ACE issues bonds to fund Chubb acquisition; Apple, Duke Energy mixed; Xerox widens

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 27 – ACE INA Holdings Inc. and Boeing Co. led another charge of issuers to the high-grade primary session on Tuesday.

The trading day hosted $8.25 billion of new issuance, pushing the week’s total to $15.85 billion.

In a highly anticipated trade, ACE issued $5.3 billion of bonds in four maturities to help fund its $28 billion acquisition of Chubb Corp., with tranches selling between 15 basis points to 20 bps tight of initial price thoughts.

Deals brought to market continued to be met with a strong reception from investors, with Prologis LP and Transurban Finance Co. Pty. Ltd. each offering upsized new issues during the session.

New York Life Global Funding also priced a substantially upsized $750 million issue. The deal was initially set at $350 million.

In the secondary, Boeing’s existing senior notes traded about 1 bp tighter.

Apple Inc.’s bonds (Aa1/AA+/) traded flat to 6 bps tighter on the long end ahead of the company’s fourth quarter earnings results that were released after the market closed and showed a strong performance.

Xerox Corp.’s 3.5% senior notes due 2020 widened about 30 bps on Tuesday in the secondary market.

Fitch Ratings announced on Tuesday that it placed the company’s ratings on Rating Watch Negative. Xerox announced on Monday that it will review its business operations to boost shareholder value following a third quarter profit loss.

Duke Energy Progress Inc.’s first mortgage bonds (Aa2/A/A+) were unchanged to 3 bps tighter on the short end in secondary trading on Tuesday. Parent company Duke Energy Corp. announced on Monday that it will acquire Piedmont Natural Gas Co., Inc. for $4.9 billion in cash and the assumption of $1.8 billion of debt.

On Tuesday, Moody’s Investors Service said it placed Duke Energy’s long-term ratings on review for downgrade. Fitch Ratings said it placed Duke Energy’s long-term issue default rating on Rating Watch Negative. Standard & Poor’s said it revised the company’s outlook to negative from stable.

In other secondary trading, Coach Inc.’s 4.25% senior notes due 2025 firmed 1 bp after the company reported better than expected first quarter earnings, though the bonds are trading more than 50 bps wider than issuance.

Credit spreads leaked wider over the day. The Markit CDX North American Investment Grade 25 index closed 1 bp softer at 79 bps. The index has ranged from a low spread of 60.7 bps to a high spread of 94.8 bps over the past 12 months, according to a Barclays Bank PLC report on Tuesday.

ACE acquisition funding

ACE INA Holdings priced a $5.3 billion four-part offering of senior notes (A3/A/A) on Tuesday in four tranches, according to a market source and an FWP filing with the Securities and Exchange Commission.

A $1.3 billion 2.3% tranche of five-year notes sold at 99.944 to yield 2.312%, or Treasuries plus 95 basis points.

There was also $1 billion of 2.875% seven-year notes sold at Treasuries plus 115 bps. Pricing was at 99.874 to yield 2.895%.

Also, $1.5 billion of 3.35% 12-year bonds priced at 99.693 to yield 3.385% with a spread of Treasuries plus 135 bps.

A $1.5 billion 4.35% tranche of 30-year bonds priced at 99.75 to yield 4.365%, or Treasuries plus 150 bps.

All four tranches sold tight of price talk.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Citigroup Global Markets Inc. are the bookrunners.

The notes are fully and unconditionally guaranteed by parent company Ace Ltd.

Proceeds from the deal will be used along with available by cash to fund the cash portion of the company’s acquisition of Chubb Corp. that is expected to close in the first quarter of 2016.

Ace is a Zurich, Switzerland-based property and casualty insurance and reinsurance provider.

Boeing three-parter

In another new issue, Boeing sold $900 million of senior notes (A2/A/A) in three tranches on Tuesday, according to a market source.

The sale included $350 million of 1.65% five-year notes sold at 98.789 to yield 1.904% with a spread of Treasuries plus 55 bps.

A $250 million 2.2% tranche of seven-year notes sold at Treasuries plus 70 bps. The notes priced at 98.495 to yield 2.435%.

The Chicago-based aerospace company also priced $300 million of 2.6% 10-year bonds at 97.599 to yield 2.878%, or Treasuries plus 85 bps.

The three tranches each sold at the tight end of price guidance.

The bookrunners for the five-year notes are Goldman Sachs & Co., BofA Merrill Lynch, Morgan Stanley & Co. LLC, BBVA, MUFG and RBC Capital Markets LLC.

Goldman Sachs & Co., J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., BNP Paribas Securities Corp., Credit Agricole Securities and Santander are bookrunners for the seven-year tranche.

