 million of 2.8% 10-year notes sold at Treasuries plus 85 bps.

A trader saw the notes at 78 bps bid, 75 bps offered.

The active bookrunners were BofA Merrill Lynch and Goldman Sachs.

Proceeds are being used for general corporate purposes.

Allergan was last in the U.S. bond market with a $650 million sale of 3.375% 10-year notes priced at 80 bps over Treasuries on Sept. 7, 2010.

The multi-specialty health-care company is based in Irvine, Calif.

Progress Energy's long bond

Progress Energy Carolinas, which does business as Carolina Power & Light Co., priced $500 million of 4.1% 30-year first mortgage bonds (A1/A/A+) to yield Treasuries plus 93 bps, according to an FWP filing with the Securities and Exchange Commission.

A source said talk was in the 95 bps area.

The bookrunners were Barclays, BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC and RBS Securities Inc.

Proceeds are being used to repay intercompany short-term debt under a money pool borrowing arrangement with Duke Energy Corp. and for general corporate purposes.

Progress Energy Carolinas was last in the U.S. bond market with a $1 billion sale of mortgage bonds in two parts on May 15, 2012. That offering included a 4.1% 30-year bond sold at 120 bps over Treasuries.

The electric utility is based in Raleigh, N.C.

KfW details short bond

KfW priced $500 million of 0.22% notes due 2014 at par to yield 0.22%, according to an FWP filing with the SEC.

The bookrunner was Credit Suisse Securities (Europe) Ltd.

The notes from the Frankfurt-based development bank are guaranteed by the Federal Republic of Germany.

Prudential's $25-par deal

Prudential Financial sold $650 million of 5.7% $25-par 40-year junior subordinated notes, according to a prospectus filed with the SEC.

A trader said the issue would "hopefully [turn] the large-issue new issue market back on again" for preferreds.

Price talk was around 5.75%, the trader said.

The trader pegged the notes at $24.80 bid, $24.85 offered in the midday gray market. Earlier in the session, he had seen the paper at $24.75 bid, $24.82 offered.

Wells Fargo Securities LLC, BofA Merrill Lynch, Citigroup, Morgan Stanley & Co. Inc. and UBS Securities LLC were the bookrunners.

Prudential intends to list the new notes on the New York Stock Exchange.

Proceeds will be used for general corporate purposes, which may include the redemption of the 9% junior subordinated notes due 2068.

Prudential is a Newark-based financial services provider.

Stephanie N. Rotondo contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.