Actavis megadeal prices; Exxon upsizes; Exxon trades; AT&T firms; Verizon mixed

By Aleesia Forni and Cristal Cody

Virginia Beach, March 3 – The investment-grade primary market was flooded with issuance on Tuesday, with a $21 billion megadeal from Actavis plc leading the charge.

Actavis saw blowout demand for what was the second largest bond offering on record, amassing roughly $80 billion of orders.

The ten tranches of the sale sold between 13 basis points to 30 bps tight of initial price thoughts.

Actavis sold the offering in order to help funds its $66 billion acquisition of Allergan, Inc.

The deal is likely to pave the way for what is expected to be a very active month for the investment-grade primary bond market.

“We will likely see more large M&A deals in the near future,” a market source said.

Exxon Mobil Corp. was another highlight of the busy session on Tuesday, attracting an order book that was nearly three times oversubscribed for its upsized $8 billion offering.

Away from the day’s two jumbo trades, Marsh & McLennan Cos., Inc., Charles Schwab Corp., European Investment Bank, Council of Europe Development Bank, Paccar Financial Corp. and KfW were among the issuers bringing new deals to the primary.

In total, more than $37.5 billion of paper priced during the session, making it the busiest day of 2015 and pushing the week’s total supply to roughly $40.8 billion.

Investment-grade bonds were mixed over the day following the strong deal calendar.

The Markit CDX North American Investment Grade index eased 1 bp to a spread of 62 bps.

Exxon Mobil’s notes traded about 1 bp tighter in aftermarket trading.

In other trading, AT&T Inc.’s notes (Baa1/BBB+/A) tightened 3 bps to 9 bps over the day.

Verizon Communications Inc.’s bonds (Baa1/BBB+/A-) were mixed in the secondary market.

Actavis sells $21 billion

Actavis Funding SCS priced $21 billion of senior notes (Baa3/BBB-/BBB-) on Tuesday in 10 tranches, according to a market source and an FWP filed with the Securities and Exchange Commission.

The deal is the second-largest bond offering on record behind Verizon Communications’ $49 billion offering, which priced in eight tranches on Sept. 11, 2013.

There was $500 million of 18-month floating-rate notes priced at par to yield Libor plus 87.5 bps.

The floaters were guided in the 90 bps area over Treasuries. Initial price talk was set in the 100 bps area over Treasuries.

A $1 billion tranche of 1.85% two-year notes priced at 99.954 to yield 1.874%, or Treasuries plus 120 bps.

The notes sold at the tight end of guidance set at 120 bps to 125 bps over Treasuries, tightening from initial price talk of 135 bps to 140 bps over Treasuries.

There was also $3 billion of 2.35% three-year notes priced at 99.951 to yield 2.367%, or Treasuries plus 130 bps.

The notes were guided at 130 bps to 135 bps over Treasuries after having firmed from earlier talk set at 145 bps to 150 bps over Treasuries.

A $500 million tranche of floaters due 2018 sold at par to yield Libor plus 108 bps.

The notes were guided at the Libor equivalent to the three-year fixed-rate notes.

The company also priced $3.5 billion of 3% five-year notes at 99.995 to yield 3.001%, or Treasuries plus 140 bps.

The notes priced at the tight end of guidance set at 140 bps to 145 bps over Treasuries. Initial price talk was set at Treasuries plus 160 bps to 165 bps over Treasuries.

A $500 million five-year floater sold at par to yield Libor plus 125.5 bps.

The tranche of notes was added following the deal’s announcement on Monday and was guided at the Libor equivalent to the five-year fixed-rate note.

A $3 billion tranche of 3.45% seven-year notes sold at 99.858 to yield 3.473%, or Treasuries plus 155 bps.

The note was guided in the 160 bps area, tightening from initial talk set at Treasuries plus 180 bps to 185 bps.

The company priced $4 billion of 3.8% 10-year notes at 99.645 to yield 3.843%. The notes sold with a spread of 175 bps over Treasuries.

Pricing was at the tight end of guidance set in the 180 bps area following initial talk in the 200 bps area over Treasuries.

A $2.5 billion tranche of 4.55% 20-year bonds sold with a spread of 190 bps over Treasuries. Pricing was at 99.57 to yield 4.583%.

The 20-year note was guided in the area of 195 bps over Treasuries. Initial talk was set at the Treasuries plus 220 bps area.

Finally, a $2.5 billion tranche of 4.75% 30-year bonds sold at 99.477 to yield 4.783%, or Treasuries plus 210 bps.

Price guidance for the 30-year tranche was set in the 215 bps area. The notes were initially talked in the area of 240 bps over Treasuries.

The notes are guaranteed by Warner Chilcott Ltd., Actavis Capital Sarl and Actavis, Inc.

