Deutsche Bank, American Tower price; week’s supply tops $42 billion; Microsoft mixed; Visa flat

By Aleesia Forni and Cristal Cody

New York, Jan. 8 – The investment-grade bond market closed a turbulent week on Friday with eight issuers pricing $8.9 billion of bonds.

Issuers piled into the unusually active Friday session to take advantage of more stable market conditions following a solid jobs report.

The Labor Department reported that non-farm payrolls increased 292,000 in December, more than the 200,000 expected.

Deutsche Bank AG, American Tower Corp., Intesa Sanpaolo and Kroger Co. were among the names bringing new deals to the primary.

The flood of issuance caps what has been a highly volatility week for the market spurred by growing fears of a slowdown in China and falling oil prices.

Still, more than $42 billion of new investment-grade issuance came to market during the opening week of the calendar year, blowing away earlier predictions of a $25 billion to $30 billion week.

The Canadian primary market remained quiet in the first week of the year with corporate bond issuers staying on the sidelines.

“There are deals waiting to get done,” a syndicate source said. “It’s going to take a couple of days of stability in Canada before we get investors engaged. One day is probably not going to be enough.”

Credit spreads continued to widen on Friday.

The Markit CDX North American Investment Grade 25 index eased 3 basis points to close at a spread of 99 bps, 9 bps wider since the start of the week.

In the secondary market, bonds were mostly unchanged to softer.

Microsoft Corp.’s senior notes (Aaa/AAA/AA+) were mixed in late afternoon secondary trading.

Visa Inc.’s 3.15% notes due 2025 were unchanged as the session closed.

Whole Foods Market Inc.’s 5.2% senior notes due 2025 traded 2 bps weaker during the day.

Funds see outflows

Meantime, Lipper US Fund Flows reported an outflow of $1.12 billion from corporate investment-grade bond funds for the week ended Jan. 6.

This follows the previous week’s $1.6 billion of outflows and a calendar year of 2015 that saw $1.82 billion of net inflows.

Deutsche Bank two-parter

Deutsche Bank priced $1.75 billion of notes (A3/BBB+/A) on Friday in two tranches after dropping plans for an additional floating-rate tranche of five-year notes.

Included in the sale was $1 billion of 3.125% five-year notes priced at 99.954 to yield 3.135% with a spread of Treasuries plus 157 bps.

Pricing came at the tight end of guidance set in the Treasuries plus 160 bps area.

A $750 million tranche of 4.1% 10-year notes sold at 99.846 to yield 4.119%, or Treasuries plus 200 bps.

The notes sold on top of guidance.

A source noted that the deal attracted around $2.8 billion of orders, with around $1.3 billion of that for the five-year tranche and $1.5 billion for the 10-year tranche.

Deutsche Bank Securities Inc. was the bookrunner.

The bank is based in Frankfurt.

Simon prices tight

Simon Property Group LP sold $1.35 billion of senior notes (A2/A/A) in tranches due 2021 and 2026 on Friday, according to a source away from the trade.

There was $550 million of 2.5% five-year notes sold at 99.918 to yield 2.516%. The notes sold with a spread of Treasuries plus 95 bps.

Pricing came at the tightest side of the Treasuries plus 100 bps area guidance and inside initial talk set in the range of Treasuries plus 110 bps to 115 bps.

Also priced was $800 million of 3.3% 10-year notes at 99.401 to yield 3.371%, or Treasuries plus 125 bps.

Guidance was in the Treasuries plus 130 bps area, having firmed from the range of Treasuries plus 135 bps to 140 bps.

BofA Merrill Lynch, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are the joint bookrunners.

Proceeds will be used for general business purposes, including to retire outstanding mortgage loans, to fund the redemption of its 6.1% notes due 2016 and to help repay $4 billion of revolving credit facility borrowings.

The real estate investment trust for retail properties is based in Indianapolis.

American Tower new issue

American Tower sold a $1.25 billion two-part offering of senior notes (Baa3/BBB-/BBB) during Friday’s session, according to a market source and an FWP filed with the Securities and Exchange Commission.

A $750 million tranche of 3.3% five-year notes priced with a 175 bps spread over Treasuries. The issue sold at 99.853 to yield 3.331%.

And a $500 million tranche of 4.4% 10-year bonds priced at 99.713 to yield 4.435%, or Treasuries plus 230 bps.

Both tranches came at the tightest side of price guidance.

BNP Paribas Securities Corp., BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley are the bookrunners.

Proceeds will be used to repay debt under an existing credit facility and for general corporate purposes.

The owner and operator of communications towers is based in Boston.

Kroger offering

Kroger sold a $1.1 billion offering of senior notes (Baa2/BBB/BBB) in tranches due 2019, 2021 and 2026 on Friday, according to a market source and an FWP filed with the SEC.

