Hewlett-Packard prices bonds; Incitec Pivot, Kite Realty on tap; Financial sector widens

By Andrea Heisinger and Cristal Cody

New York, Nov. 29 - Hewlett-Packard Co. was the only reported corporate issuer in the investment-grade bond market for Monday as fears from overseas may have kept other potential names out of the primary.

The computer and technology company sold $2 billion of notes in two tranches. Both tranches priced in line with or at the tight end of talk.

Incitec Pivot Finance announced an offering of five-year notes under Rule 144A. Pricing is expected for Tuesday with the deal going overnight to take advantage of investors in Europe and Asia, a source said.

Kite Realty Group Trust also announced plans to tap the market. The real estate owner and operator is selling perpetual preferred shares at $25 on Tuesday, a source said.

One market source who worked on the HP deal said that the market tone was "a little choppy" to start the day, but it didn't scare the issuer off since it's a high-quality name that investors know and want.

Issuance for the remainder of the week may be dependent on further developments overseas with Ireland, Portugal and North and South Korea still on the market's radar.

Treasuries got a boost on Monday from the European financial crisis. The yield on the 30-year bond fell 7 basis points to 4.14%. The 10-year note yield dropped 5 bps to 2.82%.

Corporate bond spreads overall on Monday were generally 1 to 2 bps wider, a trader said.

The Markit CDX Series 14 North American investment-grade index eased to a spread of 97 bps from 92 bps on the last full trading day before the Thanksgiving holiday, according to Markit Group Ltd.

Bank and financial paper from Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc. widened on the day and were "anywhere from 3-10 [bps] wider," a trader said.

"Volume on the low side," a source said.

Overall investment-grade Trace volume was seen on Monday at about $8.5 billion.

HP prices $2 billion

Hewlett-Packard sold $2 billion of notes (A2/A/A+) in two tranches by mid-afternoon, a source close to the trade said.

The $650 million of 2.2% five-year notes priced at a spread of Treasuries plus 73 bps. The notes priced at the tight end of guidance in the 75 bps area, the source said.

A $1.35 billion tranche of 3.25% 10-year bonds sold at a 95 bps over Treasuries spread. The spread came in line with initial talk in the 95 bps area.

Interest in the bonds was strong, with about $3.5 billion in total on the books, the source said.

"It was a high-quality book," he said. "We never have a problem getting a deal done when [Hewlett-Packard] is involved."

It was announced early in the day, with deal size and a launch happening in early afternoon.

"It went well," the source said.

Bank of America Merrill Lynch, BNP Paribas Securities Corp., UBS Securities LLC and Wells Fargo Securities LLC were the bookrunners.

Proceeds are going to repay commercial paper among other general corporate purposes.

A source away from the Hewlett-Packard deal said the five-year and 10-year notes traded in the gray market "3 and 2 bps tighter, respectively."

In the secondary market, the notes due 2015 firmed to 72 bps bid, 70 bps offered, a trader said.

The notes due 2020 also were stronger, firming to 92 bps bid, 90 bps offered in trading.

By late afternoon, the short-dated debt continued to tighten, with the five-year notes trading at 70 bps bid, 69 bps offered, another source said.

The company last sold bonds in a $3 billion issue in three tranches on Sept. 8. The 2.125% five-year notes from that deal priced at 70 bps over Treasuries.

The information technology company is based in Palo Alto, Calif.

Issuance seen moderate

One market source said his desk's week is expected to be "not too exciting" with one or two deals on the horizon.

Other desks have more action on their calendar, however, and are expecting a busier week.

"I would say we have a few possibilities, but it depends," another source said.

The week was initially expected to be busy following the short Thanksgiving week, but some of those deals may not materialize due to continued fears about the health of some countries' economies and tensions between North Korea and South Korea.

"Who knows - at first we were looking at a lot of deals, but some of those may pull out," the source said. "It could trickle down. We're all just kind of waiting to see."

Incitec Pivot eyes five-years

Incitec Pivot Finance is planning a sale of five-year notes, an informed source said late in the day.

The notes (Baa3/BBB/BBB) are expected to be priced on Tuesday under Rule 144A. Deal size has not been determined, the source said. It will be based on interest in Europe and Asia overnight.

Bookrunners are Bank of America Merrill Lynch, Citigroup Global Markets Inc. and RBS Securities Inc.

The company last sold bonds in an $800 million issue of 6% 10-year notes on Dec. 3, 2009. This is Incitec's only outstanding paper.

The industrial and agricultural chemical manufacturer is based in Melbourne, Australia.

Kite Realty plans preferreds

Indianapolis-based Kite Realty Group is planning a sale of perpetual series A cumulative preferred shares, according to a 424B5 filing with the Securities and Exchange Commission.

The preferred stock sale is expected to be Tuesday's business, a source said.

The preferreds will be priced at $25 each and are callable from December 2015 onward.

Citigroup Global Markets Inc. and Raymond James & Associates are the bookrunners.

The proceeds are being used to repay an unsecured term loan, with any remainder for working capital and for general corporate purposes. Those uses may include the acquisition of properties and to repay borrowings under a revolving credit facility.

The issuer is the owner and operator of shopping centers and commercial real estate.

Financials widen

The financial sector weakened in secondary trading, according to sources.

Charlotte, N.C.-based Bank of America's 7.625% notes due 2019 (A2/A/) widened to 277 bps on Monday from 268 bps on Wednesday, one source said.

Citigroup's 5.5% notes due 2014 (A3/A/) moved out 20 bps to 180 bps over Treasuries on Monday from the New York-based financial service company's last full trading day, a source said.

Elsewhere in the sector, New York-based Goldman Sachs' 7.5% notes due 2019 (A1/A/) were weaker on the day and were last seen trading at 222 bps from 203 bps on Wednesday.

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