AT&T, Occidental, utilities sell debt with high concessions; Google flat; Nokia bonds firm

By Andrea Heisinger and Cristal Cody

New York, Aug. 15 - The window for investment-grade debt sales remained open on Monday as issuers AT&T Inc. and Occidental Petroleum Corp. took advantage of stable market conditions.

There were other smaller deals from utilities Florida Power Corp. d/b/a Progress Energy Florida, Inc. and San Diego Gas & Electric Co.

AT&T took the biggest chunk out of the market with a $5 billion sale in three parts.

Occidental Petroleum priced $2.15 billion of bonds in two parts. Each of the tranches priced at the tight end of guidance.

Utility Progress Energy Florida priced $300 million of 10-year first mortgage bonds while San Diego Gas & Electric sold $350 million of 10-year bonds.

Sensor and infrared technology company FLIR Systems, Inc. announced a $350 million sale of five-year notes with pricing expected on Tuesday, a source said.

There is also a sale planned by Canada's Kinross Gold Corp. that could be as much as $1.5 billion. The notes (Baa3/BBB-/BBB-) are expected to price later in the week.

The tone looked good throughout the day, drawing issuers in until late morning, and a stable close will likely mean a repeat in volume for Tuesday, a syndicate source said.

"It felt good out there today," he said. "I think tomorrow should be similar - maybe five to 10 trades."

Issuers haven't balked at paying high new issue concessions or at the widening of spreads as many have specific funding needs that have brought them to the market, and investors continue to snap up the investment-grade debt as junk bonds remain quiet.

The new bonds sold on Monday and the financial sector traded tighter as overall trading volume fell nearly 15% to less than $9.5 billion.

AT&T's new bonds were stronger, but its outstanding bonds moved out in trading on Monday.

"The new issues are trading better. The existing ones are around 20, 25 wider," one trader said.

AT&T's existing 4.45% notes due 2021 widened 25 bps to 145 bps bid, 140 bps offered on Monday, the trader said.

"That's 25 bps points wider from the close Friday," the trader said.

"The AT&T deal drove most of the tech space anywhere from 10 to 15 wider," the trader said. "Otherwise, at the end of the close, it seems like there's definitely better buyers out there."

Google Inc.'s bonds widened early on the day after it announced it would acquire Motorola Mobility Holdings Inc. for $12.5 billion in cash, but went out basically unchanged, a trader said.

Other bonds in the telecommunications sector traded higher on potential deal speculation. Nokia Corp.'s bonds traded about "30 basis points tighter" on Monday, a trader said.

Financials traded as much as 5 bps to 20 bps better. Bank of America Corp.'s credit default swaps firmed about 20 basis points, "and the cash is probably 10 to 15 basis points better," a trader said.

The Markit CDX Series 16 North American high-grade index firmed 5 bps to a spread of 110 bps, according to Markit Group Ltd.

Treasuries saw losses as stocks rallied, sending yields up 4 bps to 5 bps. The benchmark 10-year note yield rose 5 bps to 2.3%. The 30-year bond yield moved up to 3.77% from 3.72%.

AT&T prices tight

AT&T tapped the debt market for an upsized $5 billion of notes (A2/A-/A) in three maturities ahead of the close, a source away from the sale said.

The size of the deal had been projected at $4 billion, but investor interest bumped up the size at the launch, a source said. There was "a great deal" of interest in the bonds, and the company paid a new issue concession of between 30 and 40 bps to sell the bonds as shown by the rise in spreads since the last deal from AT&T in April.

The $1.5 billion of 2.4% five-year notes was priced at a spread of Treasuries plus 148 bps. The notes were sold tight to guidance in the 150 bps area.

A $1.5 billion tranche of 3.875% 10-year notes sold at a spread of 160 bps over Treasuries. The notes were priced at the tightest end of talk in the 160 to 165 bps range.

The third part was $2 billion of 5.55% 30-year bonds sold at a spread of Treasuries plus 185 bps. The bonds sold at the low end of talk in the 185 to 190 bps range.

J.P. Morgan Securities LLC was bookrunner.

Proceeds are being used for general corporate purposes, including repayment of maturing debt.

AT&T last sold debt in a $3 billion sale in two tranches on April 26. The 2.95% five-year notes from that deal priced at 97 bps over Treasuries while a 4.45% 10-year note priced at Treasuries plus 115 bps.

AT&T's new notes were better in the secondary market, according to traders.

The five-year tranche traded at 143 bps bid, 140 bps offered, a trader said. A second trader saw the five-year notes tighter at 138 bps bid, 133 bps offered.

The 10-year notes were seen stronger at 148 bps bid, 145 bps offered.

The 30-year bonds were quoted soon after pricing tighter at 174 bps bid, 171 bps offered. Later in the day, the bonds were seen at 178 bps bid, 172 bps offered.