J.P. Morgan Securities LLC, Mizuho Securities (USA) Inc. and Wells Fargo Securities LLC were the bookrunners on all of the tranches, along with additional bookrunners on specific tranches.

Proceeds will be used to support the acquisition of Allergan.

Actavis is a pharmaceutical company with headquarters in Dublin. Irvine, Calif.-based Allergan is a multi-specialty health care company.

Exxon upsizes

Also on Tuesday, Exxon Mobil priced an upsized $8 billion issue of senior notes (Aaa/AAA/) in seven tranches, according to a market source.

The sale included $1.6 billion of 1.305% notes due 2018 priced at par, or Treasuries plus 23 bps.

Pricing was at the tight end of the Treasuries plus 25 bps area guidance, which had firmed from initial talk set in the low-30 bps area over Treasuries.

A $500 million tranche of three-year floaters sold at par to yield Libor plus 5 bps.

The notes were talked at the Libor equivalent.

There was also a $1.5 billion 1.912% five-year note sold at par, or Treasuries plus 30 bps.

The notes were guided in the 35 bps area over Treasuries following talk set in the low 50 bps area over Treasuries.

The company also priced $1.15 billion of 2.397% seven-year notes at par with a spread of 45 bps over Treasuries.

Pricing was at the tight end of the 50 bps area guidance, having firmed from the mid-50 bps area over Treasuries initial talk.

A $500 million seven-year floater sold at par to yield Libor plus 37 bps. The notes were talked at the Libor equivalent to the seven-year fixed-rate note.

The company also sold $1.75 billion of 2.709% 10-year notes at par, or Treasuries plus 58 bps.

The notes sold at the tight end of guidance set in the 60 bps area over Treasuries. Initial talk was set in the low-70 bps area over Treasuries

Finally, $1 billion of 3.567% 30-year bonds sold at par to yield 85 bps over Treasuries.

Price guidance was set in the 90 bps area after firming from initial talk set in the Treasuries plus high-90 bps area.

Plans for a five-year floating-rate tranche of notes were dropped prior to the deal’s launch.

Citigroup Global Markets Inc., JPMorgan and Morgan Stanley & Co. LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes, including funding for working capital, acquisitions, capital expenditures, refinancing existing commercial paper borrowings and other business opportunities.

In the secondary market, Exxon Mobil’s notes due 2020 firmed to 29 bps bid, a trader said.

The tranche of notes due 2022 headed out at 44 bps bid in aftermarket trading.

The company’s notes due 2025 traded 1 bp better at 57 bps bid.

The bonds due 2045 were quoted at 84 bps bid in the secondary market.

The oil and gas company is based in Irving, Texas.

EIB new issue

European Investment Bank priced $4 billion of 1.25% notes (Aaa/AAA/) on Tuesday at mid-swaps minus 5 bps, an informed source said.

The notes sold in line with talk.

BNP Paribas Securities Corp., Citigroup Global Markets and Goldman Sachs & Co. were the bookrunners.

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

Charles Schwab two-parter

The primary also saw Charles Schwab sell $1 billion of senior notes (A2/A/A) in tranches due 2018 and 2025 on Tuesday, according to an informed source.

There was $625 million of 1.5% three-year notes sold at 99.874 to yield 1.543%, or Treasuries plus 47 bps.

The notes sold at the tight end of guidance set in the 50 bps area over Treasuries.

A second tranche was $375 million of 3% 10-year notes priced at 99.58 to yield 3.049%, or Treasuries plus 93 bps.

Pricing was at the tight end of the Treasuries plus 95 bps area guidance.

Bookrunners were Citigroup Global Markets, Goldman Sachs and Wells Fargo Securities.

Proceeds will be used for general corporate purposes.

Schwab is a brokerage and financial services company based in San Francisco.

KfW issue

KfW priced $1 billion of 0.5% global notes (Aaa/AAA/AAA) due Sept. 15, 2016 at mid-swaps minus 12 bps, according to an informed source and an FWP filed with the SEC.

The notes sold in line with talk set in the mid-swaps minus 12 bps area.

Pricing was at 99.845.

The bookrunners were Goldman Sachs and Morgan Stanley.

The German government-owned development bank is based in Frankfurt.

CoE global bonds

In other primary action, Council of Europe Development Bank priced $1 billion of 1.625% five-year global bonds (Aa1/AA+/AA+) at mid-swaps flat, an informed source said.

Price talk was set in the mid-swaps flat area.

The bookrunners were Daiwa, JPMorgan, RBC Capital Markets LLC and Societe Generale.

The financing and development institution for social projects in Europe is based in Paris.

Marsh & McLennan prices tight

Marsh & McLennan sold $500 million of 2.35% five-year senior notes (Baa1/A-) on Tuesday at Treasuries plus 75 bps, according to an informed source and an FWP filing with the SEC.

Pricing was at 99.92 to yield 2.367%.