The company sold $300 million of 2% three-year notes at 99.884 to yield 2.04%. The notes sold at Treasuries plus 85 bps.

Price guidance was set in the Treasuries plus 90 bps area, tightened from talk in the Treasuries plus 105 bps area.

A $300 million tranche of 2.6% five-year notes priced with a 105 bps spread over Treasuries. The issue priced at 99.868 to yield 2.628%.

The notes sold at the tightest side of guidance set in the Treasuries plus 110 bps area. Initially, talk was in the Treasuries plus 125 bps area.

Finally, $500 million of 3.5% 10-year notes priced at 99.763 to yield 3.528%, or Treasuries plus 140 bps.

The issue came at the tight end of the Treasuries plus 145 bps area guidance, which had firmed from initial talk in the Treasuries plus 160 bps area.

BofA Merrill Lynch, Mizuho Securities, U.S. Bancorp Investments Inc., Citigroup and RBC Capital Markets LLC are the bookrunners for all three tranches.

BNY Mellon Capital Markets LLC is also a bookrunner on the tranche due 2026.

Proceeds will be used to repay commercial paper and for general corporate purposes.

Kroger is a Cincinnati-based grocery retailer.

Boston Properties upsizes

Boston Properties LP doubled the original size of its new offering and priced the new issue around 20 bps inside initial price thoughts.

The company sold $1 billion of 3.65% senior notes with a spread of Treasuries plus 155 bps on Friday, according to a market source and an FWP filing with the SEC.

The notes (Baa2/A-/BBB+) were upsized from $500 million and sold at 99.708 to yield 3.685%.

Pricing came at the tightest side of the Treasuries plus 160 bps area, tightened from initial talk in the 175 bps area over Treasuries.

Bookrunners are BofA Merrill Lynch, Deutsche Bank, JPMorgan, Morgan Stanley, TD Securities (USA) LLC and U.S. Bancorp Investments Inc.

Proceeds will be used for general corporate purposes, including investment opportunities and debt reduction.

The issuer is a Boston-based REIT for office properties.

Black Hills prices

Black Hills Corp. sold a $550 million issue of senior notes (BBB/BBB+) in five- and 10-year tranches on Friday, according to an FWP filed with the SEC.

The sale included $250 million of 2.5% three-year notes priced at 99.877 to yield 2.543%, or Treasuries plus 135 bps.

A $300 million 3.95% tranche of 10-year notes priced at 99.697 to yield 3.987% with a spread of 185 bps over Treasuries.

Credit Suisse, U.S. Bancorp, MUFG and Scotia Capital (USA) Inc. are the joint bookrunners.

Proceeds will be used to help fund the acquisition of SourceGas Holdings LLC and its subsidiaries from Alinda Capital Partners and GE Energy Financial Services.

The energy company is based in Rapid City, S.D.

Alabama Power 30-year bonds

Rounding out the day’s new issues, Alabama Power Co. priced $400 million of 4.3% 30-year senior notes (A1/A-/A+) at Treasuries plus 140 bps on Friday, according to an FWP filing with the SEC.

Pricing was at 99.334 to yield 4.34%.

The bookrunners were Barclays, BNP Paribas Securities Corp., Goldman Sachs & Co. and MUFG.

Proceeds will be used to repay $200 million of the company’s series FF 5.2% senior notes due Jan. 15, 2016 and for general corporate purposes, including its continuous construction program.

The electric subsidiary of Southern Co. is based in Birmingham, Ala.

Microsoft mixed

Microsoft’s 3.125% notes due 2025 traded 3 bps weaker on Friday at 80 bps bid, according to a market source.

The company sold $3 billion of the notes on Oct. 29 at a spread of Treasuries plus 95 bps.

Microsoft’s 4.45% bonds due 2045 firmed 4 bps in secondary trading to 127 bps bid.

The bonds priced in a $3 billion offering at Treasuries plus 150 bps in the Oct. 29 sale.

Microsoft is a computer software company based in Redmond, Wash.

Visa unchanged

Visa’s 3.15% notes due 2025 headed out flat over the past two sessions at 87 bps bid, according to a market source.

The company sold $4 billion of the bonds (A1/A+) on Dec. 9 at Treasuries plus 97 bps.

The retail electronic payments network operator is based in San Francisco.

Whole Foods eases

Whole Foods’ 5.2% notes due 2025 eased 2 bps to 302 bps bid on Friday, a source said.

The grocer sold $1 billion of the notes (Baa3/BBB-) on Nov. 30 at a spread of Treasuries plus 300 bps.

The natural and organic foods supermarket is based in Austin, Texas.

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