Kellogg, Cameron, Republic Services price as tone falters; Kellogg five-year notes firm 5 bps

By Andrea Heisinger and Cristal Cody

New York, May 14 - The number of new deals in the investment-grade bond market was smaller than expected on Monday, likely due to lingering headlines and fallout from the news of a giant trading loss at JPMorgan Chase & Co. that came to light late last week.

There were deals from Kellogg Co., Cameron International Corp., Republic Services, Inc. and Westar Energy Inc.

The largest offering came from Kellogg, which priced $1.45 billion of bonds in three tranches to fund an acquisition from Procter & Gamble. The company had said it would price up to $1.5 billion of paper.

There was an upsized $850 million offering of 10-year notes from Republic Services, which is using proceeds to redeem notes due 2017 issued by one of its subsidiaries.

Cameron International sold $500 million of notes due 2015 and 2022.

Westar reopened its deal of 4.125% first mortgage bonds due 2042 to add $300 million. It brings the outstanding amount to $550 million after the reopening was upsized from $250 million.

The market tone suffered over the weekend after estimates of $25 billion to $30 billion of new bonds pricing this week were made.

If the market tone improves overnight, there could be an uptick in deals for Tuesday, a source said. There were between 10 and 12 sales expected on Monday, and only a fraction of those priced.

"These deals did fine, so that's a good sign to move forward," a source who worked on two of the day's trades said of how oversubscribed Kellogg, Republic Services and Cameron were.

"Everyone's going to reexamine [the market] tomorrow."

Another source who worked on two of the day's deals called Tuesday "unclear' and said the number of issues would depend heavily on the tone at the open.

The Markit CDX Series 18 North American Investment Grade index eased 6 basis points to a spread of 115 bps on Monday.

Kellogg's three- and 10-year notes traded 1 bp tighter, while the five-year notes firmed 5 bps in secondary trading.

Westar Energy's reopened bonds traded 2 bps tighter going out.

The new bonds from Cameron and Republic Services traded mostly flat.

Treasuries rallied on concerns about Greece's political stability. The benchmark 10-year note yield dropped to 1.73% from 1.8%. The 30-year bond yield closed 8 bps lower at 2.92%.

Kellogg's $1.45 billion

Kellogg sold $1.45 billion of senior notes (Baa1/BBB+/BBB+) in three parts, an informed source said.

There was just under $7 billion of demand on the books, the source said.

The $350 million of 1.125% three-year paper priced at a spread of Treasuries plus 80 bps. The notes priced tighter than guidance of 25 bps less than the five-year note spread.

A second part was $400 million of 1.75% five-year notes sold at 115 bps over Treasuries. The notes were priced tighter than talk of 25 bps less than the 10-year note spread.

Finally, there was $700 million of 3.125% 10-year notes priced at 145 bps over Treasuries. The paper was priced in line with talk in the mid-100 bps area.

Barclays Capital Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC were the active bookrunners.

Proceeds are being used for general corporate purposes including financing a portion of the $2.7 billion Pringles acquisition from Procter & Gamble, along with related fees and expenses.

There's a mandatory call at 101 if the acquisition is not done by Dec. 31.

Kellogg was last in the market with a $500 million issue of 1.875% five-year notes priced at 100 bps over Treasuries on Nov. 14.

In the secondary market, Kellogg's notes due 2015 traded at 79 bps bid, a trader said.

The tranche of notes due 2017 firmed to 110 bps bid, 109 bps offered.

The notes due 2022 were seen in the late afternoon at 144 bps bid.

The cereal and food products company is based in Battle Creek, Mich.

Republic upsizes 10-year

Republic Services priced $850 million of 3.55% 10-year bonds (Baa3/BBB/BBB) to yield 180 bps over Treasuries, a source close to the trade said.

The size of the deal was increased from $750 million on about $2 billion of demand from investors. The paper was sold in line with guidance in the 185 bps area.

Deutsche Bank Securities Inc. and Wells Fargo were the active bookrunners.

Proceeds are being used to redeem $750 million of subsidiary Allied Waste North America, Inc.'s 6.875% senior notes due 2017 and for general corporate purposes.

Republic Services' notes due 2022 traded at 179 bps bid, 178 bps offered in the secondary market, a trader said.

The collector of non-hazardous solid waste is based in Phoenix.

Cameron sells in two parts

Cameron International priced $500 million of senior notes (Baa1/BBB+/) split evenly between tranches due 2015 and 2022, a source who worked on the deal said.

There was about $2 billion of demand on the books for the trade.

The $250 million of 1.6% three-year notes sold at a spread of Treasuries plus 125 bps. The paper priced tighter than guidance in the 150 bps area.

A second part was $250 million of 3.6% 10-year paper priced at 185 bps over Treasuries. The notes were priced in line with talk in the 187.5 bps area, the source said.

Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC ran the books.

Proceeds are being used to fund $270 million of the TTS Energy AS acquisition, with $83 million being used to repay outstanding debt. Any remainder will be used for general corporate purposes.

There's a mandatory call at 101 on the notes due 2015 if the acquisition is not done by Sept. 30.

Cameron's notes due 2022 were seen at 184 bps bid in the secondary market, a trader said.

The oil and gas pressure control and compression company is based in Houston.

Westar's reopening

Westar Energy reopened its issue of 4.125% 30-year first mortgage bonds (A3/BBB+/A-) to add an upsized $300 million, a market source said.

The deal size was increased from $250 million, the source said.

Total issuance is $550 million including $250 million priced at 110 bps over Treasuries on Feb. 27.

BNP Paribas Securities Corp., Citigroup and JPMorgan were the bookrunners.

Proceeds are being used to provide long-term funds to finance the company's ongoing capital program.

In the secondary market, the bonds traded tighter at 118 bps bid, 113 bps offered, a trader said.

The electric utility is based in Topeka, Kan.

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