The bookrunners for the 10-year bonds are Goldman Sachs & Co., J.P. Morgan Securities LLC, Muzuho Securities, Barclays, SMBC Nikko and Wells Fargo Securities LLC.

Proceeds from the offering will be used for general corporate purposes.

Prologis offering

Prologis brought an upsized $750 million issue of 3.75% senior notes (Baa1/BBB+/BBB) due Nov. 1, 2025 on Tuesday at Treasuries plus 180 basis points, according to a source away from the trade.

Pricing was at 99.381 to yield 3.825%.

Guidance was set in the area of Treasuries plus 185 bps having tightened from initial price thoughts in the Treasuries plus 205 bps area.

The deal was increased from $500 million.

Morgan Stanley & Co. LLC, BofA Merrill Lynch and Goldman Sachs & Co. are the joint bookrunners.

The company intends to use proceeds from the sale to repurchase its 4.5% notes due 2017 and to fund a $200 million cash tender offer to purchase its 6.875% notes due 2020, 7.375% notes due 2019 and 6.625% notes due 2019.

In the short term, proceeds will be used to repay outstanding borrowings under a global line of credit and/or a multi-currency senior term loan and for other general corporate purposes, including debt repayment or repurchases.

The notes are guaranteed by Denver-based Prologis Inc., an owner, operator and developer of industrial real estate.

Transurban prices tight

Also on Tuesday, Transurban Finance sold an upsized $550 million issue of 4.125% 10-year senior secured notes (Baa1/BBB+/A-) at Treasuries plus 220 bps, a market source said.

The notes, which were increased from $500 million, priced tight of guidance set in the area of 250 bps over Treasuries.

Pricing was at 99.123 to yield 4.232%.

Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were the bookrunners.

The financing unit is a subsidiary of Melbourne-based Transurban Group, an international toll road owner and operator with interests in Australia and the United States.

NY Life upsizes

New York Life Global Funding priced an upsized $750 million issue of 1.55% three-year bonds (Aaa/AA+/AAA) on Tuesday with a spread of 70 basis points over Treasuries, a market source said.

Pricing was at 99.857 to yield 1.599%.

The deal was upsized from $350 million.

Bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc.

The notes sold via Rule 144A and Regulation S.

The unit of mutual insurance company New York Life Insurance Co. is based in New York.

Boeing firms

Boeing’s existing 2.5% notes due 2025 firmed 1 bp in secondary trading to 75 bps bid, a market source said.

The company sold $250 million of the notes on Feb. 18 at a spread of Treasuries plus 65 bps.

Boeing’s 3.5% notes due 2045 headed out 1 bp tighter at 99 bps bid.

The bonds priced in a $250 million issue at 100 bps over Treasuries in the Feb. 18 offering.

The aerospace company is based in Chicago.

Apple bonds mixed

Apple’s 3.2% notes due 2025 were unchanged on Tuesday at 85 bps bid, a market source said.

Apple sold $2 billion of the notes on May 6 at a spread of Treasuries plus 100 bps.

But in a longer maturity, the company’s 4.375% notes due 2045 tightened 6 bps during the session to 136 bps bid.

Apple sold $2 billion of the bonds in the May 6 offering at 140 bps over Treasuries.

The computer and mobile communications device company is based in Cupertino, Calif.

Xerox widens

Xerox’s 3.5% senior notes due 2020, quoted 1 bp softer on Monday at 205 bps bid, widened to the 235 bps area in secondary trading on Tuesday, according to a market source.

The company sold $400 million of the notes (Baa2/BBB/BBB) on Aug. 17 at a spread of Treasuries plus 212.5 bps.

The maker of office machines is based in Norwalk, Conn.

Duke Energy flat to tighter

Duke Energy Progress’ 3.25% notes due 2025 firmed 3 bps on Tuesday to head out at 87 bps bid, according to a market source.

The company sold $500 million of the notes on Aug. 10 at a spread of Treasuries plus 105 bps.

Duke Energy’s 4.2% bonds due 2045 were unchanged at 115 bps bid.

Duke Energy priced $700 million of the bonds in the Aug. 10 sale at Treasuries plus 130 bps.

The Raleigh, N.C.-based company is an electricity distributor in North Carolina and South Carolina.

Coach improves modestly

Coach’s 4.25% notes due 2025 traded 1 bp tighter at 281 bps bid on Tuesday, a market source said.

Coach sold $600 million of the notes (Baa2/BBB-/BBB) on Feb. 23 at Treasuries plus 225 bps.

The luxury leather goods company is based in New York.

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