Mattel, Eni, DCP Midstream, Washington REIT price paper; Microsoft firms in secondary market

By Andrea Heisinger and Cristal Cody

New York, Sept. 23 - Mattel, Inc., Italy's Eni SpA, DCP Midstream Operating LP, Washington Real Estate Investment Trust and Sweden's Stadshypotek AB sold bonds on a Thursday where the market took a breather after a large deal the previous day.

Oil and gas company Eni priced its first bond offering, totaling $800 million in two tranches. They priced at the wide end of guidance late in the day.

Mattel sold its $500 million of notes in two tranches tighter than guidance that went out in the morning.

DCP Midstream was one of the first deals to price for the day. The $250 million in guaranteed five-year notes priced a little before the market close.

Washington REIT also priced $250 million, but in 10-year senior notes. They were sold at the wide end of guidance, a source said.

Swedish mortgage company Stadshypotek sold $1.6 billion of covered bonds in two tranches under Rule 144A.

Issuance is set to die down again on Friday as the market continues to absorb the new deals that have priced recently, including the $4.75 billion sale in four tranches from Microsoft Corp. on Wednesday.

Both new tranches of debt from Mattel tightened in secondary trading, sources said.

Also in the secondary market, Microsoft's notes were stronger, according to sources.

Markets were mostly quiet on lighter activity.

Overall investment-grade Trace volume fell 13% to about $12 billion, a source said.

The Markit CDX Series 14 North American investment-grade index continued to weaken on Thursday. The index eased 3 basis points to a spread of 114 bps, according to Markit Group Ltd.

U.S. Treasuries rallied on the day, pushing benchmark yields down.

Debt traded on light flows because markets were closed throughout Asia for autumn holidays.

"We're seeing fast money flows here in the U.S.," said Guy LeBas, chief fixed income strategist with Janney Montgomery Scott LLC.

A 10-year yield of "2.5% seems to be the key level for macro investors who moved out of Treasuries and seem to be moving into commodities," he said. "The curve is still a little bit stronger, and there still seems to be real-money investors putting money into the long end of the curve."

The 30-year bond yielded 3.73%, down from 3.75% the previous day. The yield on the 10-year benchmark note fell 1 bp to 2.55%.

Eni prices first bonds

Rome-based oil and gas company Eni sold $800 million of notes (Aa3/A+) in two tranches late in the day under Rule 144A, a source who worked on the sale said.

The $450 million of 4.15% 10-year notes priced at a spread of Treasuries plus 162.5 bps. They were talked in the range of 150 bps to 162.5 bps.

A second tranche of $350 million in 5.7% 30-year bonds sold at Treasuries plus 200 bps. Price talk was in the 187.5 bps area, and the notes priced at the wide end of that.

It was a new name introduced to the market, the source said, adding, "It came and went."

"It was fully subscribed, and [the company] didn't choose to do more with the price breaks," he said. "It was a lot of homework for the name."

Bank of America Merrill Lynch, Citigroup Global Markets, Goldman, Sachs & Co., Morgan Stanley & Co. Inc. and Nomura Securities were the bookrunners.

Proceeds are being used for general corporate purposes.

Deals mixed on pricing

Two of the day's bonds bucked the recent trend of pricing at the tight end of guidance, and almost none of the sales were upsized.

A $250 million sale of 10-year notes from Washington REIT priced at the wide end of talk, with a source saying it took "forever" for the deal to price. Another said it wasn't necessarily the pricing that took so much time and that the company is an infrequent issuer that last priced bonds a couple of years ago.

The introductory two-tranche sale from Eni also took much of the day to price. Both the 10-year and 30-year maturities priced at the wide end of guidance, and there were no outstanding bonds to use as a touchstone.

One source said he didn't take this as a sign that the market was struggling but rather as a fluke.

"I think they were just tough ones [to price]," he said. "I don't think it means anything."

With no large amount of new paper expected on Friday, the market should have time to settle over the weekend.

"We just need to play catch-up and watch [secondary] performance," he said.

