Deere, Paccar, GATX, Cintas sell amid stable tone, high demand; Southwestern tightens

By Aleesia Forni and Andrea Heisinger

New York, June 5 - Paccar Financial Corp. broke the ice with an issue announced early Tuesday, and other investment-grade companies followed suit into the market including Deere & Co., GATX Corp., Cintas Corp. and Southwestern Public Service Co.

Public Storage announced an offering of cumulative perpetual preferred stock.

John Deere had the day's largest offering, totaling $2.25 billion in tranches of 10-year notes and 30-year bonds.

Paccar priced $550 million split between two-year floating-rate notes and three-year fixed-rate notes. The deal size was increased from $500 million, a source said.

The three-year fixed-rate notes were seen tighter in the secondary later on Tuesday.

Cintas sold $250 million of 10-year notes via Cintas Corp. No. 2. The debt is guaranteed by the parent company.

The smallest offering of the day was a reopening of 4.5% bonds due 2041 from Southwestern Public Service to add $100 million. The sale brings the issue size to $300 million.

The deal was also seen tighter near the end of New York's session.

Treasury yields have retracted from record lows of the previous week, but investment-grade issuers who were waiting for a chance to price bonds found a more constructive tone at the start of Tuesday's session.

On Monday when no issuers tapped the market, sources said that there were companies sitting on the sidelines waiting for a guinea pig to go first and then others would follow. That was what happened at the top of the day as Paccar was first out of the gates, a syndicate source said.

"Next thing, there were like four names out there," a market source said.

A syndicate source who worked on some of the day's offerings said that "everyone wanted to go on a reasonably good day."

"It started out flat and got a little better," the syndicate source said of the tone.

Issuers that were ready to tap the market were "reaching for yield," a market source said after the close.

Many of the day's sales priced lower than guidance - in some cases 15 basis points to 20 bps better - a direct result of high demand from investors, the market source said.

Wednesday should see more activity in the primary as multiple desks said they have issuers that will look at the market in the morning.

"It should be stable the rest of the week," the market source said.

Investment-grade bank and brokerage credit default swaps costs declined on the Tuesday.

Banks tightened on the day. Bank of America's CDS costs declined 7 bps to 304 bps bid, 309 bps offered. Citi's CDS costs also decreased 8 bps to 273 bps bid, 278 bps offered. Additionally, Wells Fargo's CDS costs tightened 5 bps to 127 bps bid, 132 bps offered.

Brokers also tightened. Merrill Lynch's CDS costs traded 10 bps tighter at 320 bps bid, 330 bps offered. Morgan Stanley's CDS costs traded 5 bps tighter at 440 bps bid, 450 bps offered. Goldman Sachs' CDS costs tightened 8 bps to 330 bps bid, 340 bps offered.

Deere sells in two parts

Deere & Co. priced $2.25 billion of notes (A2/A/) in two tranches, a source close to the deal said.

There was "just under $8 billion" in demand on the trade, the source said.

The $1 billion of 2.6% 10-year paper sold at a spread of Treasuries plus 105 bps. It was sold tighter than guidance for a spread in the 120 bps area.

A second part was $1.25 billion of 3.9% 30-year bonds priced at 130 bps over Treasuries. The bonds sold tighter than talk in the 150 bps area.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC ran the books.

Proceeds are being used for general corporate purposes.

The heavy equipment and farm implement maker is based in Moline, Ill.

Paccar sees huge demand

Paccar Financial sold an upsized $550 million of notes (A1/A+/) in two maturities, an informed source said.

There was "north of $3 billion" on the books for the sale, making it more than five times oversubscribed.

The $250 million of two-year floating-rate notes priced at par to yield Libor plus 25 bps.

There was also $300 million of 1.05% three-year notes sold at a spread of Treasuries plus 75 bps. The size of the tranche was increased from $250 million.

The fixed-rate notes were sold at the low end of guidance in the 80 bps area, plus or minus 5 bps.

The three-year notes were seen 4 bps tighter late in the day on Tuesday, a source said, trading at 71 bps bid, 65 offered.

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

The provider of retail and commercial truck financing for Paccar Inc. is based in Bellevue, Wash.

GATX offers 10-years

GATX sold $250 million of 4.75% 10-year senior notes (Baa2/BBB/BBB) to yield Treasuries plus 330 bps, an informed source said.

The notes were sold well under guidance in the 350 bps area, the source said. There was more than $900 million on the books for the trade.

Bank of America Merrill Lynch and Citigroup Global Markets Inc. were bookrunners.

Proceeds are being used to repay commercial paper maturing within 39 days and for general corporate purposes including working capital and capital expenditures.

The transportation leasing service is based in Chicago.

Cintas sells $250 million

Cintas Corp. No. 2 sold $250 million of 3.25% 10-year senior notes (A2/BBB+/) to yield 170 bps over Treasuries, a source away from the trade said.

KeyBanc Capital Markets Inc. and J.P. Morgan Securities LLC ran the books.

Proceeds are being used for general corporate purposes including the repurchase of stock and acquisitions.

The deal is guaranteed by Cintas, the Cincinnati-based uniform, document management and safety equipment company.

Southwestern's reopening

Southwestern Public Service reopened its issue of 4.5% first mortgage bonds due in 2041 to add $100 million, according to an FWP filing with the Securities and Exchange Commission.

The notes (A2/A-/A-) were priced at a spread of Treasuries plus 130 bps.

Total issuance is now $300 million including the original $200 million priced on Aug. 3, 2011 at 78 bps over Treasuries.

Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. were the bookrunners.

Proceeds are being used to repay short-term borrowings incurred to fund daily operational needs and for general corporate purposes.

The bonds traded 2 bps tighter at 128 bps bid, 123 bps offered, according to a market source.

The electric utility is based in Amarillo, Texas.

Public Storage's perpetuals

Public Storage will issue series U cumulative perpetual preferred stock, according to a prospectus filed with the Securities and Exchange Commission.

Price talk is 5.625% to 5.75%, a trader said.

Dividends will be paid quarterly, beginning Sept. 30. The Glendale, Calif.-based real estate investment trust cannot redeem the preferreds before June 2017, except in order to preserve its REIT status.

Public Storage will apply to list the new preferreds on the New York Stock Exchange under the symbol "PSAPU."

Bank of America Merrill Lynch, Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC bookrunners.

Proceeds from the sale will be used to redeem $172.5 million of 7% series N cumulative preferred shares. Any remaining funds will be used for general corporate purposes, which may include investments in self-storage facilities and other possible redemptions.

Citigroup widens

In secondary trading, Citigroup Inc.'s notes due August 2014 widened 24 bps to 275 bps bid at Tuesday's close, according to a market source.

The bank priced $2.5 billion 6.375% notes at 380 bps over Treasuries in 2009.

Goldman Sachs tightens

Goldman Sachs's notes due 2037 tightened 1 bps on Tuesday, trading at 432 bps bid at the end of the session.

The bank sold $2.5 billion 6.75% senior notes in September 2007 at a spread of Treasuries plus 190 bps.

Goldman Sachs is headquartered in New York.

RBC tightens

Royal Bank of Canada's notes due 2014 also tightened on Tuesday.

The notes traded 2 bps tighter at 76 bps bid.

The bank sold $1.25 billion 1.45% senior notes in October at a spread of Treasuries plus 105 bps.

The financial services company is based in Toronto.

Stephanie N. Rotondo contributed to this review

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