CBS, UIL, Celgene, Public Storage price high-grade deals; Boston Properties debt flat on deal

By Andrea Heisinger and Cristal Cody

New York, Oct. 4 - CBS Corp., UIL Holdings Corp., Celgene Corp. and Public Storage were among the sellers in the high-grade bond market on Monday.

The tone was decent, a syndicate source who worked on two of the day's deals said. Despite that, the volume was down considerably from the previous week that got off to a busy start with a $5.1 billion deal in four tranches from NBC Universal Inc.

One of its rivals, CBS, sold a much smaller $600 million in two tranches to repay debt. The deal was guaranteed by CBS Operations Inc.

The largest sale of the day, which also priced late, came from Celgene with its upsized $1.25 billion in three tranches. A $250 million tranche of 30-year bonds was added later in the day due to reverse inquiry, a source close to the deal said.

UIL Holdings priced a $450 million deal of 10-year notes.

On the upcoming deal front, Entergy Arkansas, Inc. is planning a sale of 30-year first mortgage bonds priced at $25 each for Tuesday. The sale was announced in a filing with the Securities and Exchange Commission on Monday.

A late sale of perpetual cumulative preferred shares came from Public Storage. The deal was for $120 million or 4.8 million shares.

Overall investment-grade Trace volume rose 10% to nearly $11 billion, a source said.

In the secondary market, CBS' paper tightened, while the new deals from Entergy Arkansas and Celgene were not immediately seen in trading, sources said.

Also in the secondary, Boston Properties, Inc.'s high-grade debt was little moved on the company's deal announcement on Monday, sources said.

The Markit CDX Series 14 North American investment-grade index on Monday eased 1 basis point to a spread of 105 bps on Monday, according to Markit Group Ltd.

Treasuries rose as stocks fell, sending traders looking for safer-haven debt on concerns in Europe.

The trading sent yields on the long end of the curve down. The yield on the benchmark 10-year note fell 3 bps to 2.48%. The yield on the 30-year bond fell 1 bp to 3.71%.

In addition, a recommendation from Switzerland that UBS AG and Credit Suisse Group AG, Switzerland's two biggest banks, have 19% of their capital in risk-weighted assets caused the market to anticipate the banks will become Treasury buyers in order to keep their capital ratios down, said Nick Kalivas, a market strategist at MF Global Holdings Ltd.

"That was seen as a situation which was slow growth and essentially caused some trades to buy on Treasuries as a safe haven," Kalivas said.

Celgene up to $1.25 billion

Celgene sold an upsized $1.25 billion of senior unsecured notes (Baa2/BBB-) in two tranches late in the day, a market source said.

The deal was announced early at $1 billion, with a tranche of 30-year bonds added.

"That was built on reverse inquiry," a source who worked on the sale said.

The sale was several times oversubscribed, with about $2.75 billion of interest in the five-year tranche, $3 billion in the 10-years and $600 billion in the 30-year bonds.

"We had about 216 guys played here," the source said. "It was an absolute blowout."

The company has not issued for a while, with "some old stuff" from 2003 that the source described as "said and done."

The first tranche of the deal was $500 million of 2.45% five-year notes priced at a spread of Treasuries plus 125 bps. The notes were sold at the tight end of talk in the range of 125 to 137.5 bps.

The second tranche was $500 million of 3.95% 10-year notes priced at a 150 bps over Treasuries spread. These also priced at the tight end of guidance in the 150 bps to 162.5 bps range.

A $250 million tranche of 5.7% 30-year bonds was added to the deal late. The tranche priced a spread of Treasuries plus 200 bps, and there was no price guidance because the notes were added late, a source close to the sale said.

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

Proceeds will be used for general corporate purposes, including further development of clinical and pre-clinical programs, expansion of international operations, capital expenditures, strategic transactions and working capital needs.

The global biopharmaceutical company is based in Summit, N.J.

Week light on deals

October got off to a slower start, following a blockbuster September that had the second highest volume of issuance ever and the largest number of deals ever priced, a source said.

The coming days aren't expected to get a whole lot busier than Monday, which saw at least four bonds price in the investment-grade market.

"I think we'll be pretty light," a source at a smaller syndicate desk said. "Given the flow we've had lately, that's not surprising."

The slowdown could be due to a number of things, including the approaching earnings blackout, he said.

There are expected to be a lot of emerging markets and Yankee deals pricing while domestic companies are unable to, he added.

