Transocean, Safeway, Vornado Realty tap market; More deals possible; John Deere, AT&T firm

By Andrea Heisinger and Cristal Cody

New York, Nov. 30 - Following a solid run of issuance the first two days of the week, there were more multi-tranche deals being sold in the investment-grade bond market on Wednesday.

Transocean Inc. had the largest deal of the day at $2.5 billion in three tranches. The paper is guaranteed by parent company Transocean Ltd.

Food and drug retailer Safeway Inc. sold $800 million of notes in two tranches. It was the company's first bond sale since July 2010.

The only single-tranche debt sale of the day was from Vornado Realty LP. The New York City-based real estate investment trust priced $400 million of 10-year notes.

Wednesday ended on a high note as "the Dow ended up crazy due to the central bank," as a syndicate source said. The Dow Jones industrial average close up nearly 500 points as the Federal Reserve and other central banks announced they had taken steps to stop the spread of the euro zone debt crisis.

There are a few names looking at the market for Thursday, but "nothing like today," a source said.

"It's really going to depend on how the market looks in the morning," they added. "We had two names who are interested but we're going to have to make a call."

Another syndicate source said that they also had a couple of companies interested in pricing on Thursday.

Corporate bonds traded stronger on the day. The Markit CDX Series 17 North American high-grade index came in 11 basis points to a spread of 128 bps.

Trading picks up

Overall trading volume rose to nearly $13 billion on Wednesday.

Transocean's new tranches traded 15 bps to 20 bps tighter in the secondary market.

Vornado Realty's new notes edged wider, while Safeway's traded flat.

The new issues priced the previous day also were seen better in late afternoon trading.

John Deere Capital Corp.'s two tranches of notes traded 9 bps to 10 bps tighter on the day.

Raytheon Co.'s bonds firmed 3 bps to 5 bps.

Walt Disney Co.'s short-dated paper traded about 5 bps tighter.

Canadian Pacific Railway Co.'s 5.75% 30-year bonds traded in 25 bps by the afternoon session.

Investment-grade bank and brokerage credit default swaps costs fell on Wednesday, a sign of investor confidence, a source said.

Bank CDS costs traded 10 bps to 40 bps lower, and brokerage CDS costs moved 30 bps to 35 bps lower.

Telecom bonds traded "10 to 15 basis points better, depending on the name," one source said.

AT&T Inc.'s bonds narrowed 10 bps in the secondary.

Treasuries ended lower, sending yields up 6 bps to 9 bps on the long end. The 10-year note yield rose to 2.07% from 1.99%. The 30-year bond yield climbed to 3.05% from 2.96%.

Transocean sees huge demand

Transocean sold $2.5 billion of senior notes (Baa3/BBB-/BBB-) in three tranches, an informed source said.

There was roughly $12 billion in demand for the notes, the source said. The company could also come back to the bond market soon to sell another $1 billion or $1.5 billion, the source said.

The $1 billion of 5.05% five-year notes was priced at a spread of Treasuries plus 410 bps. They were sold tighter than talk of 415 bps.

A $1.2 billion tranche of 6.375% 10-year notes sold at Treasuries plus 430 bps. The tranche was priced tighter than guidance of 435 bps.

Finally, there was $300 million of 7.35% 30-year bonds priced at 430 bps over Treasuries. The bonds were sold tighter than talk of 435 bps.

Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Mitsubishi UFJ Securities (USA) Inc. were the active bookrunners.

About $659 million of the proceeds will be used to fund the expected repurchase of series B convertible notes that holders may require the repurchase of in December. Proceeds may also be used to refinance outstanding commercial paper as it comes due.

The debt is guaranteed by Transocean Ltd.

Transocean last priced bonds in a $2 billion sale in two tranches on Sept. 16, 2010. The 4.95% five-year notes from that offering priced at 350 bps over Treasuries while the 6.5% 10-year notes priced at 375 bps over Treasuries.

In the secondary market, the five-year notes were seen trading tighter at 392 bps bid, 382 bps offered, a trader said.

