Sanofi, Qwest, McDonald's among names tapping market despite high concessions; bonds firm

By Andrea Heisinger and Cristal Cody

New York, Sept. 27 - Sanofi SA was the big name in the market on a Tuesday that began with an upbeat tone on headlines and some successful deals the previous day.

The pharmaceutical company sold $1 billion of three-year paper after upsizing the deal from $750 million. The notes were priced at the tight end of guidance.

McDonald's Corp. priced an upsized $500 million of notes due 2022. The original deal size was $350 million.

Bemis Co., Inc. priced $400 million of 10-year notes. Insurance and reinsurance company XL Group Ltd. priced also priced $400 million of 10-year notes guaranteed by parent company XL Group plc. Full terms for the XL deal were not available at press time.

One of the lower-rated sales of the day came from Qwest Corp. The unit of CenturyLink, Inc. priced $950 million of 10-year notes to aid in a $1.5 billion note redemption.

There was a sovereign deal from Germany's KfW, which sold $3 billion of three-year notes.

American Airlines, Inc. priced $725.69 million of class A passthrough certificates. Proceeds will be used for equipment notes.

A split-rated sale from Newfield Exploration Co. was priced off the high-yield syndicate desk. The oil and gas company priced $750 million of notes due 2022.

The market tone had improved enough from Monday for companies to announce deals at the top of the day. Sanofi sold its bonds quickly, and a couple of companies jumped into the market after seeing that others had.

"The window was still open," a syndicate source who worked on a couple of the day's sales said.

New issue concessions remain high for some issuers, meaning that the more esteemed names are finding it less painful to sell debt at the moment.

The Sanofi deal had a new issue concession of about 20 basis points while others were paying much more.

"The lower-rated guys are paying up, no question," one source said.

By the end of the day, syndicate desks were taking calls with potential issuers for Wednesday. Unless there is more bad news from Greece or the euro zone, many will get go calls in the morning.

"The market's back - at least until the next Greece headline," one source said.

Overall trading volume jumped about 30% to more than $13 billion.

McDonald's notes firmed 3 bps, while Bemis' new deal tightened about 7 bps, traders said.

American Airlines' passthroughs and Newfield Exploration's notes also traded higher on the day.

The Markit CDX Series 17 North American Investment Grade index firmed 1 bp to a spread of 136 bps on Tuesday.

Treasuries ended mostly lower on Tuesday with the benchmark 10-year Treasury note yield up 9 bps at 1.97%. The 30-year bond yield also was higher on the day, up 8 bps at 3.07%.

Sanofi sells $1 billion

Sanofi priced an upsized $1 billion of 1.2% three-year notes (A2/AA-) at a spread of Treasuries plus 83 bps, a source close to the sale said.

They were priced at the tight end of guidance in the 85 bps area. The deal was upsized slightly from an initial $750 million.

There was about $3.5 billion on the books for the deal, which priced sharply tighter than initial talk in the 95 bps area, the source said.

"We went out a little conservative at 95 and then got it down to 85 before pricing at 83," he said.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Natixis Securities North America Inc. were the bookrunners.

Proceeds are being used for general corporate purposes, including repayment of existing borrowings.

The pharmaceutical company is based in Paris.

McDonald's upsizes

McDonald's priced an upsized $500 million of 2.625% notes due 2022 (A2/A/A) to yield 78 bps over Treasuries, an informed source said.

The deal size was increased from $350 million on high investor demand.

The bookrunners were Bank of America Merrill Lynch, Citigroup, J.P. Morgan Securities LLC, RBS Securities Inc. and SG Americas Securities LLC.

McDonald's last priced debt in a $400 million sale of 3.625% 10-year notes sold at 58 bps over Treasuries on May 17.

In the secondary market, the new notes firmed to 77 bps bid, 74 bps offered, a trader said.

The notes were seen trading tighter going out at 75 bps bid, 73 bps offered, another trader said.

The fast food chain is based in Oak Brook, Ill.

Bemis prices $400 million

Diversified packaging company Bemis sold $400 million of 4.5% 10-year senior notes (Baa1/BBB) to yield Treasuries plus 258 bps, an informed source said.

The active bookrunners were Bank of America Merrill Lynch, JPMorgan and Wells Fargo Securities LLC.

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

Bemis last priced debt in an $800 million sale of paper with five- and 10-year maturities on July 20, 2009.

The new notes tightened in trading to 251 bps bid, 246 bps offered, a trader said.

The diversified packaging company is based in Neenah, Wis.

Qwest sells 10-year notes

Qwest sold $950 million of 6.75% 10-year senior notes to yield 7%, a source close to the deal said.

The notes (Baa3/BBB-/BBB-) were priced at a spread of Treasuries plus 499.6 bps.

The bookrunners were Citigroup and JPMorgan.

Proceeds, along with $557 million raised from a retail note offering on Sept. 21, will be used to partially or fully redeem $1.5 billion of Qwest's 8.875% notes prior to maturity on March 15, 2012.

In secondary trading, the bonds were holding their issue spread "but saw a decent amount of flippers," a trader said.

A trader saw the notes at 98.375 bid, 99.00 offered in the secondary market.

Qwest is a telecommunications subsidiary of CenturyLink, based in Monroe, La.

AMR's passthroughs

American Airlines priced $725.69 million of 8.625% 10-year class A passthrough trust certificates, series 2011-2, at par to yield 8.625%, according to a syndicate source.

The certificates (Baa3/A-) have a final expected distribution date of Oct. 15, 2021 and a final legal distribution date of April 15, 2023. The initial average life is 6.7 years.

Morgan Stanley & Co. LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., Credit Suisse Securities (USA) LLC and Citigroup ran the books for the deal.

Proceeds are being used to purchase equipment notes for new aircraft.

The passthroughs traded higher at 100.25 in the late afternoon, a trader said.

The commercial airline is based in Fort Worth.

KfW's global notes

KfW priced $3 billion of 1.25% three-year notes (Aaa/AAA/AAA) at 99.624, according to an FWP filing with the Securities and Exchange Commission.

The bookrunners were Credit Suisse, Morgan Stanley and RBC Capital Markets.

The government-owned development bank is based in Frankfurt.

Newfield's split-rated deal

Newfield Exploration launched and priced an upsized $750 million issue of split-rated 5.75% senior notes due Jan. 30, 2022 (Ba1/BBB-/BB+) to yield 5.75%, according to an informed source.

The deal was upsized from $500 million. The yield printed at the tight end of the 5 7/8% price talk.

Joint bookrunner JPMorgan will bill and deliver. Wells Fargo was also a joint bookrunner.

In the secondary market, the notes were seen at 100.625 offered, a trader said.

The Woodlands, Texas-based independent oil and gas exploration and production company plans to use the proceeds to repay bank debt.

CDS cost flat to lower

Bank and brokerage credit default swaps costs were seen unchanged to mostly lower on Monday, a source said.

Bank of America's CDS costs were unchanged at 375 bps bid, 385 bps offered. JPMorgan's CDS costs fell 5 bps to 135 bps bid, 145 bps offered.

On the brokerage side, Merrill Lynch's CDS costs ended 15 bps lower at 425 bps bid, 445 bps offered. Morgan Stanley's CDS costs were 5 bps lower at 425 bps bid, 435 bps offered. Goldman Sachs' CDS costs closed unchanged at 280 bps bid, 288 bps offered.

Paul Deckelman and Paul A. Harris contributed to this review

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