Iberdrola Ireland, Airgas, AvalonBay, CVS, Puget Sound sell bonds; Kraft wider on Cadbury bid

By Andrea Heisinger and Paul Deckelman

New York, Sept. 8 - New deals filled the primary market once again on Tuesday, with sales from Iberdrola Finance Ireland Ltd., Airgas, Inc., AvalonBay Communities, Inc., CVS Caremark Corp. and Puget Sound Energy, Inc.

Questar Pipeline Co. also entered the market with a $50 million reopening of its 5.3% bonds due 2018.

Iberdrola's sale was about the last to price for the day. The unit of a Spanish utility company sold $2 billion of five- and 10-year notes via Rule 144A. Both came at the tight end of price guidance.

Most of the sales were medium-sized and from BBB rated names.

Airgas upsized its sale to $400 million of five-year notes, while AvalonBay priced two tranches of notes due 2017 and 2020 that totaled $500 million.

Pharmacy chain CVS Caremark sold $1.5 billion of 30-year bonds. Electric and natural gas utility Puget Sound Energy also sold long bonds, pricing $350 million 30-year notes.

The next couple of days should remain busy, syndicate sources said. The day ended with a "decent tone," one source said, which if it holds overnight should lead to more deals Wednesday.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 12 North American high-grade index tightened by 5 basis points to a mid bid-asked spread level of 116 bps.

Advancing issues - which fell behind decliners by a narrow margin on Friday, breaking an eight session winning streak -- continued to trail for a second straight session on Tuesday, lagging by nearly four to three.

Overall market activity, reflected in dollar-volume totals, was nearly double that seen in Friday's sedate pre-holiday session.

Spreads in general were seen a bit tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year note rose 4 bps Tuesday to 3.48%.

Among the new issues, Airgas was a clear gainer, tightening solidly when it was freed for secondary dealings.

The new CVS Caremark and Puget Sound energy bonds were meantime little changed from their respective issue prices.

Among the established bonds, there was busy trading, at wider levels, in Kraft Foods Inc. paper, on the news that the Northfield, Ill.-based food processing giant had made a $16.7 billion bid for British confectioner Cadbury plc - planning to use debt to pay much of the acquisition cost.

Iberdrola unit sells via Rule 144A

Iberdrola Finance Ireland priced $2 billion of notes in two tranches later in the afternoon, an informed source said.

The $1 billion tranche of 3.8% five-year notes priced at a spread of Treasuries plus 145 bps.

The notes came at the tight end of price guidance for a spread in the 150 bps area, the source said.

A $1 billion tranche of 5% 10-year notes priced at Treasuries plus 160 bps. This tranche also came at the tight end of talk, in this case for a spread in the 165 bps area.

The notes were sold via Rule 144A.

The deal went "really well," a source who worked on it said. "We did the max the issuer could do, and it just went well. There's really not much more to say."

Bookrunners were Bank of America Merrill Lynch, Barclays Capital, Citigroup Global Markets and Goldman Sachs & Co.

The subsidiary of Spanish utility company Iberdrola SA is based in Dublin, Ireland.

Airgas upsizes

Industrial and specialty gas maker Airgas sold an upsized $400 million in 4.5% five-year senior unsecured notes at Treasuries plus 215 bps.

The size was initially $300 million.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital and J.P. Morgan Securities.

Proceeds will be used for general corporate purposes including repayment of revolving debt under a senior credit facility.

The company is based in Radnor, Penn.

AvalonBay sells two tranches

AvalonBay Communities sold $500 million of medium-term notes in two tranches of notes due 2017 and 2020.

The $250 million of 5.7% notes due 2017 priced at Treasuries plus 270 bps.

A $250 million tranche of 6.1% notes due 2020 also priced at 270 bps over Treasuries.

Bookrunners were Morgan Stanley & Co. and J.P. Morgan Securities.

Proceeds will be used to reduce debt under a $1 billion unsecured variable-rate revolver and to finance the repurchase of certain long-term debt pursuant to a tender offer. The balance will be used for general corporate purposes.

