TD Bank, Xstrata, Colgate, Mattel sell as window opens; Mattel tightens, TD firms 13 bps

By Andrea Heisinger and Cristal Cody

New York, Nov. 3 - The primary market filled with new deals on Thursday as issuers saw a window open between the Federal Reserve meeting the day before and unemployment numbers coming out on Friday.

The string of debt sales included Cigna Corp., Mattel, Inc., Becton, Dickinson & Co., Xstrata Finance (Canada) Ltd., Boston Properties LP, Toronto-Dominion Bank, Colgate-Palmolive Co., Cargill Inc. and Tucson Electric Power Co.

The largest deal of the day was from Canada's Xstrata Finance, which priced $3 billion in four parts.

Another sale from Canada came from Toronto-Dominion Bank, which priced $1.85 billion of notes. The bank priced a new two-year floating-rate note and reopened a five-year note.

Colgate-Palmolive sold $1 billion of notes with maturities of 2014, 2017 and 2021.

Boston Properties upsized its deal of seven-year notes from $400 million to $850 million.

Utility Tucson Electric Power sold $250 million of 10-year notes that sold at the tight end of guidance.

Cargill sold $500 million of 10-year notes, and Becton Dickinson priced $1.5 billion of five- and 10-year notes while Cigna sold debt with five-, 10- and 30-year tranches.

Full terms for these three deals were unavailable at press time.

Issuers previously waiting on the sidelines were ready to go when the market opened, a market source said. Many had waited until after the Federal Reserve's Federal Open Market Committee on Wednesday and also wanted to get debt priced before October unemployment numbers are released on Friday.

"People just went for it," the source said.

A syndicate source said: "If unemployment [numbers] weren't coming out, I think we'd have seen more. I think we'll have something more tomorrow, but not like today."

Another syndicate source said, "There could be a deal or two tomorrow, but it's not going to be like today."

The source added that he had a couple of calls with interested issuers, but it depends on how the market looks in the morning.

Corporate bonds firmed in secondary trading, though volume was lower. The Markit CDX Series 17 North American high-grade index firmed 4 basis points to a spread of 121 bps.

Overall trading volume fell to about $10.6 billion from $12 billion the previous day.

TD's new notes due 2016 sold earlier in the day traded about 13 bps tighter.

The new tranches from Mattel and Colgate-Palmolive also traded stronger.

Treasuries fell as stocks improved on the potential that the Greek referendum on the euro bailout plan will be canceled. The 10-year note yield rose to 2.07% from 1.98%. The 30-year bond yield increased 11 bps to 3.12%.

Xstrata Finance sees demand

Xstrata Finance (Canada) priced $3 billion of debt (Baa2/BBB) in four parts after the sale was increased from a benchmark size of $500 million, an informed source said.

There was about $11 billion on the books for the trade, the source said.

The $800 million of 2.85% three-year notes were priced at a spread of Treasuries plus 250 bps. The notes were sold at the low end of talk in the 255 bps area, plus or minus 5 bps.

A $700 million tranche of 3.6% five-year notes priced at a spread of 37.5 bps over Treasuries. It was sold at the tight end of talk in the 275 bps area, plus or minus 5 bps.

The largest part was $1 billion of 4.95% 10-year notes priced at Treasuries plus 290 bps. The notes sold at the low end of talk in the 295 bps area, plus or minus 5 bps.

Finally, there was a $500 million tranche of 6% 30-year bonds sold at Treasuries plus 300 bps. The securities were priced at the low end of guidance in the 305 bps area, plus or minus 5 bps.

Bookrunners were Barclays Capital Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

The notes were priced under Rule 144A and Regulation S.

The proceeds will be used to repay debt and for general corporate purposes.

The debt is guaranteed by Xstrata plc, Xstrata (Schweiz) and Xstrata Canada Financial Corp.

Xstrata Finance last priced $500 million of 6.9% 30-year bonds at Treasuries plus 230 bps on Nov. 13, 2007.

The finance unit of mining company Xstrata plc is based in Toronto, Ontario.

TD Bank sells two tranches

Toronto-Dominion Bank priced $1.85 billion of senior medium-term notes (Aaa/AA-/AA-) in two tranches, a market source said.

The $1.25 billion of two-year floating-rate notes was priced at par to yield Libor plus 45 bps.

TD Bank also reopened its 2.375% five-year notes to add $600 million. The notes were priced at a spread of Treasuries plus 117 bps.

The total issuance was $2.1 billion, including $1.5 billion priced on Oct. 12 at Treasuries plus 135 bps.

TD Securities (USA) LLC was agent.

In trading, the notes firmed to 104 bps bid, 100 bps offered, a trader said.

