AstraZeneca returns to market with $2 billion deal, joins RBS, News America, Computer Sciences

By Aleesia Forni and Andrea Heisinger

New York, Sept. 11 - Volume in the high-grade bond market was dialed back on Tuesday from the previous day's haul of deals, but the primary remained active.

The day's sales were primarily $1 billion or more in size.

Royal Bank of Scotland Group plc sold $2 billion of three-year senior notes. The financial services company had announced the possibility of the deal the previous week.

Biopharmaceutical company AstraZeneca plc priced $2 billion of bonds in tranches due 2019 and 2042. It was the pharmaceutical maker's first deal in the U.S. bond market since 2007.

News America Inc. was in the market with a $1 billion deal of 10-year notes sold under Rule 144A and Regulation S.

Computer Sciences Corp. brought an upsized $700 million offering of senior notes in tranches of three-year notes and 10-year paper. The size of the deal was increased by $200 million.

The smallest trade of the day was $150 million of long 10-year notes sold by Tucson Electric Power Co.

The preferred stock market saw a new issue from Public Storage that was more than double in size from when it was announced on Monday.

A two-day meeting of the Federal Reserve Federal Open Market Committee begins on Wednesday. While that doesn't mean issuance will stop on Wednesday, or even on Thursday, it will be more measured.

"Some people still want to get in before [the meeting ends]," a source said late Tuesday.

"I would imagine we'll have some deals [Wednesday]."

A syndicate source at a large desk said they had two potential trades for the coming session and that "things aren't shutting down" due to the Fed meeting.

Issuers are eager to sell bonds under optimal conditions that have included massive investor demand and low yields.

The Markit CDX Series 18 North American Investment Grade index was unchanged at a spread of 95 bps on Tuesday.

In the secondary market, Morgan Stanley's 7.3% notes due 2019 were among the day's most actively traded deals, according to a market source.

The notes were seen 4 bps tighter compared to Monday's levels.

In other trading, notes from Goldman Sachs due 2037 and Citigroup due 2019 also firmed on Tuesday.

RBS prices short bond

RBS priced a $2 billion deal of 2.55% three-year senior notes (Baa1/A-/A)at a spread of 225 bps over Treasuries, a market source said.

The bonds were priced at the tight end of talk in the 225 bps to 235 bps range.

RBS Securities Inc. was bookrunner.

Proceeds are being used for general corporate purposes, including managing the refinancing of forthcoming maturities of term debt issued by the RBS Group.

The financial services company is based in Edinburgh, Scotland.

AstraZeneca $2 billion trade

AstraZeneca was in the market with a $2 billion deal of notes (A1/AA-/) sold in two tranches, a source close to the offering said.

A $1 billion tranche of 1.95% seven-year notes was priced at Treasuries plus 85 bps. The notes were sold tighter than guidance in the 95 bps area.

The $1 billion of 4% 30-year bonds sold at Treasuries plus 120 bps. The tranche was priced in line with talk in the 120 bps area.

Goldman Sachs & Co., HSBC Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used to repay outstanding debt and for general corporate purposes.

AstraZeneca was last in the market with a $6.9 billion offering in four tranches on Sept. 5, 2007. That sale included a 6.45% 30-year bond priced at 170 bps over Treasuries.

The biopharmaceutical company is based in London.

Computer Sciences tight

Computer Sciences sold an upsized $700 million of senior notes (Baa2/BBB/) in two tranches, a syndicate source said.

The deal size was initially $500 million. There was about $5.7 billion in total demand for the deal, with about $3 billion on the three-year tranche and $2.7 billion for the 10-year notes, the source said.

"It was very popular," the source added. This was the reason that the sale was upsized and that both of the maturities were priced tightly in comparison to talk.

A $350 million tranche of 2.5% three-year notes sold at a spread of 220 bps over Treasuries. The notes were priced tighter than guidance in the range of 225 bps to 250 bps.

