Tyco International, Ontario sell bonds on quiet day; Goldman Sachs bond issue strong

By Andrea Heisinger and Cristal Cody

New York, April 28 - Tyco International Finance SA and the Province of Ontario priced bonds on an otherwise sleepy Wednesday in the high-grade bond market.

The industrial company Tyco priced $500 million of five-year notes that are guaranteed by parent company Tyco International Ltd. The sale came in more than two times oversubscribed.

Canadian province Ontario sold $500 million of three-year floaters.

There was also a split-rated deal on the emerging markets side from Kazakhstan's KMG Finance Sub BV.

Unlike the previous day, there wasn't much in the way of headlines to mess with the market.

The Federal Reserve meeting netted an announcement that key short-term interest rates would remain near zero for a while.

"That did nothing," a source said of the news' impact on the tone. "There was not much today."

Goldman Sachs Group Inc.'s bonds started the day strong and didn't let up in trading, according to a source.

"Goldman bonds are tighter today by 10 basis points to 20 bps," the trader said.

Back in the secondary, Tyco International Finance's new offering of 3.375% notes due 2015 was trading about 3 bps firmer, according to a source.

Also in trading, overall Trace volume jumped about 24% to $13.5 billion, a market source said.

In addition, the CDX Series 14 North American high-grade index firmed 3 bps to a mid bid-asked spread level of 94 bps, according to a source.

Elsewhere, Treasuries were weaker.

The yield on the 10-year benchmark Treasury note eased 7 bps to 3.76% on Wednesday. In addition, the yield on the 30-year Treasury bond was seen 6 bps weaker at 4.63%.

The final auction of the Treasury Department's weeklong sale of $129 billion of notes and inflation-indexed debt is on Thursday with the auction of seven-year notes.

"Japan's golden week holiday begins, so their lack of participation in the seven-year may hurt it a bit - the seven-year generally gets pretty good foreign participation," a source said Wednesday.

Tyco unit sells five-year notes

Tyco International Finance sold $500 million of 3.375% five-year unsecured notes (Baa1/A-/BBB+) by mid-afternoon to yield Treasuries plus 95 bps, according to a market source and an FWP filing with the Securities and Exchange Commission.

There was no official price talk for the deal, a source said, but it was whispered in the 100 bps area after looking at a couple of the company's outstanding bonds.

Late in the day, the five-year notes were seen tighter at 92 bps bid, 90 bps offered, another source said.

Bookrunners looked at the companies' bonds due October 2014 and January 2019, he said, and adjusted for the curve since they're long five-year notes.

There was about $1.3 billion on the books.

The deal is guaranteed by parent company Tyco International Ltd.

Citigroup Global Markets and Goldman Sachs & Co. ran the books.

Proceeds are being used to redeem 6.375% notes due in October 2011.

The diverse industrial company is based in Schaffhausen, Switzerland and Luxembourg.

Primary tone improves

Perhaps it was a lack of dire headlines about the economic health of European countries or Goldman Sachs, but the tone was up in the primary by the end of the day.

"It felt better," a source said. "I'm not sure why, but it did. There was nothing about Greece today. Maybe that was it."

New deals were mostly missing from the investment-grade primary for the day, with only two small sales getting done.

Issuance will likely not turn robust for another week or so following earnings season.

"There wasn't anything wrong with the market [today]," a syndicate source said of why new deals weren't plentiful. "It's just a lot of sovereign and EM stuff."

Many issuers from other countries have taken advantage of the relatively empty primary market during the previous few weeks as U.S. banks and companies announced first-quarter earnings.

More deals have been coming out of the woodwork in the past couple of weeks as those announcements come out.

"We should pick up some [next week]," he said.

Ontario prices floaters

The Province of Ontario sold $500 million of three-year floating-rate notes at par to yield three-month Libor plus 16 bps, according to an FWP filing with the SEC.

The notes (Aa1/AA-) are non-callable and have interest paid quarterly.

Bookrunners were Deutsche Bank Securities and UBS Ltd.

The issuer is based in Toronto.

KMG Finance sells split-rated deal

Kazakhstan's KMG Finance priced $1.5 billion of split-rated 7% 10-year notes (Baa2/BB+/BBB-) late in the day to yield 7.25%.

They have a spread of Treasuries plus 347.7 bps.

The deal initially also included a tranche of five-year notes, with both talked at 350 bps.

Citigroup Global Markets, Credit Suisse Securities and RBS Securities were bookrunners for the deal that was done under Rule 144A.

The unit of oil and gas exploration company KazMunaiGas is based in Astana, Kazakhstan.

Kommunalbanken gives terms

Kommunalbanken AS gave partial terms for its $1.5 billion of 2.75% five-year notes that priced on Tuesday, according to a release from the London Stock Exchange.

The notes (Aaa/AAA) were sold under Rule 144A and Regulation S.

Bookrunners were Deutsche Bank Securities, Bank of America Merrill Lynch, J.P. Morgan Securities and Mizuho Securities.

The bank provides low-cost funding to municipalities and is based in Oslo.

Goldman firms

A day after current and former Goldman executives were grilled before a Senate panel investigating the New York bank's role in investor fraud, the New York-based bank's outstanding high-grade debt firmed in the secondary, a trader said.

"Goldman's are tighter," the source said.

For example, Goldman's 5.375% notes due 2020 firmed to 202 bps bid, 199 bps offered.

"Yesterday, they were 220 bid."

The stronger tone was a reverse. Goldman's notes had widened nearly daily since civil fraud charges were filed April 16 by the SEC.

The strengthening was in line with other financial paper trading on Wednesday, according to the trader.

"Most of the other issues I saw were 10-15 bps tighter today from yesterday."

Advance Auto Parts volume up

A high-yield trader said that Advance Auto Parts Inc.'s 5.75% notes due 2020 "was the big-volume one today," seeing over $50 million of the Roanoke, Va.-based automotive parts and supplies retailer's new issue changing hands.

He saw the split-rated (Ba1/BBB-) bonds - which have attracted interest from both junk accounts and from high-grade investors - trading in a 100.75-101.25 range, with most of the day's trading around 101 and the last trades of the day around 100.875 bid. This compares to the 99.587 level at which the $300 million issue priced on Monday to yield 5.805%.

Another market source pegged the bonds at a spread of 193 bps over Treasuries versus the 200 bps spread seen when the bonds priced.

Banks and brokerage CDS costs declines

A trader who follows the credit-default swaps market said that the cost of protecting holders of bonds issued by major banks, such as Bank of America, Citigroup and JP Morgan Chase, against a possible event of default declined by between 5 bps and 8 bps on Tuesday, a sign of increased investor confidence in the banking sector.

He also saw the CDS costs for paper of major investment banking companies like Goldman Sachs and Morgan Stanley fall between 5 bps and 11 bps on the session.

Paul Deckelman contributed to this report.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.