The communications company is based in Dallas.

Oxy's two tranches

Occidental Petroleum sold $2.15 billion of senior notes (A2/A/A) in two parts, a source close to the trade said.

There was a lot of interest in the bonds, the source said. Books totaled about $7.5 billion with about $3.75 billion in each tranche. The new issue concession was lower on this trade than AT&T at between 10 and 15 bps, he added.

The $1.25 billion of 1.75% notes due 2017 were sold at a spread of 95 bps over Treasuries. The securities priced at the low end of guidance in the 100 bps area, plus or minus 5 bps.

A $900 million tranche of 3.125% notes due 2022 was priced at a spread of Treasuries plus 105 bps. The tranche was sold at the tight end of talk in the 110 bps area, plus or minus 5 bps.

Bookrunners were Barclays Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes, including working capital, acquisitions, debt retirement, stock repurchase and other business opportunities.

Occidental's last bond sale totaled $2.6 billion in two tranches on Dec. 13, 2010. The 2.5% five-year notes from that sale sold at 60 bps over Treasuries while the 4.1% 10-year notes were priced at 80 bps over Treasuries.

In the secondary market, the notes due 2017 traded at 80 bps offered, a trader said. Going out late in the day, the 51/2-year notes traded at 86 bps offered.

The 10-year notes traded tighter at 102 bps bid, 98 bps offered. Another trader saw the notes due 2022 at 102 bps bid, 98 bps offered.

The oil and gas, chemical and midstream company is based in Los Angeles.

Florida Power's 10-years

Florida Power Corp. (d/b/a Progress Energy Florida) priced $300 million of 3.1% 10-year first mortgage bonds (A2/A/A) at a spread of Treasuries plus 85 bps, according to an FWP with the Securities and Exchange Commission.

Barclays Capital Inc., Citigroup Global Markets Inc. and Goldman Sachs & Co. were bookrunners.

Proceeds will be used to repay a portion of outstanding short-term debt.

In secondary trading, Florida Power's notes firmed 1 bp on the bid to 84 bps bid, 82 bps offered, a trader said.

The utility company is based in St. Petersburg, Fla.

San Diego G&E's $350 mln

San Diego Gas & Electric sold $350 million of 3% 10-year first mortgage bonds, series JJJ, (Aa3/A+/AA-) at a spread of 78 bps over Treasuries, according to an FWP with the SEC.

Bookrunners were CastleOak Securities, LP, Deutsche Bank Securities Inc., RBC Capital Markets LLC and UBS Securities LLC.

Proceeds will become part of the company's general treasury funds and used for general working capital purposes, to support electric and gas procurement programs and replenish amounts expended and to be expended for expansion and betterment of the utility plant.

In the secondary market, the bonds traded at 75 bps bid, 70 bps offered, a trader said. Another trader saw the bonds firmer at 74 bps bid, 71 bps offered.

The electric and natural gas company is based in San Diego.

FLIR plans five-years

FLIR Systems announced a $350 million of five-year senior notes (Baa3/BBB-), according to a 424B5 filing with the SEC.

A source close to the deal said pricing is expected on Tuesday.

Bank of America Merrill Lynch and Barclays Capital Inc. are bookrunners.

Proceeds are being used for general corporate purposes, including working capital, investments in or extension of credit to subsidiaries, capital expenditures, acquisitions and stock repurchase.

The sensor and thermal imaging company is based in Wilsonville, Ore.

Google unchanged

Google's bonds were mostly flat in trading on the deal news.

"They haven't been very active today," the trader said. "Initially, it went about 3 to 4 basis points wider on the news and now they're back to unchanged."

Google's 2.125% senior notes due 2016 (Aa2/AA-) traded unchanged from Friday at 60 bps bid, 45 bps offered. Google sold the notes on May 16 at a spread of 43 bps over Treasuries.

The technology company is based in Mountain View, Calif.

Nokia comes in

Nokia's 5.375% notes due 2019 narrowed about 30 bps in the secondary market to 340 bps bid, 320 bps offered as the telecom sector firmed in trading.

Nokia sold the bonds (A1/A) in 2009 at a spread of 237.5 bps over Treasuries.

The mobile phone manufacturer and internet services provider is based in Espoo, Finland.

Bank of America tightens

Bank of America's credit default swaps traded about 20 basis points better "and the cash is probably 10 to 15 basis points better," a trader said on Monday.

The bank's stock and bonds jumped after it announced plans to sell its Canadian credit card business to TD Bank Group.

Bank of America's 5% notes due 2021 (A2/A/A+) firmed 15 bps on Monday to 345 bps bid, 335 bps offered.

The bank is based in Charlotte, N.C.

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