The bank and financial services company is based in Toronto.

Mattel's $600 million

Toy company Mattel sold $600 million of paper (Baa1/BBB+/A-) split evenly between two maturities, a market source said.

The $300 million of 2.5% five-year notes was priced at a spread of Treasuries plus 165 bps. The notes were whispered in the 185 bps area and priced tighter than that.

The second part was $300 million of 5.45% 30-year bonds sold at a spread of 240 bps over Treasuries. It was priced tighter than whispered guidance in the 255 bps area.

Active bookrunners were Bank of America Merrill Lynch and Morgan Stanley & Co. LLC.

The proceeds, together with cash on hand, will be used to buy HiT Entertainment for $680 million in cash and for general corporate purposes.

Mattel last priced bonds in a $500 million sale in two parts on Sept. 24, 2010. The 6.2% 30-year bonds from that deal were priced at 250 bps.

In the secondary market, the notes due 2016 firmed to 158 bps bid soon after pricing, a trader said.

The bonds due 2041 also firmed early to 237 bps bid.

Going out, the five-year notes traded tighter at 155 bps bid, 150 bps offered, another trader said.

The bonds due 2041 were seen at 237 bps bid, 232 bps offered.

The toy company is based in El Segundo, Calif.

Boston Properties upsizes

Boston Properties priced an upsized $850 million of 3.7% seven-year notes (Baa2/A-/BBB) to yield Treasuries plus 225 bps, an informed source said.

The size was increased from $400 million.

Bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC.

The proceeds will be used to repay, redeem and repurchase debt, including 2.875% exchangeable senior notes due in 2037 or other securities with near-term maturities and repurchase rights; and for general corporate purposes, including investments.

The real estate investment trust is based in Boston.

Colgate-Palmolive $1 billion

Colgate-Palmolive sold $1 billion of notes (Aa3/AA-/AA-) in three tranches, an informed source said.

A $300 million tranche of 0.6% three-year notes was priced at a spread of Treasuries plus 35 bps.

The $400 million of 1.3% five-year paper sold at Treasuries plus 50 bps.

Finally, there was a $300 million tranche of 2.45% 10-year notes sold at a spread of Treasuries plus 55 bps.

The bookrunners for the three-year notes were Goldman Sachs & Co., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Those for the five-year notes were BNP Paribas, Citigroup Global Markets Inc., HSBC and J.P. Morgan.

The bookrunners for the 10-year tranche were Citigroup, Goldman Sachs, J.P. Morgan and Morgan Stanley.

The company last sold $500 million of notes in two parts on April 29, including 1.25% three-year notes at 30 bps over Treasuries.

In trading, the notes due 2014 tightened to 32 bps bid, 31 bps offered, a trader said.

The notes due 2016 traded soon after pricing at 48 bps bid, 46 bps offered, a trader said.

Another trader saw the notes firmer at 45 bps offered.

The notes due 2021 were seen at 54 bps bid, 52 bps offered.

The consumer products company is based in New York City.

Tucson Electric prices tight

Tucson Electric Power sold $250 million of 5.15% 10-year notes (Baa3/BBB-/BBB-) to yield Treasuries plus 312.5 bps, a source close to the trade said.

The notes sold at the tight end of guidance in the range of 312.5 bps to 325 bps, the source said.

Credit Suisse Securities (USA) LLC, Scotia Capital Inc. and Wells Fargo Securities LLC were bookrunners.

The proceeds will be used to purchase or redeem up to $150 million of tax-exempt variable-rate debt with maturities from 2018 to 2020; to redeem an outstanding series of fixed-rate debt; repay amounts under a revolving credit facility; and for general corporate purposes.

The utility is based in Tucson, Arizona.

EQT gives terms

EQT Corp. priced $750 million of 4.875% 10-year notes (Baa2/BBB/BBB) to yield Treasuries plus 300 bps, according to an FWP with the Securities and Exchange Commission.

The bookrunners were Barclays Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and SunTrust Robinson Humphrey Inc.

The integrated energy company is based in Pittsburgh, Penn.

Wild ride for Jefferies

A junk-bond trader said the most interesting situation of entire day was neither the high-yield calendar nor was it MF Global.

It was Jefferies, as the New York-based investment bank's nominally high-grade ponds gyrated wildly, some of them trading down to levels normally associated with distressed debt.

But just like the company's shares, the bonds bounced off their badly oversold bottom levels.

A trader declared, "The bonds just got crushed."

He was referring to one issue: the 8½% notes due 2019, which fell as much as 23 points on the day from Wednesday's close above 103 bid. The notes went all the way down to 82 in intraday trading before coming back above 90 to close in the mid-90s, still down at least 8 points.

