Goldman Sachs, U.S. Bancorp, Republic Services price oversubscribed deals; secondaries 'slower'

By Andrea Heisinger and Cristal Cody

New York, March 1 - Goldman Sachs Group Inc., U.S. Bancorp and Republic Services Inc. sold notes on Monday, making it a solid start to the week.

Goldman Sachs priced its first bonds in a while with a $2 billion deal of 10-year notes. It was the first sale of long-dated bonds by the financial company since early 2009 that was not backed by the Federal Deposit Insurance Corp.

U.S. Bancorp priced $500 million of five-year notes by early afternoon. The size of the deal was announced early and not upsized, and it priced in line with guidance.

Republic Services sold its $1.5 billion of notes in two tranches tight to guidance. The sale consisted of $850 million of 10-year notes and $650 million of 30-year bonds.

The flow of bond sales is expected to continue through at least Thursday, a source said at the end of the day, adding the caveat of "unless something bad happens."

Monday's sales were oversubscribed and mostly priced in line with or at the tight end of price guidance.

"That should help sway [some issuers]," the source said.

No "special interest" was taken in the new investment-grade offerings on Monday, but interest in the secondary market by retail investors continues, a source told Prospect News.

"We have had fairly good interest in the market today, but it's been fairly slow. In the afternoon, it was a little bit slower," the source said.

"In general, we're still seeing good retail interest. Our buyers are looking for less expensive names."

At the start of the new month, the high-grade market overall "had a quietly firm tone," the source said. "Nothing really" stood out in trading, though three new offerings hit the secondary.

Looking at the widely followed CDX Series 13 North American high-grade index, the index tightened 3 bps to a mid bid-asked spread level of 89 bps, according to a source.

Also, overall Trace volume added about 10% from Friday to about $10 billion on Monday, one source reported.

Elsewhere, Treasuries were slightly firmer but mixed on Monday. For example, the yield on the 10-year benchmark Treasury note firmed 1 basis point to 3.61%, and the yield on the 5-year note tightened 2 bps to 2.28%, according to a market source.

Meanwhile, the yield on the 30-year Treasury bond eased 1 bp to 4.56%.

In secondary trading, the new notes from Republic Services and U.S. Bancorp firmed, while a tight market temporarily clipped the wings off Goldman Sachs' new deal, sources said.

Goldman Sachs sells 10-year quickly

Goldman Sachs Group priced its $2 billion of 10-year 5.375% global notes (A1/A/A+) at 190 bps over Treasuries in the afternoon, soon after the U.S. Bancorp deal got done.

The sale was two to three times oversubscribed, a source said.

It was one of the only deals done by Goldman in the past year that was not backed by the FDIC. They last sold 10-year notes on Jan. 29, 2009, with an offering of $2 billion of 7.5% notes priced at 500 bps over Treasuries. This deal was later reopened on May 27 with $1 billion added, and a comparatively palatable spread of 337.5 bps.

Goldman Sachs & Co. ran the books.

The financial services company is based in New York City.

Republic Services prices tranches tight to talk

Phoenix-based waste management company Republic Services sold $1.5 billion of notes (Baa3/BBB/BBB-) in two tranches by mid-afternoon, a source away from the deal said.

The $850 million of 10-year 5% notes priced at a spread of Treasuries plus 140 bps. This was at the tight end of price guidance in the 145 bps area.

A $650 million tranche of 30-year 6.2% bonds sold at Treasuries plus 165 bps. The tranche also priced tight to talk in the 170 bps area.

The deal was done under Rule 144A.

Barclays Capital and J.P. Morgan Securities ran the books for the 10-year notes, with Bank of America Merrill Lynch and J.P. Morgan on the 30-year tranche.

U.S. Bancorp offers $500 million

Minneapolis-based financial holding company U.S. Bancorp sold $500 million of five-year 3.15% notes (Aa3/A+/AA-) early in the day at 90 bps over Treasuries.

There was no official price guidance, the source said, and it was launched at 90 bps. Unofficial guidance was in the 90 bps area. The sale was "several times oversubscribed," he said.

The potential spread of the deal "pointed to the secondary," the source said, where bookrunners "looked at what the curve was worth."

Despite demand for the notes, the deal went out at a size of $500 million, with a will-not-grow clause.

Bookrunners were Credit Suisse Securities, Morgan Stanley & Co. and US Bancorp Investments.

Financials flow back to primary

Bonds from the financial sector made up the bulk of the day's issuance and priced early in the day with minimal fanfare.

The Goldman Sachs sale was in a single tranche and priced in line with guidance. It was the first long-maturity bond sale for the company since it issued non-FDIC backed bonds at the beginning of 2009 when the market was in the grips of the financial crisis and it paid a stiff new issue premium.

"I think they need to replenish after paying [TARP] funds back," a source away from the sale said. "It wasn't a surprise."

In the shadows of that sale was the U.S. Bancorp offering that also priced in line with talk.

The Republic Services sale was the only bond on the industrial side of the market for the day, and it is expected to be joined by others in the next couple of days.

"I know we're working on two deals," a syndicate source said, adding that they are both on the industrial side of the market.

"Everything did well today."

The tone was "a little better" than where the previous week ended on Friday, he said. There were no bonds issued that day.

Republic Services tightens

The $1.5 billion two-part deal priced earlier on Monday from Republic Services firmed in secondary trading, sources told Prospect News.

The notes due 2020, which priced at Treasuries plus 140 bps, were seen in the afternoon at 140 bps bid, 135 bps offered, one trader said.

In addition, Republic Services' bonds due 2040, which priced at Treasuries plus 165 bps, tightened in trading to 164 bps bid, 157 bps offered, according to the trader.

Meanwhile, as the market closed, the notes continued to tighten, according to a source.

The 10-year notes firmed to 137 bps bid, 134 bps offered, while the 30-year bonds tightened to 160 bps bid, 157 bps offered, the source said.

U.S. Bancorp firms

Elsewhere in the secondary market, U.S. Bancorp, which priced $500 million of 3.15% notes due 2015 at 90 bps over Treasuries on Monday, saw its notes tighten, according to a trader.

Earlier, the trader was "seeing a gray market bid at 89 bps" on the five-year notes.

Late in the day, the notes firmed to 85 bps bid, 82 bps offered, the source said.

Goldman faces tight market

Goldman Sachs Group priced $2 billion of 5.375% notes due 2020 at Treasuries plus 190 bps on Monday, and the notes didn't move much in secondary trading, according to a trader.

The 10-year notes "were trading in the gray market right before pricing at 188/185."

The notes didn't budge headed into the close, the trader said.

"Last I saw on the new GS was 190 bps bid, 189 bps offered. Tight market."

Also, Goldman's existing notes were mixed in trading, according to one source.

The 6.15% notes due 2018 tightened 2 bps to 164 bps over Treasuries.

Goldman's 6.75% bonds due 2037 also firmed 5 bps to 242 bps over Treasuries on Monday.

Meanwhile, the 7.5% notes due 2019 moved out to 184 bps from 182 bps on Friday.

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