Disney, VF, Burlington Northern among sellers as window remains open; Dell widens on forecast

By Andrea Heisinger and Cristal Cody

New York, Aug. 17 - There were deals on Wednesday from names not recently seen in the debt market, including VF Corp., Northern Trust Corp. and Progressive Corp.

Walt Disney Co. had the largest sale of the day at $1.89 billion in three maturities. The bonds were priced by mid-afternoon at the tight end of guidance.

Apparel company VF sold $900 million of notes in two parts, including a two-year floating-rate note and 10-year note. It was the first bond sale for the company since 2007.

Burlington Northern Santa Fe, LLC priced $750 million of debt in two parts.

Magellan Midstream Partners, LP reopened an issue of notes due 2021 to add $250 million.

Financial Northern Trust priced $500 million of 10-year notes. The last sale from the company was $500 million of 3.45% 10-year notes on Nov. 1, 2010. The notes were sold at a much tighter spread of 83 bps over Treasuries.

Insurance company Progressive was in the market selling $500 million of 10-year notes. It was the first debt sale for the company in several years.

Western Union Co. increased the size of its seven-year note sale to $400 million from $350 million.

There was a sale with an unusual maturity date from Midland Cogeneration Venture LP. The energy generation company sold $560 million of bonds due in 2020.

Stable market conditions from the first two days of the week held at the top of the day and led to the continued flood of new paper from some companies that hadn't tapped the debt market since late 2010 or before.

"It was less volatile," said one source who worked on two of the day's trades. "We're still getting things done without huge concessions."

He went on to say that the high-grade bond market is doing well at the moment and added, "Stable is good right now."

The backlog of supply isn't done. More sales are expected for Thursday if the tone holds at the open.

"I would say we have three maybe - not as big [in size] as today," a syndicate source said.

Sources at other desks said they also had some possibilities for Thursday, but nothing definite.

Overall trading volume edged about 5% higher to more than $13.5 billion on Wednesday.

In the secondary market, Dell Inc.'s bonds and credit default swaps widened after the company cut its annual revenue growth forecast late Tuesday.

Bonds overall were seen better late afternoon, including financials, which traded "5 basis points better on the day," a trader said. "Everything's a little bit better."

The telecom sector was seen about 1 bp to 2 bps better by late afternoon.

Progressive's new 10-year notes traded 8 bps tighter, while Burlington Northern and Northern Trusts' new bonds firmed about 2 bps in the secondary market, a trader said.

The Markit CDX Series 16 North American high-grade index firmed 3 bps to a spread of 110 bps.

U.S. investment-grade bonds have held in better than European high-grade debt, according to a Moody's Analytics, Inc. research note released Wednesday.

From the April 2011 mean to Aug. 15, the United States' high-grade industrial spread broadened from 120 bps to 156 bps, while the financial company spread swelled from 164 bps to 271 bps, the note said.

The United States' latest high-grade industrial spread exceeded each prior monthly average back to August 2010's 158 bps, while the recent financial company spread surpassed each previous monthly average since November 2009's 271 bps, Moody's said.

"To better understand just how risk-laden today's macro and policy environments are, consider that during January 2003 through July 2007, the U.S.' median high-grade bond yield spreads were 107 bp for the industrials and 73 bp for the financials," Moody's said in the note.

"Record high mountains of cash and a very low and still declining default rate have been of no avail to the still extraordinarily wide yield spreads of investment-grade and high-yield bonds."

Longer-dated Treasuries rose higher by late afternoon. The 10-year benchmark note yield fell to 2.17% from 2.22%. The 30-year bond yield dropped 10 basis points to 3.57%.

Disney sells $1.85 billion

Walt Disney Co. sold $1.85 billion of notes (A2/A/A) in three tranches, said a source away from the trade.

The $750 million tranche of 1.35% five-year notes was priced at a spread of Treasuries plus 60 bps. It was priced at the tight end of guidance in the 65 bps area.

A $750 million tranche of 2.75% 10-year notes sold at a spread of 72 bps over Treasuries. The notes were priced at the low end of guidance in the 75 bps area.

The third part was $350 million of 4.375% 30-year bonds sold at Treasuries plus 87.5 bps. The bonds were sold at the tight end of talk in the 90 bps area.

Bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co., Inc.

Proceeds are being used for general corporate purposes, including debt repayment and share repurchase.

Disney last priced debt in a $500 million sale of 3.75% 10-year notes on May 18 at Treasuries plus 60 bps.

Walt Disney's new bonds were still seen trading in the gray markets late afternoon, according to a trader.

The notes due 2016 traded at 57 bps bid, 55 bps offered, while the tranche of notes due 2021 edged wider to 73 bps bid, 70 bps offered in the gray markets. The bonds due 2041 were seen in the grays at 87 bps bid, 84 bps offered, the trader said.

The media conglomerate is based in Burbank, Calif.

Western Union upsizes

Western Union sold an upsized $400 million of 3.65% seven-year senior notes (A3/A-/A-) at a spread of Treasuries plus 220 bps, an informed source said.

The deal size was increased from $350 million. The notes were priced in line with whispered talk in the low 200 bps area and tighter than revised guidance in the 230 bps area, a source said.

There was about $1.4 billion of demand for the paper.

Bookrunners were Citigroup Global Markets Inc. and Wells Fargo Securities LLC.

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

Western Union's last debt sale was $300 million of two-year floating-rate notes priced on March 2.

The money management and payment service company is based in Englewood, Colorado.

BNSF's two tranches

Burlington Northern Santa Fe sold $750 million of debentures (A3/BBB+) in two tranches, according to an FWP filing with the Securities and Exchange Commission and an informed source.

