Union Pacific, Rabobank lead high-grade deal surge; AutoZone firms, Union Pacific mixed

By Cristal Cody and Aleesia Forni

Virginia Beach, Jan. 7 - Activity in the high-grade primary market heated up on Tuesday, as a wave of issuers priced new deals during the session.

Union Pacific Corp. brought a $1 billion issue of senior notes sold in three tranches during the session.

The sale included $300 million of 2.25% notes due 2019 priced at Treasuries plus 60 basis points and $400 million of 3.75% notes due 2024 sold at 90 bps over Treasuries.

There was also $300 million of 4.85% 30-year notes priced at Treasuries plus 100 bps.

American Tower Corp. was also in Tuesday's market, selling a $750 million two-part tap of its existing senior notes, according to a market source and an FWP filed with the Securities and Exchange Commission.

There was a $250 million tap of the company's 3.4% senior notes due 2019, which sold at Treasuries plus 110 bps, while a $500 million add-on to its 5% notes due 2024 priced with a spread of Treasuries plus 175 bps.

Meanwhile, AutoZone Inc. priced a $400 million issue of 1.3% senior notes due 2017 at Treasuries plus 55 bps.

Arizona Public Service Co. priced $250 million of 4.7% 30-year senior notes at Treasuries plus 83 bps, according to a syndicate source.

In a crossover trade on Tuesday, MDC Holdings Inc. brought a $250 million issue of senior notes due 2024.

The notes priced with a spread of Treasuries plus 256 bps.

The session also saw Rabobank Group sell $1.75 billion of 2.25% senior notes with a spread of Treasuries plus 70 bps, according to an informed source.

In other market action, both Sumitomo Mitsui Banking Corp. and European Investment Bank launched new deals during the session.

Demand for new issues in the high-grade market remains strong, with a number of the day's new issues tightening significantly from initial guidance.

The rush of issuance that the primary has seen so far this week is "not likely to slow" going into Wednesday's session, one source said.

"Conditions right now are just great," he added.

Bond spreads were flat to slightly wider over the day, according to market sources.

The Markit CDX North American Investment Grade series 21 index eased 1 bp to a spread of 64 bps.

In the secondary market, AutoZone's 1.3% notes due 2017 tightened 2 bps.

American Tower's two tranches of notes reopened earlier in the day traded unchanged from issuance, a trader said.

Arizona Public Service's 4.7% notes due 2044 firmed about 1 bp.

Union Pacific's three tranches of bonds were mixed in aftermarket trading, with the shorter-dated notes tighter and the long bonds 1 bp wider, a trader said.

Rabobank prices tight

Rabobank Group priced $1.75 billion of 2.25% senior notes on Tuesday (Aa2/AA-) with a spread of Treasuries plus 70 bps, according to an informed source.

The notes were sold at the tight end of talk.

Barclays, Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were the joint bookrunners.

The financial services company is based in Utrecht, the Netherlands.

Union Pacific three-parter

Union Pacific sold a three-part issue of senior notes (Baa1/A/) in tranches due 2019, 2024 and 2044 on Tuesday, according to a market source.

The new issue included $300 million of 2.25% notes due Feb. 15, 2019 sold with a spread of Treasuries plus 60 bps, or 99.869, to yield 2.277%.

The company also priced $400 million of 3.75% notes due 2024 at 90 bps over Treasuries.

Pricing was at 99.247 to yield 3.839%.

Finally, $300 million of 4.85% notes due June 15, 2044 priced at Treasuries plus 100 bps, or 99.373, to yield 4.89%.

All three tranches were sold at the tight end of talk.

In the secondary market, Union Pacific's 2.25% notes due 2019 tightened to 56 bps bid, 52 bps offered, according to a trader.

The 3.75% notes due 2024 traded flat at 90 bps bid, 87 bps offered.

The 4.85% bonds due 2044 eased to 101 bps bid, 98 bps offered.

Barclays, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were the joint bookrunners.

Proceeds from the offering will be used for general corporate purposes.

The Omaha-based railroad transportation company was last in the market with $500 million of 4.75% 30-year bonds priced with a spread of Treasuries plus 110 bps on Oct. 22.

American Tower add-ons

American Tower priced a $750 million two-part add-on to its existing senior notes (Baa3/BBB-/BBB), according to a market source and an FWP filed with the SEC.

The company priced a $250 million tap of its 3.4% senior notes due 2019 at 102.94 to yield 2.777%, or Treasuries plus 110 bps.

There was also a $500 million add-on to the company's 5% notes due 2024.

The notes priced with a spread of Treasuries plus 175 bps, or 102.458, to yield 4.691%.

American Tower's 3.4% notes due 2019 traded flat at 110 bps bid, 106 bps offered, a trader said. The 5% notes due 2024 headed out unchanged on the bid side at 175 bps bid, 172 bps offered.

