Johnson Controls, Raytheon, Disney, John Deere sell multi-tranches; short-dated deals in

By Andrea Heisinger and Cristal Cody

New York, Nov. 29 - A handful of deals totaling $1 billion or more was priced in the high-grade bond market on Tuesday, sources said.

Johnson Controls, Inc., Raytheon Co., John Deere Capital Corp. and Walt Disney Co. were all in the market with funding needs.

This solid roster of issuers followed Monday's full slate of small deals.

Media conglomerate Disney priced the largest sale of the day at $1.6 billion in maturities of three- and 30-years.

John Deere Capital upsized its sale to $1.1 billion from $500 million of notes in two tranches. The three- and five-year paper sold at the tight end of guidance.

Johnson Controls also priced $1.1 billion, but in three tranches.

There was a $1 billion deal in three- and 30-year tranches from Raytheon. The defense contractor sold its debt in line with price talk.

One syndicate source said that issuers have been patiently waiting for a day when the market tone was "decent enough to sell off the bat," because borrowing rates are so low.

Issuers and syndicate desks thought the market looked good enough in the morning to announce the sales, although one source said he was "not so sure about" a brief rally recently in equities caused by news in Europe.

"I think guys are looking at all-in-yields and wanted to just get in and out and be done with their funding at these coupons," the source said. "I'm not sure I'm buying this rally, and I think investors are getting kind of worn out."

He added that the "30-year year really underperformed" for the day.

A long bond sold by Johnson Controls was priced wider than where it was talked while a 30-year tranche from Raytheon sold in line with guidance.

Overall trading volume jumped to more than $12 billion from $9 billion on Monday.

John Deere Capital's and Walt Disney's short-dated new paper was stronger over the day in the secondary market, traders said.

"A lot of people are looking at all the new issues," a trader said. "They're all trading a little bit better. Disney's in about 3 basis points from the break. It's a relatively positive tone today after yesterday being very strong as well."

The Markit CDX Series 17 North American high-grade index firmed 2 bps to a spread of 139 bps on Tuesday.

Bank and financial paper traded unchanged to 5 bps better going out.

Investment-grade bank and brokerage credit default swaps costs rose as investor confidence in the sector lessened, a trader said.

Bank CDS costs increased anywhere from 5 bps to 35 bps. Brokerage CDS costs rose 5 bps to 20 bps.

Treasuries were lower. The 10-year note yield rose 2 bps to 1.99%. The 30-year bond yield ended 3 bps higher at 2.96%.

Johnson sells $1.1 billion

Johnson Controls priced an upsized $1.1 billion of senior notes (Baa1/BBB+/BBB+) in three tranches, an informed source said.

The deal size was initially $750 million. There was about $2 billion in total demand for the debt.

The $400 million of 2.6% five-year debt priced at a spread of Treasuries plus 168 bps. The notes were priced tighter than whispered talk in the 175 bps area.

A $450 million tranche of 3.75% 10-year notes sold at 183 bps over Treasuries. The notes were sold tighter than whispered guidance in the 190 bps area.

There also was a $250 million tranche of 5.25% 30-year bonds priced at a spread of Treasuries plus 230 bps. This tranche was priced wider than initial talk in the 210 bps area, a source said.

Barclays Capital Inc. and Citigroup Global Markets Inc. were bookrunners.

The proceeds are being used for general corporate purposes, including repaying short-term debt.

Johnson Controls last priced a $1.6 billion deal in four tranches on Feb. 1.

The 4.25% 10-year notes from that sale priced at 90 bps over Treasuries, while the 5.7% 30-year bonds sold at 110 bps.

Johnson Controls' five-year notes were seen at 163 bps offered in the secondary market, a trader said.

The 10-year notes traded at 178 bps offered.

The diversified technology and industrial company is based in Milwaukee, Wis.

Disney sells two tranches

Disney priced $1.6 billion of notes (A2/A/A) in two tranches, an informed source said.

There was roughly $3 billion on the books for the trade, they said, including about $1.75 billion for the three-year notes and $1.25 billion for the 30-year bonds.

The $1 billion of 0.875% three-year paper sold at a spread of Treasuries plus 60 bps. This tranche sold tighter than guidance in the range of 65 to 70 bps.

A second tranche was $600 million of 4.125% 30-year bonds priced at a spread of Treasuries plus 125 bps. The notes sold at the tight end of talk in the 125 to 130 bps range.

Bookrunners were BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc.

The proceeds are being used for general corporate purposes.

Disney last priced $1.85 billion of debt in three tranches on Aug. 17. The 4.375% 30-year notes from that deal were priced at 87.5 bps over Treasuries.

In trading, Disney's three-year notes firmed to 58 bps bid, 55 bps offered, a trader said.

Another trader saw the notes going out tighter at 57 bps bid.

The new bonds due 2041 traded unchanged at 125 bps bid, 121 bps offered.

The entertainment and media company is based in Burbank, Calif.

Raytheon's $1 billion

Raytheon sold $1 billion of unsecured notes (A3/A-/A-) in two tranches, a source close to the deal said.

The $575 million of 1.4% three-year notes was priced at a spread of Treasuries plus 105 bps. These notes were sold at the tight end of talk in the 105 to 110 bps range.

A $425 million tranche of 4.7% 30-year bonds sold at a spread of 180 bps over Treasuries. The notes were priced in line with guidance in the 180 bps area.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

The proceeds will be used for general corporate purposes, including discretionary pension contributions.

Raytheon was last in the market with a $500 million sale of 4.4% 10-year notes on Nov. 12, 2009. It was priced at Treasuries plus 95 bps.

No secondary market activity was seen late afternoon on the three-year notes, while the 30-year bonds traded flat at 180 bps bid, 175 bps offered, a trader said.

The defense and homeland security technology company is based in Waltham, Mass.

John Deere upsizes

John Deere Capital priced an upsized $1.1 billion of notes (A2/A/A) in two parts, a market source said.

The size of the trade was more than doubled from $500 million, the source said.

The $600 million of 1.25% three-year notes sold at a spread of Treasuries plus 90 bps. The notes priced at the tight end of talk in the 92 bps area.

A second tranche of $500 million of 2% five-year notes priced at 110 bps over Treasuries. It was sold at the tight end of guidance in the 112 bps area.

Barclays Capital Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. were bookrunners.

John Deere's three-year notes were seen at 86 bps bid in trading, a source said.

The five-year notes traded at 109 bps bid.

The funding arm of the heavy equipment maker is based in Reno, Nev.

Canadian Pacific gives terms

Canadian Pacific Railway Co. sold $500 million of notes (Baa3/BBB-) in two tranches late on Monday, a market source said, and the terms were released in an FWP with the Securities and Exchange Commission.

A $250 million tranche of 4.5% 10-year notes priced at a spread of Treasuries plus 275 bps.

The second part was $250 million of 5.75% 30-year bonds sold at 300 bps over Treasuries.

J.P. Morgan Securities LLC was bookrunner.

The proceeds will be used to fund a voluntary prepayment of future pension contributions to the Canadian defined benefit pension plan.

In the secondary market, the 10-year notes firmed to 262 bps bid, 257 bps offered and the long bonds traded in to 282 bps bid, 277 bps offered, a trader said.

The railroad operator is based in Calgary.

Paul Deckelman contributed to this review

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