Another syndicate source said that they were also expecting a quiet week "heading into the Columbus [Day] holiday."

"It's not unexpected. Everyone needs a break," she said.

CBS sells two tranches

Broadcast and media company CBS sold $600 million of senior unsecured notes (Baa3/BBB-/BBB-) in two tranches by early afternoon, a source close to the deal said.

The $300 million of 4.3% notes due 2021 priced at a spread of Treasuries plus 185 bps. The notes priced at the tight end of guidance in the 190 bps area, with a margin of plus or minus 5 bps, the source said.

A $300 million tranche of 5.9% 30-year bonds sold at 220 bps over Treasuries. These notes also priced at the tight end of guidance in the 225 bps area, plus or minus 5 bps.

Citigroup Global Markets, Credit Suisse Securities, J.P. Morgan Securities LLC and Morgan Stanley & Co. Inc. were bookrunners.

Proceeds will be used to fund the pending offer to purchase up to $250 million of outstanding 2012 debentures and 2012 notes and to redeem all outstanding 7.25% senior notes due 2051. The remainder will be used for general corporate purposes, including the potential repayment of other debt.

The deal is guaranteed by CBS Operations Inc., which is based in New York City.

In the secondary market, CBS' notes firmed, sources said.

Early afternoon, the notes due 2021 were seen trading at 178 bps bid, 174 bps offered, a trader said.

Later in the day, the notes were seen trading from a range of 177 bps bid, 176 bps offered, to 178 bps bid, 174 bps offered, sources said.

Also, the tranche of bonds due 2040 traded tighter soon after pricing at 216 bps bid and later at 211 bps bid, 205 bps offered, one trader said.

Later, the bonds were seen 210 bps bid, 209 bps offered, another source said.

UIL branch offers 10-years

UIL Holdings sold $450 million of 4.625% 10-year senior unsecured notes (Baa3/BBB-) to yield Treasuries plus 225 bps, according to an FWP filing with the SEC.

Morgan Stanley & Co. Inc., J.P. Morgan Securities LLC and Bank of America Merrill Lynch were the bookrunners.

Proceeds are going to fund a portion of the cash consideration payable in connection with the acquisition of South Carolina Electric & Gas, Connecticut Gas and Berkshire for $1.296 billion from Iberdrola USA, and for general corporate purposes. If the acquisition is not complete on or before Aug. 25, 2011, the proceeds will be used to redeem the notes at par plus interest.

The holding company for electric utility United Illumination Co. is based in New Haven, Conn.

Entergy unit plans sale

Entergy Arkansas is expected to price a $150 million deal of 30-year first mortgage bonds (A3/A-) on Tuesday at $25 each, an informed source said.

Citigroup Global Markets and Wells Fargo Securities LLC are bookrunners.

Proceeds are going to repay outstanding debt with interest rates ranging from 6 % to 6.7% per year maturing in 2032 and for general corporate purposes.

The subsidiary of energy company Entergy Corp. is based in New Orleans.

Public Storage preferreds

Public Storage sold $120 million, or 4.8 million shares, of perpetual cumulative preferred stock (Baa1/BBB) late in the day at par of $25, a source who worked on the trade said.

Bank of America Merrill Lynch was the bookrunner.

Proceeds are being used to redeem 7.125% cumulative preferred shares, series B, with a liquidation preference of $108.75 million.

The real estate investment trust of self-storage facilities is based in Glendale, Calif.

Boston Properties unaffected

Light activity was seen in Boston Properties' high-grade debt on the company's deal announcement on Monday, sources said.

The Boston-based real estate investment trust said it would buy the John Hancock Tower and Garage for $930 million, which includes $289.5 million in cash and $640.5 million in debt, from a partnership formed by Normandy Real Estate Partners and Five Mile Capital Partners.

Boston Properties' 5.625% senior notes due 2020 traded on Monday mostly unchanged at 190 bps bid, 180 bps offered, a trader said. The 5.875% senior notes due 2019 were seen at 175 bps bid, 165 bps offered in light activity.

"There was no activity on the 19s and very few trades on the 20s," another trader said.

Bank, brokerage CDS higher

The cost of credit default swaps contracts protecting holders of bank paper against event of default and the CDS costs for brokerage/investment bank paper were slightly higher on the day, a source said.

Both ended the day up 1 bp to 3 bps, the source said.

Paul Deckelman contributed to this review.

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