Baxter, Teco, Johnson Controls price on good tone; little movement in secondary; Dow wider

By Andrea Heisinger and Cristal Cody

New York, March 4 - Baxter International Inc., Teco Finance Inc., Johnson Controls, Inc. and Rabobank Nederland each priced bonds on a solid Thursday in the investment-grade bond market.

Baxter sold $600 million of notes in three- and 10-year tranches. The deal priced early and both tranches came in line with initial guidance.

Teco Finance had one of the last sales to price for the day with its $550 million offering in two tranches. It was made up of a $250 million tranche of six-year notes and $300 million of 10-year notes.

Johnson Controls sold its $500 million deal in a single tranche of 10-year notes.

A late sale came from Rabobank Nederland, which priced its $1 billion of five-year notes after 5 p.m. ET. It was launched late in the day, a source said.

Market tone remained stable, as it has been for much of the week.

"I can't complain," a market source said.

New deals attracted some activity in trading but nothing to write home about, sources told Prospect News on Thursday.

"Some paper did trade but not a ton. It looks like people are still looking for yield," one trader said. "I'm seeing things unchanged to a little bit better generically."

On Wednesday, overall Trace volume fell about 19% to just under $13 billion, according to a source.

Meanwhile, a source said Thursday was "really kind of a sideways day" for investment-grade debt.

The financial sector, including paper from Bank of America Corp. and Goldman Sachs Group Inc., was little changed, but industrials, including Dow Chemical Co.'s debt, moved out, according to sources.

Also, the CDX Series 13 North American high-grade index was unchanged at a mid bid-asked spread level of 89 bps, according to a source.

Treasuries were mixed on Thursday, with the 10-year note and 30-year bond tighter 2 by basis points, while shorter dated government debt moved out.

The yield on the 10-year Treasury note tightened to 3.60%, and the yield on the 30-year Treasury bond firmed to 4.56%, according to a market source. But other Treasuries were slightly wider, including the five-year note, seen weaker by 1 bp at 2.27%.

Johnson Controls sells 10-years

Johnson Controls priced $500 million of 5% 10-year senior unsecured notes (Baa2/BBB) by mid-afternoon at 145 bps over Treasuries, an informed source said.

The deal priced well inside of initial talk for a spread in the 160 bps area, the source said.

Initially demand totaled about $5 billion but there were "a lot of [order] drops" once the bonds kept tightening, and after there was "north of $4 billion" on the books. The source also noted that the notes traded tighter in the gray.

The company has not issued in 3.5 years, he said, which drew some investors eager to buy from the infrequent issuer.

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

Proceeds will be used for general corporate purposes, including repayment of short-term debt incurred for working capital purposes.

The building, automotive and power technology company is based in Milwaukee.

Tone boosted, deals price tightly

New deals continued to price tightly and well oversubscribed near the end of the week, sources said.

One source said he "couldn't be happier" with how things went for the day, after working on two of the deals.

"The market felt great," he said, adding that the Johnson Controls sale went well - putting it mildly since the sale came 15 bps inside of initial guidance and was roughly 10 times oversubscribed.

The sale from Baxter International priced in line with guidance. Tightening of the same magnitude as Johnson's 10-year notes was not present, both due to the low spreads and because Baxter has more recent outstanding bonds to provide guidance.

Johnson last issued in 2006, a source said, while Baxter last sold bonds in the second half of 2009.

"We had a lot of positivity out there today," a syndicate source said. "Let's hope this keeps rolling."

There are no issues expected for Friday, but the coming week is expected to have a similar volume of new deals as the past one.

A deal of three-year notes announced earlier in the week by the Bank of England has either temporarily or permanently been shelved, a source away from it said. A bookrunner for the deal said it had no comment.

Teco sells $550 million

Teco Energy unit Teco Finance priced $550 million of unsecured notes (Baa3/BBB-) in two tranches in the late afternoon.

A $250 million tranche of 4% six-year notes priced at a spread of Treasuries plus 180 bps.

The $300 million of 5.15% 10-year notes sold at 160 bps over Treasuries.

The deal is guaranteed by Teco Energy Inc.

Citigroup Global Markets, J.P. Morgan Securities and Morgan Stanley & Co. ran the books.

Proceeds are going to retire floating-rate notes due in 2010 at maturity, repurchase debt securities in tender offers and for general corporate purposes.

The energy holding company is based in Tampa, Fla.

Baxter prices two tranches

Medical technology company Baxter International sold $600 million of senior unsecured notes (A3/A+/A) in two tranches by early afternoon.

The $300 million of 1.8% three-year notes priced at a spread of Treasuries plus 50 bps, which was in line with talk.

A $300 million tranche of 4.25% 10-year notes sold at 70 bps over Treasuries. This was also in line with price guidance.

Bookrunners were Credit Suisse Securities, Deutsche Bank Securities and Goldman Sachs & Co.

Proceeds are going for general corporate purposes, including debt refinancing.

The medical technology company is based in Deerfield, Ill.

Rabobank offers $1 billion late

Rabobank Nederland priced $1 billion of five-year notes (Aaa/AAA) late in the day at 95 bps over Treasuries, a source away from the deal said.

Full terms were not available at press time due to the lateness of pricing.

They were priced under Rule 144A.

Bookrunners were Barclays Capital, Citigroup Global Markets and Morgan Stanley & Co.

The food and agriculture financing institution is based in Utrecht, the Netherlands.

Dow wider

In secondary trading, Dow's 7.6% notes due 2014 widened 4 bps to 160 bps over Treasuries, a source reported.

In addition, the Midland, Mich.-based chemical and plastics manufacturer's 8.55% notes due 2019 moved out to 225 bps from 205 bps on Wednesday.

More spread to financial sector

While some new issues from Johnson Controls, Baxter International and Teco Finance traded on Thursday on top of a round of new deals in industrials on Wednesday, financials still hold the most interest, according to sources.

"There's a little more spread in them," a source said of financial high-grade debt versus industrial bonds. "They seem to have a better bid to them."

Goldman 'sideways'

Still, the financial sector was only marginally better on Thursday, according to sources.

"Things were sideways most of the day," a trader said after the market closed.

For example, Bank of America's outstanding 7.625% notes due 2019 firmed 1 bp to 205 bps, according to a source.

In addition, little change was seen in the new notes priced on Monday from Goldman Sachs, a trader said.

"The new Goldman was trading at 188, 187 all day long," the trader said. "It was generally better but more sideways than anything else."

New York City-based Goldman Sachs priced the 5.375% notes due 2020 at Treasuries plus 190 bps on Monday.

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