Morgan Stanley, BNY sell post-earnings; Xstrata, Oracle do megadeals; RPM new issue widens

By Aleesia Forni and Andrea Heisinger

New York, Oct. 18 - Two large financials were among a slate of large offerings in the high-grade bond market on Thursday as low yields on bank paper lured them in.

Morgan Stanley priced $2 billion of 10-year subordinated notes after posting better-than-expected third-quarter revenue numbers in the morning.

The Bank of New York Mellon Corp. sold $1.5 billion of bonds in three tranches, after announcing positive Q3 earnings on Wednesday. The sale included two tranches of three-year notes, one with a fixed rate and the other floating, along with five-year notes.

Toronto-based Xstrata Finance (Canada) Ltd. sold $4.5 billion of bonds in four maturities under Rule 144A and Regulation S. All of the tranches were priced 20 basis points to 30 bps tighter than initial guidance.

"I heard Xstrata went phenomenally well," a source away from the sale said.

Oracle Corp. tapped the market for $5 billion of five-year notes and 10-year notes, divided evenly between the tranches.

The day's smallest corporate offering was from RPM International Inc. which priced $300 million of 10-year notes after the size was increased from $250 million.

"We saw good demand - about $2 billion," a source who worked on the trade said.

The Province of Ontario sold a $2.25 billion offering of five-year bonds after the sale went overnight from Wednesday.

Friday is expected to be quiet, with nothing on the scale of issuance in the past two days.

"We shouldn't have any issues since Fridays are generally quieter," a syndicate source said. "Maybe a financial will jump in, but that's about it."

The Markit CDX Series 18 North American Investment Grade index widened 1 basis point to a spread of 91 bps on Thursday.

The new issue from RPM International widened 7 bps in the secondary market near the end of the session, while the fixed-rate notes from Bank of New York Mellon were unchanged to 2 bps tighter, according to a trader.

Xstrata Finance's new four-tranche deal was about 5 bps tighter, another source said.

Investment-grade bank and brokerage credit default swaps costs rose on the day.

Banks were wider. Bank of America's CDS costs widened 5 bps to 141 bps bid, 146 bps offered. Citi's CDS costs were also 5 bps wider at 140 bps bid, 145 bps offered. J.P. Morgan's CDS costs rose 3 bps to 102 bps bid, 107 bps offered. Wells Fargo's CDS costs were 3 bps wider at 79 bps bid, 84 bps offered.

Brokers also went wider. Merrill Lynch's CDS costs widened 4 bps to 140 bps bid, 150 bps offered. Morgan Stanley's CDS costs rose 10 bps to 198 bps bid, 203 bps offered. Goldman Sachs' CDS costs widened 8 bps to 165 bps bid, 170 bps offered.

Oracle does megadeal

Oracle sold $5 billion of bonds (A1/A+/A+) in two maturities, a source close to the trade said.

There was about $10.4 billion in total on the books, including $5.3 billion of the five-year notes and $5.1 billion for the 10-year tranche, the source said.

A $2.5 billion tranche of 1.2% five-year notes sold at a spread of Treasuries plus 45 basis points. The tranche sold tighter than talk in the 50 bps over Treasuries area.

The second part was $2.5 billion of 2.5% 10-year notes priced at a spread of 68 bps over Treasuries. The bonds sold at the low end of guidance in the 70 bps area.

Bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes, which may include stock repurchases, possible future acquisitions and repayment of debt, including 4.95% senior notes due April of 2013, of which there is $1.25 billion outstanding.

Oracle last priced bonds in a $3.25 billion offering in two parts on July 12, 2010. A 3.875% 10-year note was priced at 85 basis points over Treasuries.

The computer software and technology company is based in Redwood City, Calif.

Xstrata sells $4.5 billion

Xstrata Finance (Canada) priced $4.5 billion of notes (Baa2/BBB+/) in four maturities, a market source told Prospect News.

There was a $1.25 billion tranche of 1.8% three-year notes priced at a spread of Treasuries plus 140 bps. The bonds sold tighter than initial talk in the 160 bps area and at the low end of revised guidance in the 140 bps to 150 bps range.

A $1.75 billion tranche of 2.45% five-year notes sold at 170 bps over Treasuries. This was at a tighter level than initial talk in the 200 bps area and at the low end of revised guidance in the 170 bps to 180 bps range.