The notes sold at the tight end of guidance set in the 80 bps area over Treasuries.

Citigroup Global Markets, HSBC Securities (USA) Inc., Barclays and Goldman Sachs were the joint bookrunners.

Proceeds will be used for general corporate purposes.

The professional services firm is based in New York City.

Paccar offering

Paccar Financial priced $500 million of 1.45% senior medium-term notes, series N, due March 9, 2018 on Tuesday at Treasuries plus 42 bps, according to an FWP filed with the SEC.

Pricing was at 99.906 to yield 1.482%.

The notes (A1/A+/) sold at the tight end of guidance set in the 45 bps area over Treasuries. Initial price talk was set in the low-50 bps area over Treasuries.

Proceeds will be used for general corporate purposes.

The bookrunners were Barclays, JPMorgan, Mizuho Securities USA Inc. and U.S. Bancorp Investments Inc.

The provider of retail and commercial truck financing for Paccar Inc. is based in Bellevue, Wash.

Idaho Power mortgage bonds

Idaho Power Co. priced $250 million of 3.65% 30-year first mortgage bonds (A1/A-/) at Treasuries plus 100 bps, according to an informed source and an FWP filed with the SEC.

Pricing was at 99.314 to yield 3.688%.

The notes sold at the tight end of guidance.

Proceeds will be used to repay the company’s $120 million of 6.025% mortgage bonds due July 2018 and to fund a portion of its capital requirements.

JPMorgan, Wells Fargo Securities and BofA Merrill Lynch were the bookrunners.

The electric utility is based in Boise, Idaho.

Element equipment notes

Element Financial Corp., along with subsidiaries Element Rail Leasing II LLC and Element Rail Leasing Canada LP, sold $405 million of secured portfolio railcar equipment notes, series 2015-1, on Tuesday, according to a company news release.

The deal included three classes of notes with an initial blended coupon of 3.46% and an expected weighted average life of 5.9 years.

The transaction was secured by a portfolio of 4,145 railcars.

Proceeds will be used to pay down amounts under the company’s senior credit facility.

Credit Suisse Securities (USA) LLC was the lead arranger and initial purchaser, while Barclays and Deutsche Bank Securities Inc. were additional initial purchasers.

Forward calendar builds

Solar Star Funding LLC and Caisse d'Amortissement de la Dette Sociale announced new deal plans on Tuesday.

Solar Star plans to sell $315 million of senior secured notes (Baa3/BBB/BBB-), series B, due June 2045 on Wednesday, setting initial guidance in the 4.25% area.

Barclays, Citigroup Global Markets and RBS Securities Inc. are managing the Rule 144A and Regulation S without registration rights sale.

Solar Star is owned by Des Moines-based utility holding company Berkshire Hathaway Energy Co.

Cades set price talk for its planned offering of three-year notes in the mid-swaps plus 5 bps area during the session, a market source said.

The notes will be sold via Rule 144A and Regulation S.

Citigroup Global Markets, Deutsche Bank Securities, JPMorgan and Societe Generale are bookrunners for the Paris-based debt agency’s deal.

AT&T tightens

AT&T’s 3.9% notes due 2024 firmed 6 bps to 132 bps bid on Tuesday, a source said.

The company sold the notes in a $1 billion offering on March 5, 2014 at Treasuries plus 125 bps.

AT&T’s 4.8% bonds due 2044 tightened 9 bps to 206 bps bid, according to the market source.

AT&T sold $2 billion of the bonds on June 3, 2014 at a spread of Treasuries plus 140 bps.

The telecommunications company is based in Dallas.

Verizon mixed

Verizon’s 4.15% notes due 2024 eased 2 bps to 127 bps bid, a market source said.

The company sold $1.25 billion of the notes on March 10, 2014 at Treasuries plus 140 bps.

Verizon’s 3.5% notes due 2024 firmed 1 bp to 124 bps bid, the source said.

Verizon sold $2.5 billion of the notes on Oct. 22 at 135 bps over Treasuries.

The telecommunications company is based in New York City.

Bank/broker CDSs flat to lower

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

Bank of America Corp.’s CDS costs were 1 bp lower at 64 bps bid, 67 bps offered. Citigroup, Inc.’s CDS costs were flat at 72 bps bid, 76 bps offered. JPMorgan Chase & Co.’s CDS costs were down 1 bp to 61 bps bid, 64 bps offered. Wells Fargo & Co.’s CDS costs were unchanged at 40 bps bid, 44 bps offered.

Merrill Lynch’s CDS costs fell 1 bp to 66 bps bid, 69 bps offered. Morgan Stanley’s CDS costs were unchanged at 72 bps bid, 76 bps offered. Goldman Sachs Group’s CDS costs were also flat at 81 bps bid, 85 bps offered.

Paul Deckelman contributed to this review.

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