U.S. Bancorp, ILFC, utilities sell as deal flow subsides; Macy's trades up; Gap slides 30 bps

By Andrea Heisinger and Cristal Cody

New York, May 19 - The flow of new deals slowed on Thursday but did not stop as companies like U.S. Bancorp and BlackRock, Inc. sold bonds.

Minneapolis-based U.S. Bancorp sold $1 billion of 10-year bonds at the low end of talk.

BlackRock sold $1.5 billion of paper split evenly between two-year floaters and 10-year notes.

Public Service Co. of New Hampshire was in the market with a $122 million offering of 10-year first-mortgage bonds.

Another utility, DTE Energy Co., sold an upsized $300 million of two-year floating-rate notes. The size was increased by $50 million.

There was a crossover deal done by International Lease Finance Corp. The subsidiary of American International Group did a late sale of $2.25 billion of senior notes with maturities of 2016 and 2019. Each sold at the low end of guidance. The deal size was also increased from $1 billion, a source said.

Issuance slowed as expected following a deluge of deals totaling more than $30 billion in the first half of the week.

"We're still absorbing, seeing how things are performing [in the secondary]," one market source said.

Companies have clamored to price new paper before a window void of volatility closes. Several of the week's sales were held from previous weeks when it was too hazardous to sell new paper.

"Now they're all grabbing for coupons," a source said, referring to the low interest rates at the moment.

In the secondary market, Macy's, Inc.'s bonds rose after the retailer regained its investment-grade rating from Standard & Poor's, a trader said.

Meanwhile, Gap Inc.'s bonds slid 30 basis points on its earnings report, a trader said.

The new bonds from U.S. Bancorp were trading about 2 bps tighter, while Liberty Mutual Group, Inc.'s new bonds were flat in trading, a source said.

Overall investment-grade Trace volume rose about 4% to $12 billion, according to a market source.

In other data, the Markit CDX Series 14 North American investment-grade index held flat at a spread of 89 bps on Thursday, Markit Group Ltd. said.

Treasuries closed mixed on the day in choppy trading on weaker economic data. The 10-year note yield also edged down 1 bp to 3.17%. The 30-year bond yield rose 1 bp to end at 4.3%.

U.S. Bank sells $1 billion

U.S. Bancorp sold $1 billion of 4.125% 10-year medium-term notes (Aa3/A+/AA-) to yield Treasuries plus 97 bps, an informed source said.

This was at the low end of guidance in the 100 bps area.

Deutsche Bank Securities Inc., Morgan Stanley & Co., Inc. and U.S. Bancorp Investments Inc. were bookrunners.

Proceeds are being used for general corporate purposes.

The notes were seen "locked" around 95 bps in the secondary market, a trader said.

The bank and financial services company is based in Minneapolis.

Blackrock's two tranches

BlackRock sold $1.5 billion of notes (A1/A+) in two parts, an informed source said.

A $750 million tranche of two-year floating-rate notes priced at par to yield Libor plus 30 bps. The $750 million tranche of 4.25% 10-year notes sold at a spread of Treasuries plus 115 bps.

Bookrunners were Bank of America Merrill Lynch and Barclays Capital Inc.

Proceeds are being used to fund the repurchase of series B preferred stock from Merrill Lynch.

The investment management company is based in New York City.

ILFC ups to $2.25 billion

International Lease Finance sold $2.25 billion of split-rated senior notes (B1/BBB-/BB) in two parts late in the day, a market source said.

The sale was at first announced at a size of $1 billion, with the ability to purchase $750 million of notes tendered for.

The $1 billion of 5.75% five-year notes sold at par to yield 5.75%. These were priced at the lowest end of talk in the 5.875% yield area, with a margin of plus or minus 12.5 bps.

A second tranche of $1.25 billion in 6.25% eight-year notes priced at par to yield 6.25%. The notes sold at the tight end of guidance in the 6.375% area, plus or minus 12.5 bps.

Barclays Capital Inc., J.P. Morgan Securities LLC, RBC Capital Markets LLC and UBS Securities LLC were active bookrunners.

Proceeds are being used to purchase up to $1.75 billion cash consideration of notes tendered for in various series of debt.

ILFC last sold senior notes in the junk market in a $1 billion deal on Dec. 2, 2010. Those 10-year maturities priced at a yield of 8.375%. S&P has since upgraded the company to investment grade.

The commercial jet aircraft leasing subsidiary of American International Group Inc. is based in Los Angeles.

DTE upsizes

DTE Energy sold an upsized $300 million of two-year floating-rate notes, series C, (Baa2/BBB/BBB) at par to yield Libor plus 70 bps, a market source said.

The deal size was increased from $250 million.

Bank of America Merrill Lynch, Barclays Capital Inc. and Deutsche Bank Securities Inc. were bookrunners.

Proceeds are being used to repay a portion of $600 million of 7.05% senior notes due on June 1 and for general corporate purposes.

The issuer operates utilities through subsidiaries and is based in Detroit.

Public Service mortgage bonds

Public Service Co. of New Hampshire sold $122 million of 4.05% 10-year first-mortgage bonds, series Q, (A3/A-/A-) to yield 88 bps over Treasuries, according to an FWP with the Securities and Exchange Commission.

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

Proceeds are being used to redeem $75 million of Pollution Control Refunding Revenue bonds, series D and $44.8 million of the bonds, series E and to pay call premiums and issuance costs or to retire debt.

The electric subsidiary of Northeast Utilities is based in Manchester, N.H.

Macy's higher

Macy's regained its investment-grade rating from S&P the previous day and bonds jumped "3 to 12 points" in trading Thursday, a source said.

"Those are pretty active."

Macy's 5.9% notes due 2016 traded at 112.75, up 2½ points, the source said.

The retailer is based in Cincinnati, Ohio.

Gap drops

Gap's debt sank after the company said that first-quarter earnings fell 23% to $233 million and it cut its annual forecast.

"Looks like they're in line with revenues and per share but missed on the full year guidance," a trader said. "Bonds are about 30 basis points wider right now. That's in the last 20 minutes."

Gap's 5.95% notes due 2021 traded at 305 bps bid, 295 bps offered.

The retailer sold the notes on April 7 at a spread of Treasuries plus 245 bps.

Liberty flat

Liberty Mutual Group sold $600 million of 5% 10-year notes (Baa2/BBB-/BBB-) to yield Treasuries plus 210 bps on Wednesday.

The notes traded Thursday at 210 bps bid, 207 bps offered, a trader said.

The property and casualty insurance company is based in Boston.

© 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.