The 10-year notes firmed 15 bps to 415 bps bid, 405 bps offered.

The 30-year bonds also traded 15 bps tighter at 415 bps bid, 405 bps offered.

The offshore oil and gas drilling contractor is based in Zug, Switzerland.

Safeway's two tranches

Safeway sold $800 million of senior notes (Baa2/BBB/BBB) in two tranches, a market source said.

A $400 million tranche of 3.4% five-year notes priced at a spread of Treasuries plus 245 bps.

The second part was $400 million of 4.75% 10-year notes sold at Treasuries plus 270 bps.

Bookrunners were Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities LLC.

Proceeds, along with borrowings under a planned $700 million term loan, will be used to repay $800 million of outstanding 5.8% notes due Aug. 15, 2012 and for other general corporate purposes.

Safeway last priced debt in a $500 million sale of 3.95% 10-year notes on July 27, 2010 at 95 bps over Treasuries.

No secondary markets were seen on the five-year notes, while the 10-year tranche traded flat at 270 bps bid, 260 bps offered, a trader said.

The food and drug retailer is based in Pleasanton, Calif.

Vornado sells $400 million

Vornado Realty priced $400 million of 5% 10-year notes (Baa2/BBB/BBB) to yield 300 bps over Treasuries, a source close to the deal said.

The notes were priced in line with talk in the 300 bps area.

The sale was about "1.5 times oversubscribed," the source said. Regarding the notes pricing at the level they were talked, the source said that "in this environment we weren't going to take any more off of that."

"There was some push back" from investors, they said, adding that this was because "it was a REIT with covenants and because of some of the names associated with it."

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

Proceeds will be used for general corporate purposes, including repayment or repurchase of debt and for possible acquisitions.

The 10-year notes edged wider in the secondary market to 301 bps bid, 296 bps offered, a trader said.

The real estate investment trust is based in New York City.

John Deere better

John Deere Capital's 1.25% three-year notes firmed to 81 bps bid, 76 bps offered from Tuesday's pricing of 90 bps over Treasuries, a trader said.

John Deere Capital sold a total of $1.1 billion of notes (A2/A/A) in two parts.

The second tranche of 2% notes due 2017 firmed to 100 bps bid, 95 bps offered on Wednesday, the trader said.

The company sold $500 million of the five-year notes (A2/A/A) at 110 bps over Treasuries on Tuesday.

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

Raytheon tightens

Raytheon's two new tranches of bonds (A3/A-/A-) moved tighter in the secondary market on Wednesday.

A trader saw the 1.4% three-year notes at 100 bps bid, 95 bps offered. The notes priced in a $575 million offering at a spread of Treasuries plus 105 bps the previous day.

The tranche of 4.7% 30-year bonds traded better at 177 bps bid, 172 bps offered. Raytheon sold the $425 million tranche at a spread of 180 bps over Treasuries.

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

Disney stronger

Disney's $1 billion of notes (A2/A/A) sold on Tuesday also traded better on the day.

The 0.875% three-year notes firmed 5 bps from the issue price to 55 bps bid, 50 bps offered, a trader said.

Disney sold the notes a spread of Treasuries plus 60 bps.

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

Canadian Pacific firms

Canadian Pacific Railway's 5.75% 30-year bonds, which were sold at 300 bps over Treasuries, traded in 25 bps to 275 bps bid, 270 bps offered, a trader said on Wednesday.

Canadian Pacific Railway sold the bonds in a $500 million offering of U.S. dollar-denominated bonds (Baa3/BBB-) on Monday. On Tuesday, the company tapped the Canadian bond markets for C$125 million of 5.1% medium-term notes due Jan. 14, 2022 (DBRS: BBB).

The railroad operator is based in Calgary, Alta.

AT&T ends better

AT&T's 4.45% notes due 2021 traded 10 bps better on Wednesday to 162 bps bid, 152 bps offered, according to a trader.

The issue was sold on April 26, 2011 at Treasuries plus 115 bps.

The communications company is based in Dallas.

Paul Deckelman contributed to this review

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