Prudential Financial, Western Union, R.R. Donnelley sell bonds; BP debt comes in better

By Andrea Heisinger and Cristal Cody

New York, June 16 - Prudential Financial, Inc., Western Union Co. and R.R. Donnelley & Sons Co. all jumped in and priced deals on Wednesday.

Prudential Financial had the largest sale of the day at $1 billion in two tranches. The deal consisted of $650 million of 10-year notes and $350 million of 30-year bonds.

Chicago-based R.R. Donnelley upsized its sale to $400 million from $300 million of 10-year notes that priced at a yield and levels similar to junk bonds.

Western Union priced its notes by mid-afternoon. The financial services and communications company came forward with $250 million of 30-year senior bonds.

A deal of perpetual subordinated capital securities was announced by HSBC Holdings plc. They are exchangeable for non-cumulative dollar preference shares.

The primary side of the market was slightly improved for the day, with a lot of accounts clamoring for high-grade debt.

BP plc's high-grade debt, like its stock, fared better on news Wednesday that the London-based company would set aside a $20 billion fund package for damages over the continuing oil leak in the Gulf of Mexico.

Overall investment-grade Trace volume dropped 15% to about $10.5 billion, according to a source.

The CDX Series 14 North American investment-grade index was 1 basis point tighter at a spread of 118 bps.

In Treasuries, overseas fears and a decrease in homebuilding pushed yields down.

Yields on 10-year benchmark notes ended the day at 3.26%, compared to 3.3% on Tuesday.

Yields on 30-year bonds also moved to 4.18% from 4.22%.

"Increasing worries over Spain weighed on the European equity markets," Bill O'Grady, chief market strategist with Confluence Investment Management LLC, said in a research note on Wednesday.

"These reports have been denied, but the comments raised fears of further problems in Europe and weakened the euro."

The Spanish Finance Ministry on Wednesday denied that it was seeking a $350 billion bailout package in response to media reports.

Investors also were swayed by a drop in U.S. housing starts, which fell 10% to 593,000 in May.

Prudential Financial prices $1 billion

Newark-N.J.-based Prudential Financial priced $1 billion of notes (Baa2/A/BBB) in two tranches by late afternoon, a source who worked on the sale said.

The deal was massively oversubscribed with about $7.5 billion on the books.

The $650 million of 5.375% 10-year notes priced at a spread of Treasuries plus 220 bps. They came in at the tight end of guidance in the 225 bps area.

A $350 million tranche of 6.625% 30-year notes priced at Treasuries plus 245 bps. This tranche also came in at the tight end of guidance in the 250 bps area.

The deal was "phenomenal," the source said, adding that he "wasn't sure" why buyers left the books so oversubscribed.

"They're a name that people know," he said. "There was a little extra spread because of the ratings."

The company last sold bonds on Jan. 11, according to Prospect News. That deal totaled $1.25 billion of bonds in three-year and five-year tranches. The last time it sold 10-year notes was on June 2, 2009, and they priced at 370 bps over Treasuries.

Citigroup Global Markets, J.P. Morgan Securities and Wells Fargo Securities Inc. were bookrunners.

Proceeds are being used for general corporate purposes, including loans and capital contributions to affiliates.

The issuer is an insurance and financial services company.

Primary improves as issuance steadies

There was slight improvement in the primary side of the market for the day, which may have helped get the day's three new bond sales done, a source said.

"Things looked a lot tighter," the source said, adding that bank and finance names were tighter in the secondary side of the market.

"We had a lot of people looking for high-grade [bonds] today," he said. "It's been kind of dry lately."

There haven't been many sales announced for the remainder of the week, except for the capital securities from HSBC Holdings.

"That's more of a retail thing," a source said. "We might have a couple more straight IG bonds."

R.R. Donnelley upsizes to $400 million

R.R. Donnelley & Sons priced an upsized $400 million of 7.625% 10-year senior unsecured notes (Baa3/BBB/BBB-) at Treasuries plus 435.9 bps, an informed source said.

The size was increased from $300 million.

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. were active bookrunners.

Proceeds are being used to repay borrowings under a revolving credit facility drawn on May 13, to repay $325.7 million of 4.95% senior notes due on May 15 and for general corporate purposes.

The integrated communications company is based in Chicago.

Western Union sells long bonds

Western Union sold $250 million of 6.2% 30-year senior unsecured notes (A3/A-/A-) to yield Treasuries plus 200 bps, a source who worked on the deal said.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc. and Wells Fargo Securities.

The bonds traded in the secondary tighter at 191 bps bid, 187 bps offered, a trader said.

Proceeds will be used for general corporate purposes, including debt repayment.

The financial services and communications company is based in Englewood, Colo.

HSBC plans exchangeable sale

HSBC Holdings is planning a sale of perpetual subordinated capital securities that are exchangeable into non-cumulative dollar preference shares, according to a 424B2 filing with the Securities and Exchange Commission.

The deal did not price on Wednesday, a source close to the deal said. Pricing is expected on Thursday afternoon.

The securities will be priced at $25 each. They are callable on or after Dec. 15, 2015 at par plus accrued interest.

The capital securities can be exchanged for preference shares in whole on quarterly coupon payment dates.

Wells Fargo Securities is the active bookrunner. HSBC Securities, Citigroup Global Markets, Morgan Stanley & Co. and UBS Investment Bank are passives.

BNP Paribas Securities, RBC Capital Markets, Goldman Sachs & Co., Credit Suisse Securities, J.P. Morgan Securities and RBS Securities are co-managers.

Proceeds are being used to support development and further strengthen the capital base.

The financial services company is based in London.

Goldman gives terms for one-year notes

Goldman Sachs Group Inc. priced $100 million of 1.75% one-year medium-term notes at par to yield 1.75%, according to a 424B2 filing with the SEC.

Goldman Sachs & Co. ran the books.

The financial services company is based in New York City.

BP bonds, stock improve

BP agreed to the fund package on Wednesday after president Barack Obama threatened in an address to Americans on Tuesday night to make the company pay for the environmental damages and financial damages over the oil spill.

The continued leak caused by an oilrig explosion that killed 11 people on April 20 is now considered the worst environmental disaster in U.S. history and is affecting businesses and residents in Mississippi, Louisiana, Alabama and Florida.

BP's notes due 2015 "are quoted 86, 87.50, which is about 3 points better," a trader said late in the day.

One trader saw the notes on Tuesday at $85, $86 in the secondary.

BP's stock also rose 45 cents, or 1.43%, to close in New York Stock Exchange trading at $31.85.

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