The developer and manager of apartment communities is based in Alexandria, Va.

CVS prices long bond

CVS Caremark sold $1.5 billion 6.125% 30-year senior notes at Treasuries plus 187.5 bps.

The active bookrunner was Barclays Capital. Bank of America Merrill Lynch, Bank of New York Mellon Capital, J.P. Morgan Securities Inc. and Wells Fargo Securities were also bookrunners.

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

The prescription and healthcare services company is based in Woonsocket, R.I.

Post-holiday surge to continue

Predictions that the days after the long Labor Day weekend would be busy came true on Tuesday when a healthy portion of new deals were priced.

"Things looked good today," one market source said. "We didn't see any [deals] that were too crazy. We had a couple over $1 billion."

Syndicate sources would not commit to when upcoming sales might price, but said there were things on the burner for the remainder of the week.

"We definitely have a calendar," a source at a smaller desk said. "We should see some of it tomorrow, but nothing too big."

Puget Sound Energy sells 30-year

Electric and natural gas utility Puget Sound Energy priced $350 million 5.757% 30-year notes at Treasuries plus 150 bps.

Bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities, RBS Securities and SunTrust Robinson Humphrey.

The company is based in Bellevue, Wash.

Questar Pipeline retaps notes

Questar Pipeline reopened its 5.83% notes due 2018 to add $50 million at Treasuries plus 197 bps, according to an FWP filing with the Securities and Exchange Commission.

Total issuance is now $250 million, including $200 million issued Jan. 15, 2008 at Treasuries plus 200 bps.

Bookrunners were Barclays Capital and SunTrust Robinson Humphrey.

Proceeds are going to repay $42 million in medium-term notes maturing in October, and for general corporate purposes.

The interstate natural gas pipeline subsidiary of Questar Corp. is based in Salt Lake City, Utah.

Airgas improves in aftermarket

When the new Airgas 4.50% notes due 2014 were freed for secondary dealings, a trader quoted the bonds as being "wrapped around 200 [bps]," while a second concurred that the bonds were at 201 bps bid, 200 bps offered.

That was well in from the 215 bps spread over comparable Treasuries at which the company had priced its $400 million issue - upsized from $300 million originally -- earlier in the session.

CVS, Puget Sound go nowhere

In contrast to Airgas' aftermarket appreciation, the traders saw Puget Sound Energy "wrapped around issue," in the words of one, with a second also pegging the $350 million of 1.50% bonds due 2039 at 150 bps bid, with no offered level seen. The bonds had priced at 150 bps over earlier in the day.

And one of the traders also saw CVS Caremark's $1.5 billion of 6.125% bonds due 2039 at 186 bps bid, 185 bps offered. That was just slightly tighter than the 187.5 bps over level at which the mega-deal had priced.

Other new deals unseen in secondary

The traders did not see any activity in the new Avalon Bay Communities, Questar Pipeline or Iberdrola Finance Ireland issues, which all came to market late in the session and did not move into the aftermarket.

Kraft widens out

Among the established names, Kraft's bonds widened around 20 bps across the board on the news that the company has made a bid for candy maker Cadbury, which has so far rebuffed Kraft's advances.

A trader saw its 6.125% notes due 2018, Kraft's busiest issue, having widened almost 25 bps to around the 160 bps level. Over $34 million of the bonds had changed hands by mid-afternoon, making it one of the busier issues of the day.

Another market source pegged the bonds just under the 160 bps level, calling that a 17 bps widening out on the day.

The source also saw Kraft's 6.5% notes due 2017 having gapped out more than 20 bps on the session to around the 145 bps mark, with over $30 million of the bonds traded.

Kraft is offering a combination of cash and its own stock for Cadbury, said it can fund the cash component of its bid with existing cash and with debt, adding that it has good access to the debt markets, and that any financing it undertakes will be done with an eye toward maintaining its investment-grade ratings.

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