Colgate hunts for record-low coupon, misses; Aflac prices add-on; new notes make trading gains

By Aleesia Forni and Andrea Heisinger

New York, July 27 - Colgate-Palmolive Co. was in the market with expectations of a record-low coupon, joining Aflac Inc. for an unusually busy Friday of investment-grade bond sales.

Colgate-Palmolive sold $500 million of notes due 2023, hunting for a lower 10-year rate than International Business Machines Corp. garnered only two days earlier. IBM broke the 2% barrier by pricing notes with a 10-year maturity at a 1.875% rate. In the end, Colgate-Palmolive's 1.95% coupon missed the record-low rate due to a fluctuation in the 10-year Treasury rate before the deal was priced.

"I know the Treasury [yield] really hurt them, and there was also push back from investors because the spread was so tight," a source away from the trade said.

Aflac did a quick reopening of notes due in 2017 to add $250 million. The original deal was priced in February, and the total outstanding is now $650 million.

About $8.75 billion of new bonds priced during the week, which was lower than the expected $10 billion to $15 billion range.

Two previous weeks saw lower volume due to earnings blackouts and unease about the economic health of European countries. That trend could change in the coming week, sources said.

"It's looking busy," a syndicate source said after the close Friday. "We're seeing $10 [billion] to $15 [billion]. I know we have four trades and hearing of a couple away from us."

The flow of deals should start on Monday with another handful Tuesday through Thursday.

"A couple of them are for M&A, but honestly, I know a lot are just opportunistic," the syndicate source said.

A market source also knew of a couple of deals that were confirmed for Monday or Tuesday depending on how the tone looks at the start of the week.

The syndicate source said that some of the opportunistic deals will be similar to those of Colgate-Palmolive or IBM where they were "coupon hunting" or coming in to take care of future financing needs while rates are low. Some companies are now able to issue because their earnings blackouts have lifted.

On the secondary side of the market, Aflac and Colgate-Palmolive each saw their notes come in slightly from where they priced, traders said.

Colgate-Palmolive was quoted as 3 basis points tighter near the end of the session in New York, a trader said.

Aflac was seen "a couple of basis points tighter," according to a New York-based source.

BB&T Corp. saw its recent issue trade better in the preferred stock secondary market, a source said.

Colgate prices 10-year notes

Colgate-Palmolive priced $500 million of 1.95% medium-term notes due 2023 (Aa3/AA-/AA-) to yield Treasuries plus 58 bps, an informed source said.

The deal was priced tighter than initial guidance in the 65 bps area and revised talk in the 60 bps area.

There was about $1.25 billion on the books, showing "healthy demand," a source away from the trade said.

The bookrunners were HSBC Securities (USA) Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds are being used to retire commercial paper that was issued for general corporate purposes.

The new notes were seen trading at 55 bps bid, 52 bps offered.

Colgate was last in the market less than three months ago on April 30 with a similar $500 million sale of 2.3% 10-year notes priced at 58 bps over Treasuries.

The consumer products company is based in New York.

Aflac's add-on

Aflac reopened its issue of 2.65% notes due Feb. 15, 2017 to add $250 million, according to an FWP filing with the Securities and Exchange Commission.

The notes (A3/A-/) were sold at a spread of Treasuries plus 130 bps.

The reopened notes were seen by a trader at 127 bps bid, 122 bps offered near the end of the day.

Total issuance is $650 million including $400 million priced on Feb. 8 at 185 bps over Treasuries.

Morgan Stanley was the bookrunner.

Proceeds are being used for general corporate purposes including capital contributions to subsidiaries if necessary.

The supplemental insurance company is based in Columbus, Ga.

BB&T stronger

Among recent deals in the preferred stock market, BB&T's $1 billion of 5.625% series E noncumulative perpetual preferred stock was "still not listed," a trader said, seeing the preferreds trade at $25.10.

The issue came upsized and at the tight end of talk on Tuesday.

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