The $350 million of 4.45% 10-year notes was priced at a spread of Treasuries plus 280 bps. The tranche was sold tighter than talk in the 287.5 bps to 312.5 bps range.

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

Proceeds are being used to redeem a portion of 5.5% notes due in 2013 and all or a portion of 5% notes due 2013.

The information technology company is based in Falls Church, Va.

News America's private deal

News America priced $1 billion of 3% 10-year notes (Baa1/BBB+/BBB+) to yield Treasuries plus 140 bps, a syndicate source said.

The deal was sold under Rule 144A and Regulation S.

J.P. Morgan Securities LLC was bookrunner.

The subsidiary of media conglomerate News Corp. is based in New York City.

Tucson Electric $150 million

Tucson Electric Power priced $150 million of 3.85% notes due 2023 (Baa3/BBB-/BBB-) at a spread of Treasuries plus 220 bps, according to an FWP filing with the Securities and Exchange Commission.

The size of the deal was increased slightly from $100 million, a source said.

Mitsubishi UFJ Securities (USA) Inc. and J.P. Morgan Securities LLC were bookrunners.

Proceeds will be used to repay amounts outstanding under a revolving credit facility. Any remainder will be used for general corporate purposes.

The utility is based in Tucson, Ariz.

Public Storage preferreds

Public Storage is selling $450 million 5.375% series V cumulative perpetual preferred shares of beneficial interest, a trader told Prospect News.

The shares will be issued as depositary shares representing a 1/1,000th interest.

The deal came at the low end of talk and was upsized from $200 million.

Dividends are payable quarterly, beginning on Dec. 31. The preferreds become redeemable on or after Sept. 30, 2017.

The Glendale, Calif.-based real estate investment trust will apply to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "PSAPV."

Settlement is expected on Sept. 20.

Joint bookrunning managers are Bank of America Merrill Lynch, Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC.

Proceeds will be used to redeem all outstanding 6.45% series X cumulative preferreds. Any remaining funds will be used to general corporate purposes, which might include investments in self-storage facilities and the redemption of other preferred issues.

Goldman Sachs firms

Goldman Sachs' 30-year bond due 2037 closed the session at 337 bps bid, 13 bps tighter from Monday's levels.

Goldman priced the $2.5 billion 6.75% bond at 190 bps over Treasuries in September 2007.

Citi tightens

In other trading, Citigroup's 8.5% 10-year notes tightened 6 bps to 174 bps bid.

The bank priced $1 billion notes due 2019 at Treasuries plus 437.5 bps on June 11, 2009.

Morgan Stanley active

In the secondary market, Morgan Stanley's 7.3% notes due 2019 traded 4 bps tighter at 298 bps bid.

Morgan Stanley priced $1 billion of the notes at 360 bps over Treasuries in May 2009.

High-grade debt maturing

A report put out on Tuesday by Standard & Poor's talks about the concern about the large amount of debt maturing in the corporate credit markets during the next four years.

About $8 trillion of debt is expected to come due from 2012 to the end of 2016, according to S&P. Issuers based in the United States make up about 36% of that amount. Of the $8 trillion maturing, about $6.3 trillion or 78% is rated investment grade, according to the report.

Non-financial issuers make up $3.3 trillion of the total amount, and financials, including banks and insurance companies, account for the remaining $4.8 trillion.

Among those divisions, telecommunications and utilities have the most significant debt, followed by the media and entertainment sectors.

Financial companies based in the United States have the most debt coming due, at about $1.1 trillion, according to the report.

The recently announced plan for the European Central Bank to buy short-term maturity government bonds of euro zone countries is expected to lessen some risk when sovereign banks have to restructure debt, according to the report.

There has been about $1.9 trillion of corporate bond issuance in the first eight months of 2012, which the report notes is the most for that period since 2009.

U.S.-based companies issued 33% of that debt and 36% came from companies based in Europe. Those rated investment-grade sold nearly 60% of the $1.9 trillion total.

Stephanie N. Rotondo contributed to this review

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