CareFusion sells $1.4 billion, USAA offers bonds, tightens; Goldman results boost market

By Andrea Heisinger

New York, July 14 - New issuer CareFusion Corp. made its bond market debut late Tuesday, selling three tranches in a deal that took all day. Pricing much earlier was a small deal sold via Rule 144A from USAA Capital Corp.

The CareFusion bonds were priced too late to get trading levels, while the USAA bond was about 10 basis points better in the secondary, a trader said.

Goldman Sachs Group Inc.'s positive second-quarter earnings provided a small boost to the secondary, but sentiment was also helped by the deals that priced.

Spreads were mostly tighter by later afternoon as Treasury yields nearly unanimously rose. The five-year note saw its yield shrink about 1 basis point, but the 30-year bond was 13 bps worse.

CareFusion offers three tranches

CareFusion, the medical products spin-off from Cardinal Health, priced $1.4 billion of notes in three tranches Tuesday, an informed source said.

The $250 million of three-year notes priced at a spread of Treasuries plus 287.5 bps.

A $450 million tranche of five-year notes priced at Treasuries plus 300 bps.

The final tranche was $700 million of 10-year notes priced at 312.5 bps over Treasuries.

Deutsche Bank Securities, Goldman Sachs & Co. and UBS Investment Bank ran the books.

The issuer is based in San Diego.

The three tranches priced too late in the afternoon for trading levels, a trader said.

A market source said the notes had not priced at 5:15 p.m. ET. It was announced early in the day, but a market source said he didn't think it took a long time to price because of any snags.

"I think it's allocations," he said. "It's a decent-size deal and I don't think there are any issues. There might be something they're not telling us."

The informed source said this was not the case, and that things took awhile because it was a new issuer and there were "three different dealers for three tranches."

"There were a lot of calls and we went through a bunch of comps."

Among the outstanding bonds that were looked at to provide guidance were those from parent company Cardinal Health and pharmacy benefit manager Express Scripts Inc.

"It went well," the source said. "It was a long one."

USAA Capital sells five-year

Insurance and financial services parent company USAA Capital offered $200 million of 3.5% five-year notes early Tuesday at Treasuries plus 125 bps, an informed source said.

It was priced via Rule 144A.

Bookrunnners were Banc of America Securities and Deutsche Bank Securities.

The issuer is based in San Antonio, Texas.

Goldman earnings boost bonds

Goldman Sachs Group's bonds were about 3 to 5 bps better overall in trading late Tuesday, a trader in the financial sector said.

Other bonds in the sector got a boost due to the good news, he said.

Goldman announced Q2 earnings of $3.44 billion, which topped analysts' predictions.

It is also an improvement over the bank's first-quarter earnings.

The primary also gained from the news, a source said, adding "the secondary was definitely better. Trades were about 5 to 10 bps better."

The news of the positive earnings wasn't a surprise, he said. "Everyone expected it. It was just a matter of how much.

"I think the reason we didn't see more of a rally was because they only beat [analyst forecasts] by about a buck."

No rally seen in primary

Despite a good set of earnings from Goldman Sachs, the news is not expected to trigger a landslide of deals for Wednesday or the other remaining days this week.

One syndicate desk sources reported "one new deal tomorrow," and another also said they had one floating around that could price in the next couple of days.

A source at a small primary desk said they had one scheduled for Thursday that had been postponed.

"It didn't have anything to do with the market," he said. "They're just trying to get some internal bookkeeping in order."

Other companies are attempting to release earnings early, he said. This would allow them to issue now when the market isn't crowded with deals, instead of at the end of the month.

"They want to get out of blackout," he said. "Then they can file debt shelfs and file their deals. It's a great time out there to issue since there's not a lot pricing."

USAA bonds gains

The new 3.5% bonds due 2014 from USAA Capital were about 10 bps better once it was freed for trading, a trader said late in the day.

The bond sold at Treasuries plus 125 bps and was quoted at 117 bps bid, 115 bps offered, he said.

Valero bond tops trading

Early afternoon activity was topped by a bond from Valero Energy Corp. Its 9.375% bond due 2019 sat atop early afternoon trading, a trader said.

The oil company is halting production at an Aruba refinery due to economic reasons, according to a Wall Street Journal article.

Coming up behind this bond was a floating-rate one from CIT Group Inc. Income Fundings Trust. CIT Group, the financial company preparing to file for bankruptcy, also had several bonds trading heavily on the high-yield side.

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