The $1 billion tranche of 4% 10-year paper priced at a spread of 220 bps over Treasuries. This was tighter than initial talk of 250 bps area and at the low end of revised guidance in the 220 bps to 230 bps range.

Finally, there was $500 million of 5.3% 30-year bonds sold at Treasuries plus 235 bps. The bonds priced at a level tighter than initial talk in the 262.5 bps area and within the revised range of 230 bps to 250 bps.

The bonds were priced under Rule 144A and Regulation S.

A trader saw the deal about 5 bps tighter in the secondary market.

"It's just a little cheap," the source said.

The company's notes due 2015 firmed 5 bps to 135 bps bid, 130 bps offered.

The notes due 2017 traded better at 165 bps bid, 160 bps offered. Another trader saw the five-year notes at 170 bps bid, 155 bps offered.

The third tranche of notes due 2022 traded in to 215 bps bid, 210 bps offered and later at 209 bps bid, 200 bps offered, the traders said.

The long bonds firmed to 231 bps bid, 226 bps offered, according to one trader. A trader at another desk saw the bonds at 235 bps bid, 220 bps offered.

Barclays, J.P. Morgan Securities LLC, Mizuho Securities USA Inc. and RBS Securities Inc. were bookrunners.

Xstrata was last in the U.S. bond market with a $3 billion offering in four tranches on Nov. 3, 2011.

The finance unit of mining company Xstrata plc is based in Toronto.

Morgan Stanley's $2 billion

Morgan Stanley was in the market with a $2 billion sale of 4.875% 10-year global medium-term subordinated notes (Baa2/BBB+/) priced at Treasuries plus 310 bps, a market source said.

Morgan Stanley & Co. LLC was bookrunner.

Proceeds are being used for general corporate purposes.

The financial services company is based in New York City.

BNY sells three tranches

Bank of New York Mellon priced $1.5 billion of notes (Aa3/AA/AA-) in three tranches, a source away from the offering said.

There was a $600 million tranche of three-year notes priced at a spread of 33 bps over Treasuries. The bonds sold tighter than talk in the 40 bps area.

A $400 million tranche of three-year floating-rate notes sold at par to yield Libor plus 23 bps.

The final part was $500million of five-year notes priced at a spread of 55 bps over Treasuries. The bonds also priced tighter than guidance in the 60 bps area.

The three-year fixed-rate notes traded at 33 bps bid, 31 bps offered late in the day, while the five-year notes were quoted at 53 bps bid, 50 bps offered.

A trader said at midday that the books on the three-year maturity were at about $1.2 billion.

Full terms of the sale were not available at press time.

Bookrunners were BNY Mellon Capital Markets, Morgan Stanley & Co. LLC, RBS Securities Inc. and UBS Securities LLC.

BNY was last in the market with a $500.1 million remarketing of five-year junior subordinated notes. The bank also priced $1.25 billion of bonds in two tranches on Feb. 13, which included a 1.2% three-year note sold at 85 bps over Treasuries.

The financial services company is based in New York City.

RPM upsizes

RPM International priced $300 million of 3.45% 10-year senior notes (Baa3/BBB-/BBB-) to yield Treasuries plus 165 bps, an informed source said.

A trader quoted the notes at 172 bps bid, 168 bps offered near the end of Thursday's session.

The size of the offering was increased from $250 million. The bonds were sold tighter than initial whispers in the 185 bps area, plus or minus 10 bps, and at the low end of revised talk in the 175 bps area, plus or minus 10 bps.

RBS Securities Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used to repay a portion of borrowings under a revolving credit facility.

RPM was last in the bond market with a $150 million reopening of 6.125% 10-year notes priced on May 24, 2011 at Treasuries plus 178 basis points.

The specialty chemical products maker is based in Medina, Ohio.

Ontario's five-years

The Province of Ontario priced $2.25 billion of 1.1% five-year notes (Aa2/AA-/) at mid-swaps plus 25 bps, or Treasuries plus 35.95 bps, a market source said.

Active bookrunners were Barclays, Citigroup Global Markets Inc., CIBC World Markets Corp. and Morgan Stanley & Co. LLC.

Cristal Cody contributed to this review

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