Proceeds will be used to repay existing debt incurred under its 2012 and 2013 credit facilities, with any remaining proceeds being used for general corporate purposes, including the repayment of other debt.

The joint bookrunners were Barclays, Goldman Sachs, RBC Capital Markets LLC, RBS Securities Inc. and TD Securities (USA) LLC.

The original $750 million issue of 3.4% notes due Feb. 15, 2019 priced with a spread of Treasuries plus 196 bps on Aug. 14.

The $500 million 5% notes due 2024 were sold on the same date at Treasuries plus 230 bps.

The owner and operator of communications towers is based in Boston.

AutoZone new issue

AutoZone sold $400 million of 1.3% senior notes due 2017 on Tuesday at Treasuries plus 55 bps, according to a market source and an FWP filing with the SEC.

The notes (Baa1/BBB/) priced at 99.98 to yield 1.307%.

In the secondary market, AutoZone's 1.3% notes due 2017 tightened to 53 bps bid, 51 bps offered, according to a trader.

JPMorgan, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will be used for working capital, capital expenditures, new store openings, repurchases of common stock, acquisitions or general corporate purposes, which may include repaying, redeeming or repurchasing existing debt.

AutoZone is a Memphis-based automotive parts retailer.

Arizona Public's $250 million

Arizona Public Service sold a $250 million issue of 4.7% 30-year senior notes (Baa1/A-/A-) on Tuesday with a spread of Treasuries plus 83 bps, according to a syndicate source.

The notes priced at 99.6 to yield 4.725%.

Pricing came at the tight end of talk.

Arizona Public Service's 4.7% notes due 2044 traded at 82 bps bid, 80 bps offered late Tuesday, a trader said.

BofA Merrill Lynch, Citigroup Global Markets, UBS Securities LLC and U.S. Bancorp Investments were the joint bookrunners.

Proceeds will be used to repay commercial paper and replenish cash temporarily used to fund the company's acquisition of Southern California Edison Co.'s ownership in Units 4 and 5 of the Four Corners Power Plant and to finance the payment of other costs and expenses related to the acquisition.

The company also plans to use the proceeds to replenish cash used to re-acquire two series of its tax-exempt debt.

Arizona Public Service is an electric utility based in Phoenix and a subsidiary of Pinnacle West Capital Corp.

MDC crossovers

MDC Holdings priced a $250 million split-rated issue of 10-year senior notes (Baa3/BB+/BBB-) at par to yield 5.5% on Tuesday, according to a market source.

The yield came on top of yield talk that had narrowed from initial talk of 5.5% to 5.625%.

Citigroup Global Markets and U.S. Bancorp Investments were the joint bookrunners.

The company plans to use the proceeds for general corporate purposes, which may include repayment of its 5.375% senior notes due 2014 and its 5.375% senior notes due 2015.

The home building and financial services company is based in Denver.

European Investment launches

The European Investment Bank launched a $4.5 billion offering of five-year notes on Tuesday to yield mid-swaps plus 17 bps, according to an informed source.

The notes were launched in line with guidance.

Barclays, Goldman Sachs and HSBC Securities are running the books.

The lender for the European Union is based in Kirchberg, Luxembourg.

Sumitomo Mitsui four-parter

Sumitomo Mitsui Banking launched a $3 billion sale of senior notes (Aa2/A+/) in four tranches on Tuesday, according to a market source.

The company launched $750 million each of three-year floating-rate notes at Libor plus 43 bps and three-year fixed-rate notes at Treasuries plus 55 bps.

A $1 billion tranche of notes due 2019 was launched at 80 bps over Treasuries.

Finally, SMBC launched $500 million of 10-year notes at Treasuries plus 105 bps.

All four tranches launched tight of talk.

Bookrunners are Barclays, Citigroup Global Markets, Goldman Sachs, JPMorgan and Societe Generale.

Sumitomo Mitsui Banking is a Tokyo-based financial services company.

Bank/brokerage CDS costs mixed

Investment-grade bank and brokerage CDS prices were unchanged to lower, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 74 bps bid, 77 bps offered. Citigroup Inc.'s CDS costs were unchanged at 68 bps bid, 71 bps offered. JPMorgan Chase & Co.'s CDS costs ended flat at 65 bps bid, 70 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 38 bps bid, 41 bps offered.

Merrill Lynch's CDS costs ended flat at 76 bps bid, 83 bps offered. Morgan Stanley's CDS costs firmed 1 bp to 83 bps bid, 88 bps offered. Goldman Sachs Group, Inc.'s CDS costs tightened 1 bp to 89 bps bid, 92 bps offered.

Paul Deckelman and Paul A. Harris contributed to this review.

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