More than $50 million of those bonds changed hands.

Jefferies' issues were easily the most actively traded bonds of the day, with some racking up even heftier volume totals.

A market source said the company's 5 1/8% notes due 2018 zoomed to an astonishing $262 million traded by the time they closed at 88 bid.

Its shortest issue, the 7¾% notes due March 15, 2012, saw turnover of more than $124 million, ending around 98¾ bid, which was well down from week-earlier levels of about 1021/2. And that was down even from Wednesday's close at just below 101.

A high-yield trader said that those kind of movements - particularly among the shorter-dated paper - pushed yields up well above average junk yields, which currently hover a little more than 8%. This signals a possible buying opportunity.

"I spent a good portion of the morning talking to high-yield people, saying 'You gotta take a look at this,' " the market source said.

He said the company's 8½% notes due 2019 were closing around 95 to 96, after having traded as low as 82 earlier in the morning.

That low represented a yield of 12.17%, while the eventual close was still a hefty 9¼% to 9½% yield.

He saw the 6 7/8% notes due 2021 get as low as 85, or a 9.30% yield, while the bonds bounced off their lows to close at 87 bid for a 8.95% yield.

The 6.45% notes due 2027 were down to 77 at its low point, or a 9.27% yield. Its close at 79 yielded 8.98%. Unlike some of the other Jefferies bonds, these notes were not heavily traded with just one round-lot transaction seen all day.

Further out on the curve, Jefferies' 6¼% notes due 2036 hit a low of 74 bid on an 8.88% yield. The close at 78 bid yielded 8.38%.

In falling from recent levels, which for the shorter- and medium-term bonds were in most places at or above par, the market "went right by crossover, right by the mainstream high yield guys," a source said.

Some Jefferies debt even hit the traditional benchmark for distressed issues, meaning spreads of more than 1,000 basis points.

For instance, a market source saw the March 2012 bonds' yield going home above 11½%, and with short-term Treasuries yielding practically nothing, a spread of almost 1,150 bps.

A trader characterized the latter bond as one of the most volatile in the whole capital structure, plunging as low as 86 bid during the day, though not on a large trade, before recovering to end in the upper 90s.

The bonds seemed to be moving in tandem with Jefferies' stock; its New York Stock Exchange-traded shares, which have been getting hit hard all week, fell as much as 20% in intra-day trading.

That was before coming off their lows, briefly moving into positive territory, then ending down 26 cents, or 2.12% on the day, at $12.01.

Volume of 45.8 million shares was nearly 18 times the norm.

While the stock managed to cut its losses, those shares still trade well below the nearly $15 level seen as recently as last Friday.

As to what was hammering those bonds and shares down, a trader said it was a combination of factors, including market unease over whether Jefferies has any kind of substantial exposure to deeply troubled European debt.

The ratings downgrade on Thursday from the small but influential Egan-Jones agency, which rates the creditworthiness of financial companies, also had an effect.

A junk trader also mentioned Jefferies' prominent role as the lead underwriter on this past summer's $325 million bond issue by the beleaguered and now bankrupt MF Global Holdings Inc.

The trader cited investor fears that the investment bank might conceivably find itself "caught in the crossfire" of possible bondholder legal action against MF Global, which also faces severe regulatory and legal scrutiny over allegedly missing client funds.

A Jefferies spokesman on Thursday declined comment about the latter potential scenario.

But, the company has taken pains to reassure the markets that its exposure to MF Global and to Europe's sagging sovereign debt was small.

It said over the weekend that its exposure to MF Global was only about $9 million.

On Thursday, it put out several news releases outlining the limits of its exposure to the European sovereigns, explaining while it has long inventory of more than $2.684 billion, it also has offsetting short positions in such sovereign debt of $2.545 billion, as well as offsetting positions in futures instruments.

And the company said that among the sovereign issues of the economically weakest European nations - the so-called PIIGS consisting of Portugal, Ireland, Italy, Greece and Spain - it has just $3 million of exposure to Greece. And among the five countries, it has just combined net short exposure of about $38 million, or about 1% of the total value of Jefferies' shareholders' equity.

One of the factors giving Jefferies' stock, and presumably its bonds, a boost from their day's lows was an endorsement of sorts by prominent financial analyst Meredith Whitney, who told CNBC that the company is "conservative" in its outlook and should not be unfairly lumped in with the failed MF Global.

Among junk traders, opinion was mixed.

One trader said that while Jefferies was denying any major exposure to potentially bad debt, "When in doubt, people sell."

A second noted that the company's recent financial results were weak, which further spooked investors.

But a third trader said: "The people who were blowing out of these things today just panicked" and may have "thrown out the baby with the bathwater."

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