A $450 million tranche of 3.45% 10-year notes was sold at a spread of Treasuries plus 130 bps. The tranche was sold at the tight end of talk in the 135 bps area, a source said.

The second tranche was $300 million of 4.95% 30-year bonds priced at 140 bps over Treasuries. The notes were priced at the low end of guidance in the 145 bps area.

The deal was hugely oversubscribed at about $5 billion in demand.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Goldman Sachs & Co.

Proceeds are being used for general corporate purposes, including working capital, capital expenditures and debt repayment.

Burlington Northern last priced bonds in a $750 million sale in two parts on May 16. The 4.1% 10-year notes from that deal were priced at 100 bps over Treasuries while the 5.4% 30-year bonds were sold at 115 bps over Treasuries.

Burlington Northern's new debentures traded about 2 bps tighter in the secondary market, a trader said.

The notes due 2021 firmed to 128 bps bid, 125 bps offered. The 30-year bonds tightened in trading to 138 bps bid, 136 bps offered.

The holding company for railroad and transportation services is based in Fort Worth, TX.

VF returns to market

VF Corp. priced $900 million of senior notes (A3/A-) in two parts, a source close to the trade said.

A $400 million tranche of two-year floating-rate notes was sold at par to yield Libor plus 75 bps.

There was also a $500 million tranche of 3.5% 10-year notes priced at a spread of 137.5 bps over Treasuries.

Active bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities LLC.

Proceeds are being used, along with cash on hand and short-term borrowings, to pay for the acquisition of Timberland Co.

There is a mandatory call at 101 if the acquisition is not done by March 12, 2012.

VF last priced bonds in a $600 million sale with maturities of 10- and-30-years on Oct. 10, 2007. The 5.95% 10-year notes from that trade were sold at 133 bps over Treasuries.

V.F.'s notes due 2021 traded soon after pricing wrapped around the issue price at 137 bps bid, 134 bps offered, a trader said.

The lifestyle apparel company is based in Greensboro, N.C.

Magellan's reopening

Magellan Midstream Partners reopened its issue of 4.25% notes due 2021 to add $250 million, an informed source said.

The notes (Baa2/BBB) were priced at a spread of Treasuries plus 155 bps.

Total issuance is $550 million, including $300 million priced on Aug. 4, 2010, at 135 bps over Treasuries.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used to repay borrowings under a revolving credit facility and for general corporate purposes.

The energy transportation, storage and distribution company is based in Tulsa, Okla.

Northern Trust 10-years

Northern Trust sold $500 million of 3.375% 10-year senior notes (A1/AA-) at a spread of Treasuries plus 125 bps, a source away from the offering said.

Bookrunners were J.P. Morgan Securities LLC and Morgan Stanley & Co., Inc.

Proceeds will be used for general corporate purposes.

The company's new notes due 2021 tightened about 2 bps to 123 bps bid, 119 bps offered in secondary trading, a trader said.

The financial holding company is based in Chicago.

Progressive's $500 million

Progressive sold $500 million of 3.75% 10-year senior notes (A1/A+/A) to yield Treasuries plus 160 bps, according to an FWP filing with the SEC.

Credit Suisse Securities (USA) LLC was bookrunner.

Proceeds are being used for general corporate purposes, including repurchase and repayment of outstanding debt including $350 million of 6.375% senior notes due 2012 and/or $150 million of 7% notes due 2013.

According to Prospect News data, Progressive hasn't sold debt any time after mid-2007.

Progressive's new notes due 2021 firmed about 8 bps to 152 bps bid, 148 bps offered, a trader said.

The insurance company is based in Mayfield Village, Ohio.

Midland's debt due 2020

Midland Cogeneration Venture sold $560 million of 6% senior secured notes due 2020 in the Rule 144A, Regulation S private placement market, a market source said.

The notes (BBB-/BBB-) were priced at par to yield 6% with a spread of Treasuries plus 383.1 bps.

Bookrunners were Credit Suisse Securities (USA) LLC, Mitsubishi UFJ Securities (USA) Inc. and RBC Capital Markets LLC.

Proceeds are being used to pay dividends to stockholders and to repay loans.

The energy generation company is based in Midland, Mich.

Dell trades wider

Dell's bonds traded wider on Wednesday after the company reported lower-than-expected revenue and cut its annual revenue forecast to 1% to 5% from 5% to 9%.

"They opened up about 5 basis points wider today and are basically trading around that," a trader said.

Dell's 4.625% senior notes due 2021 (A2/A-/A) widened to 145 bps bid, 135 bps offered late Wednesday. Dell sold the 10-year notes on March 28 at a spread of 125 bps over Treasuries.

Dell's 5.4% bonds due 2040 (A2/A-/) also traded wider at 160 bps bid, 150 bps offered. The company sold the long bonds on Sept. 8 at Treasuries plus 175 bps.

Dell's credit default swaps were "definitely trading a lot more" than the company's bonds, the trader said.

Dell's CDS was quoted at 105 bps, 110 bps.

"Yesterday, before the announcement, it was 97, 107," the trader said.

The technology and IT company is based in Round Rock, Texas.

CDS costs fall

A trader saw a solid decline in the cost of credit default swaps contracts protecting the holders of bank and brokerage/investment bank paper from events of default, a sign of increased investor confidence.

He saw bank CDS costs ease anywhere from 3 bps to 18 bps, with the J.P. Morgan CDS contracts 3 bps cheaper and contracts for Bank of America paper 18 bps lower.

Among the Investment banks, he saw the cost of protecting Goldman Sachs paper ease by 5 bps and the cost of CDS contracts for Merrill Lynch paper come in by 18 bps.

Paul Deckelman contributed to this review

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