Mattel prices tighter than talk

Toy maker Mattel sold its $500 million of senior unsecured notes (Baa2/BBB/BBB+) in two tranches tighter than guidance, said a source close to the sale.

The $250 million of 4.35% 10-year notes priced at a spread of Treasuries plus 182 bps, which was below talk in the 200 bps area.

A second tranche of $250 million in 6.2% 30-year bonds priced at 250 bps over Treasuries. They also priced tighter than guidance in the 262.5 bps area.

Bank of America Merrill Lynch and RBS Securities ran the books.

Proceeds are going for general corporate purposes, including repayment of outstanding debt maturing in 2011.

The notes firmed in late afternoon secondary trading, according to sources.

The notes due 2020 were seen at 175 bps bid, 173 bps offer, a source said.

Later in the day, another trader saw the notes tighter at 173 bps bid, 170 bps offer.

The second tranche of bonds also firmed.

The bonds due 2040 traded at 240 bps bid, 237 bps offered soon after pricing. The notes were quoted later at 240 bps bid, 232 bps offered.

The issuer is based in El Segundo, Calif.

Washington REIT's 10-years

Washington REIT priced $250 million of 4.95% 10-year senior notes (Baa1/BBB+) late in the day to yield a spread of 250 bps over Treasuries, an informed source said.

They priced at the wide end of guidance in the 237.5 to 250 bps range.

The bookrunners were Citigroup and Wells Fargo.

Proceeds are being used for the purchase of outstanding 3.875% convertible senior notes due Sept. 15, 2026 and 5.95% notes due June 15, 2011, with the remainder to repay amounts under lines of credit or for general corporate purposes.

The owner of properties in the Washington, D.C., metro area is based in Rockville, Md.

DCP sells $250 million

DCP Midstream Operating sold $250 million of 3.25% five-year senior unsecured notes (/BBB-/BBB-) by late afternoon at Treasuries plus 195 bps, a source who worked on the trade said.

They priced at the tight end of guidance in the 200 bps area, with a margin of plus or minus 5 bps.

Morgan Stanley and Wells Fargo were active bookrunners.

Proceeds are being used to repay funds borrowed under the revolving part of a credit facility.

The deal is guaranteed by Midstream Partners LP.

The energy midstream company is based in Denver.

Stadyshypotek's covered bonds

Stadshypotek priced $1.6 billion of covered bonds (Aaa/AAA) in two tranches, a source away from the sale said late in the day.

The $600 million of three-year floating-rate notes priced at par to yield Libor plus 55 bps.

A second tranche was $1 billion of 1.45% three-year notes priced at a spread of 78.4 bps over Treasuries.

Both of the notes were priced under Rule 144A.

Bank of America Merrill Lynch, Deutsche Bank Securities, Morgan Stanley and RBS Securities were the bookrunners.

The mortgage company is based in Stockholm.

Microsoft firms in secondary

Microsoft's mega deal that stunned traders on Wednesday tightened in secondary trading, sources said.

Microsoft sold $4.75 billion of senior unsecured notes (Aaa/AAA/AA+) in four tranches.

The tranche of 0.875% notes due 2013 priced at a spread of Treasuries plus 25 bps. On Thursday, the notes firmed to 22 bps bid, 21 bps offered, a trader said.

The 1.625% notes due 2015, which priced at 40 bps over Treasuries, firmed to 33 bps bid, 31 bps offered.

The five-year notes were "offered this a.m. at +30," a source said.

The tranche of 3% notes due 2020 came at Treasuries plus 55 bps and tightened to 52 bps bid, 50 bps offer, the trader said.

The final tranche of 4.5% bonds due 2040 priced at a spread of 83 bps over Treasuries. The bonds were 1 bp tighter on the offer side at 83 bps bid, 82 bps offer.

The software and computing device maker is based in Redmond, Wash.

Bank, brokerage CDS costs wider

A trader saw the cost of credit default swap contracts protecting holders of bank paper against event of default at 5 bps wider to even.

Also, CDS costs for brokerage/investment bank paper widened 10 bps to 12 bps.

Stephanie Rotondo contributed to this report

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