Travelers, Broadcom, Kilroy, Georgia-Pacific price; Broadcom 8 bps stronger in trading

By Andrea Heisinger and Cristal Cody

New York, Oct. 27 - Travelers Cos. Inc., Broadcom Corp., Kilroy Realty LP and Georgia-Pacific LLC each tapped the high-grade bond market Wednesday for various amounts.

Travelers was tied for the largest sale of the day at $1.25 billion in two tranches. The size had initially been announced at $1 billion.

There was a $700 million sale of notes in two tranches from Broadcom. It was the company's first debt offering and it took much of the day to price after being announced in a press release late on Tuesday.

Split-rated pulp and paper company Georgia-Pacific sold $1.25 billion of 10-year notes late in the afternoon.

A late edition to the roster of new deals was Kilroy Realty. The company announced and sold its upsized $325 million in five-year bonds in the afternoon.

"The market's still OK," a source said late in the afternoon. There was a slight downward turn on renewed fears over debt in other, mostly European, countries, he said.

Other than that, it was seen as a favorable day with three more corporate bonds hitting the market and pricing at the tight end of guidance. In some cases the deals were upsized on demand, he said.

"It's slow, but I don't think it's unexpected," the source said.

Issuance for the week has been as expected - from lower-rated issuers and smaller amounts.

"A lot of these people are taking advantage of the market and rates still," a syndicate source said. "Some of them just did a go call this morning. Look at Kilroy [Realty's late announcement]."

New deals improve

Secondary traders saw the debt from Broadcom and Travelers Cos. firming late afternoon.

Broadcom's notes due 2015 firmed as much as 8 bps in trading, sources said.

Elsewhere, the trading tone was weaker, according to sources.

The Markit CDX Series 14 North American investment-grade index eased on Wednesday 2 bps to a spread of 94 bps, according to Markit Group Ltd.

Overall investment-grade Trace volume fell 12% to under $13 billion, a market source said.

Treasuries ended Wednesday weaker for the sixth session, sending yields up, as the market anticipates the Federal Reserve's response on the asset buyback program ahead of next week's two-day meeting. Treasuries also were weaker on lukewarm response to the government's auction of $35 billion in five-year notes on Wednesday.

The yield on the 10-year benchmark Treasury note rose to 2.72% from 2.64%. The yield on the 30-year bond rose above 4% for the first time since August, ending the day up 6 bps to 4.06%.

"What's happening is a repricing of the market heading into this highly anticipated event," said George Goncalves, strategist at Nomura Securities International, Inc. "This is a profit-taking after a pretty big rally and some squaring up positions. People are rethinking the initial view of QE."

Travelers offers $1.25 billion

Travelers Cos. priced an upsized $1.25 billion of senior notes (A2/A-/A) in two tranches ahead of the market close, a source who worked on the sale said.

The size was increased from $1 billion. There was "more than $7 billion on the books combined" for the two tranches, another source said, describing it as "massive."

The $500 million of 3.9% 10-year notes priced at a spread of 120 bps over Treasuries. They were talked in the range of 120 to 125 bps and priced at the tight end of that range.

A $750 million tranche of 5.35% 30-year bonds sold at Treasuries plus 135 bps. They were sold at the tight end of price guidance in the range of 135 to 140 bps.

Bookrunners were Barclays Capital Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds are going toward general corporate purposes, including funding a tender offer for any and all of $1 billion outstanding subordinated debentures, and to pay a portion of outstanding debt maturing over the next few years.

Travelers last priced debt in a $500 million sale of 5.9% 10-year notes at 225 bps over Treasuries on May 28, 2009. The company doesn't have any recent outstanding 30-year bonds.

In the secondary market, both new tranches were tighter, sources said. The notes due 2020 firmed 4 bps on the offer side to 116 bps.

The bonds due 2040 were tighter at 132 bps bid, 130 bps offered.

The holding company for commercial, property and casualty insurance subsidiaries is based in New York City.

Georgia-Pacific's split-rated notes

Georgia-Pacific sold $1.25 billion of split-rated 5.4% 10-year senior notes (Ba2/BBB/BB+) late in the day to yield Treasuries plus 275 bps, a source away from the deal said.

The notes priced at the tight end of talk in the 287.5 bps area, a source said.

The notes were offered under Rule 144A and are guaranteed by domestic subsidiaries. The size was increased from a benchmark $500 million.

It was the first bond sale for the company since 2001, the source said.

Deutsche Bank Securities Inc. and JPMorgan were bookrunners.

Proceeds are going to repay debt and for other general corporate purposes.

No secondary activity was immediately seen on Georgia-Pacific's deal, which priced late in the day.

"Too early," one trader said.

The pulp and paper company is based in Atlanta.

Broadcom's upsized $700 million

Broadcom priced an upsized $700 million of senior notes (A2/BBB+) in two tranches late in the afternoon after the sale went overnight, a market source said.

A deal size of "about $600 million" had been announced in a press release late Tuesday.

The $300 million of 1.5% three-year notes priced at a spread of Treasuries plus 98 bps.

A second tranche of $400 million in 2.375% five-year notes priced at 118 bps over Treasuries.

The notes were sold under Rule 144A and Regulation S.

Bookrunners were Bank of America Merrill Lynch and JPMorgan.

Proceeds from the company's first debt offering are going to general corporate purposes.

Broadcom's short-dated two-tranche deal was stronger in the secondary market, traders said.

The notes due 2013, which priced at 98 bps over Treasuries, were seen tightening to 95 bps and then 94 bps on the offer side.

The notes due 2015 priced at 118 bps over Treasuries and tightened in trading 3 bps initially on the offer side and later were seen trading at 110 bps bid, 106 bps offered.

The maker of chips for broadcasting is based in Irvine, Calif.

Kilroy sells five-year

Kilroy Realty sold an upsized $325 million of 5% senior notes late in the day to yield 370 bps over Treasuries, a source close to the sale said.

The size was initially $250 million. There was no formal price talk because of the quick turnaround on the deal, a source said.

The notes (Baa3/BBB-) are guaranteed by Kilroy Realty Corp.

Bookrunners were Barclays Capital, Bank of America Merrill Lynch and JPMorgan.

Proceeds are being used to fund acquisitions and for general corporate purposes. Those include the repayment of outstanding long-term debt, borrowings under an unsecured revolving credit facility, repurchase of debt and potential acquisitions.

The office and industrial real estate owner and developer is based in Los Angeles.

Bank-broker CDS prices flat

After a drop on Tuesday, little change was seen in the costs of bank/broker credit default swaps and the cost of CDS to protect holders of brokerage house/investment bank paper, a source said.

Both were as much as 3 bps higher, the source said.

Paul Deckelman contributed to this review

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