Kroger, RBS bring new issues ahead of FOMC meeting; Kroger firms; Time Warner Cable tightens

By Cristal Cody and Aleesia Forni

Virginia Beach, Dec. 16 - Kroger Co. was in Monday's market with a $2 billion four-part sale of senior notes, kicking off what is expected to be a mostly quiet week for high-grade bonds.

The company sold $500 million of three-year floaters at par to yield Libor plus 53 basis points and $300 million of 1.2% three-year notes at Treasuries plus 55 bps.

Kroger also sold $500 million of 2.3% notes due 2019 at 80 bps plus Treasuries.

A $700 million tranche of 3.3% notes due 2021 sold at Treasuries plus 110 bps.

A source noted that the deal was "more than four times" oversubscribed.

The session also saw Royal Bank of Scotland Group plc bring a $2 billion issue of 6% subordinated tier 2 notes due 2023 at Treasuries plus 325 bps, according to a market source.

Meanwhile, Micron Semiconductor Asia Pte. Ltd. sold a $462.28 million issue of 1.258% notes due Jan. 15, 2019 during the session.

The primary is expected to be relatively muted for the remainder of the week, with the possibility of "maybe $5 billion" of total supply, a source said.

The Federal Open Market Committee's meeting on Tuesday and Wednesday will be the focus of the week, with some expecting the Federal Reserve to begin tapering its bond-buying program this month.

Bonds ended flat to about 1 bp tighter over the day, according to market sources.

The Markit CDX North American Investment Grade series 21 index firmed 1 bp to a spread of 69 bps.

In the secondary market, Kroger's new tranche of 2.3% notes due 2019 tightened 5 bps, while the grocery retailer's two other tranches traded about 1 bp to 3 bps better, a trader said.

In other trading, Time Warner Cable Inc.'s bonds continued to rally over the day after coming in late the previous week, according to market sources. Time Warner Cable's bonds have been volatile in secondary trading on reports that Comcast Corp. and Charter Communications Inc. are eyeing the company for an acquisition to gain market share.

Kroger prices tight

Kroger priced $2 billion of senior notes (Baa2/BBB/BBB) in four tranches, according to an informed source.

The deal included $500 million of three-year floaters priced at par to yield Libor plus 53 bps.

There was also $300 million of 1.2% notes due 2016 priced with a spread of Treasuries plus 55 bps, or 99.937 to yield 1.223%.

A $500 million issue of 2.3% notes 2019 was sold at 80 bps over Treasuries. Pricing was at 99.852 to yield 2.331%.

Finally, $700 million of 3.3% seven-year notes sold at 99.755 to yield 3.339%, or Treasuries plus 110 bps.

Kroger's 1.2% notes due 2016 traded at 54 bps bid, 51 bps offered, a trader said. The 2.3% notes due 2019 tightened to 75 bps bid, 70 bps offered. The 3.3% notes due 2021 firmed to 107 bps bid, 104 bps offered.

BofA Merrill Lynch, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the bookrunners.

Proceeds will be used to fund the merger of Kroger and Harris Teeter Supermarkets, Inc. and for general corporate purposes.

The Cincinnati-based grocery retailer was last in the U.S. bond market with $1 billion of senior notes priced in two tranches on July 18.

The sale included $600 million of 3.85% 10-year notes sold with a spread of Treasuries plus 132.5 bps and $400 million of 5.15% 30-year bonds priced at 155 bps over Treasuries.

RBS sells tier 2 notes

Royal Bank of Scotland Group sold $2 billion of 6% 10-year subordinated tier 2 notes (Ba2/BB+/BBB-) with a spread of Treasuries plus 325 bps on Monday, according to a market source.

Pricing was at 99.098 to yield 6.122%.

The notes sold tight of guidance, which was set in the area of Treasuries plus 330 bps.

Proceeds will be used for general corporate purposes.

RBS Securities Inc. was the global coordinator and structuring adviser and was joined by Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC as joint bookrunners and joint lead managers.

The financial services company is based in Edinburgh.

Micron's new issue

Micron Semiconductor Asia, a subsidiary of Micron Technology Inc., priced $462.28 million of 1.258% notes due Jan. 15, 2019 on Monday, according to an 8-K filing with the Securities and Exchange Commission.

Proceeds will be used to finance the purchase of equipment and other eligible goods and to finance the premium charged by Export-Import Bank of the United States for its guarantee of the scheduled installments of principal and interest on the 1.258% notes.

The notes are secured by a charge over some of Micron's equipment.

The notes will amortize in 10 consecutive semiannual installments beginning Jan. 15.

The semiconductor producer is based in Boise, Idaho.

Time Warner Cable firms

Time Warner Cable's 4% notes due 2021 (Baa2/BBB/BBB) tightened to 241 bps going out on Monday from an early morning quote of 245 bps bid, 235 bps offered, sources said.

The notes were quoted on Dec. 9 at 270 bps bid, 260 bps offered.

Time Warner Cable sold $1 billion of the notes on Sept. 7, 2011 at a spread of 210 bps over Treasuries.

The broadband communications company is based in New York City.

Bank CDS costs tighten

Investment-grade bank and brokerage CDS prices tightened, according to a market source.

Bank of America Corp.'s CDS costs firmed 1 bp to 80 bps bid, 84 bps offered. Citigroup Inc.'s CDS costs declined 1 bp to 74 bps bid, 78 bps offered. JPMorgan Chase & Co.'s CDS costs tightened 1 bp to 69 bps bid, 73 bps offered. Wells Fargo & Co.'s CDS costs firmed 1 bp to 42 bps bid, 46 bps offered.

Merrill Lynch's CDS costs firmed 1 bp to 82 bps bid, 89 bps offered. Morgan Stanley's CDS costs tightened 2 bps to 93 bps bid, 98 bps offered. Goldman Sachs Group, Inc.'s CDS costs declined 2 bps to 96 bps bid, 101 bps offered.

Paul Deckelman contributed to this review

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