Alcoa brings $1.25 billion deal, bonds firm in trading; new Ford notes gain 20 bps

By Sheri Kasprzak and Cristal Cody

New York, April 13 - Primary action tapered off slightly on Wednesday, but there was still a substantially sized $1.25 billion offering of senior notes from Alcoa Inc.

The offering was conducted to fund a tender offer for the company's 5.375% notes due Jan. 15, 2013, and 6% notes due July 15, 2013. Remaining proceeds will be used for working capital, acquisitions and general corporate purposes.

The notes (Baa3/BBB-/BBB-) were upsized from $750 million, said one sellsider familiar with the deal.

"It got a good reception," he noted.

The notes are due April 15, 2021, and have a 5.4% coupon. They priced at 99.848 to yield 5.42%, a spread of Treasuries plus 195 bps.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC and RBS Securities Inc. were the joint bookrunners.

In the secondary market, Alcoa's notes traded slightly tighter at 194 bps bid, 192 bps offered, a trader said.

Another trader saw the notes at 194 bps bid, 193 bps offered.

New York-based Alcoa is an aluminum producer.

Market rallies

Along with Alcoa's notes, other bonds were stronger on the day, sources said. The deal from the previous day from Ford Motor Co., which priced $1.5 billion of exchange-linked notes via the FUEL Trust 2011-1, traded more than 20 bps tighter, a trader said.

The Markit CDX Series 14 North American investment-grade index firmed 2 bps to a spread of 95 bps, according to Markit Group Ltd.

Overall investment-grade Trace volume rose more than 15% to nearly $12.5 billion on Wednesday, a market source said.

Treasuries rallied on Wednesday sending yields down, with the rally felt more on the longer end of the curve. The 10-year note's yield dropped 3 bps to 3.46%. The 30-year bond yield fell 3 bps to 4.54%.

The government's auction of a $21 billion reopening of 10-year notes at a yield of 3.494% was seen for the most part as weak.

FUEL notes firm

In the high-grade secondary market, Ford Motor's FUEL Trust 2011-1 notes traded more than 20 bps tighter, traders said Wednesday.

The notes were seen "offered earlier this a.m. at 176," one trader said.

The 4.207% notes (Baa2/BBB-/) are due April 15, 2016 and priced Tuesday at a spread of Treasuries plus 200 bps.

Another trader saw the notes late afternoon at 180 bps bid, 176 bps offered.

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