Southern Copper, EBRD tap market; earnings stall primary; Lowe's notes up again in secondary

By Andrea Heisinger and Cristal Cody

New York, April 13 - Southern Copper Corp. and European Bank for Reconstruction and Development were the only games in town in the high-grade new issue market on Tuesday.

Southern Copper, which is based in the United States but has its operations in South America and Mexico, priced $1.5 billion of notes in two tranches following a roadshow. The sale priced tight to initial talk.

EBRD priced its $1 billion of five-year notes early in the day after the sale went overnight.

The flow of new bonds slowed on Tuesday as first-quarter earnings season was in full swing. Computer chip maker Intel Corp. reported earnings after the market close, and other big names are set to release numbers as the week progresses.

"I don't see this as a busy week," one market source said.

In secondary trading on Tuesday, Southern Copper's offering firmed, with the 10-year notes tighter nearly 20 basis points, according to sources.

In addition, Lowe's Cos. Inc.'s $1 billion of senior unsecured notes that priced on Monday traded tighter for a second day, according to sources.

Elsewhere, overall Trace volume jumped about 52% on Tuesday to a little more than $14 billion, according to a market source.

Meanwhile in investment-grade trading, the widely followed CDX Series 14 North American high-grade index was unchanged on Tuesday at a mid bid-asked spread level of 84 bps, according to a source.

Also on Tuesday, U.S. Treasuries on the short end eased, while the 10-year benchmark note and 30-year Treasury bond were tighter a second day.

For example, the two-year Treasury note eased 2 bps to 1.05%, while the yield on the 10-year Treasury note firmed 2 bps to 3.82% and the yield on the 30-year Treasury bond tightened 2 bps to 4.68%.

Southern Copper taps market for $1.5 billion

Southern Copper priced a $1.5 billion sale of senior unsecured notes (Baa2/BBB-/BBB) in two tranches in late afternoon, a market source said.

This came a week after the offering was announced on April 6. A roadshow ran from Thursday to Monday.

The $400 million tranche of 5.375% 10-year notes priced at Treasuries plus 162.5 bps.

This was tighter than initial talk on Monday of a range of 175 bps to 187.5 bps over Treasuries.

A $1.1 billion tranche of 6.75% 30-year bonds sold at a spread of 212.5 bps over Treasuries.

The bookrunners were Credit Suisse Securities, Goldman, Sachs & Co. and Morgan Stanley & Co. Inc.

Proceeds are being used for general corporate purposes, including financing capital expenditures.

"We invested or made an additional investment in the beginning of the year," Luz Padilla, lead portfolio manager of the DoubleLine Emerging Markets Fixed Income Fund, said of Southern Copper in a web cast Tuesday.

"Since we bought that at the beginning of the year, it has tightened 50 basis points and the credit has done well. It came today and continues to tighten. It wasn't well followed when it made its introduction today, but it caught the attention of crossover players and developed-market investment players. They see the potential of that credit and the ability of spreads to continue to tighten."

The copper producer has operations in Peru, Chile and Mexico and is based in Phoenix.

EBRD sells global notes

The EBRD priced $1 billion of 2.75% five-year notes (Aaa/AAA) to yield Treasuries plus 16.75 bps, an informed source said.

The deal was announced on Monday, but pricing went overnight, and the notes were sold in line with talk in the mid-swaps plus 2 bps area.

The bookrunners were Citigroup Global Markets, Daiwa Securities, HSBC Securities and Morgan Stanley.

The investor in countries from central Europe to central Asia is based in London.

Earnings lead to lull

New deal activity mostly came to a halt on Tuesday as earnings announcements continue, and the only sales came from a sovereign issuer and one more on the emerging-markets side of the fence.

"We're not seeing much out there," a source said of the prospects of deals for the rest of the week.

When asked if the lull in offerings was due to company earnings, he said, "Exactly."

It did not appear there was any change in the market tone, although it was hard to tell with no new bonds to go off.

Spreads have continued to move tighter recently, which could be an incentive for some issuers needing funding to tap the debt market if they're not in earnings blackout, a syndicate source said.

"It looks good, but only if you can [issue]," he said.

Southern Copper tighter

Southern Copper's $1.5 billion two-part debt offering on Tuesday was stronger in secondary trading, according to sources.

The company priced the 5.375% notes due 2020 at Treasuries plus 162.5 bps. By the market close, the 10-year notes firmed to 143 bps bid, 139 bps offered, a trader said.

In addition, Southern Copper's 6.75% bonds due 2040, which priced at Treasuries plus 212.5 bps, firmed to 205 bps bid, 195 bps offered, a source said.

Lowe's firms in trading

Also in high-grade trading, Lowe's $1 billion of senior unsecured notes (A1/A/A+) sold on Monday continued to firm on Tuesday, according to sources.

Lowe's sold $500 million of 4.625% notes due April 2020 at Treasuries plus 80 bps and $500 million of 5.8% notes due April 2040 at Treasuries plus 110 bps on Monday.

Both tranches steadily firmed in trading over the day and continued tightening on Tuesday.

The 10-year notes were seen Tuesday at 65 bps bid, 63 bps offered after ending the previous day at 68 bps bid, 64 bps offered, according to a source.

Meanwhile, the 30-year bonds were quoted at 101 bps bid, 100 bps offered as the market neared closing on Tuesday, a trader said. The bonds were seen in the market on Monday at 104 bps bid, 100 bps offered before a last quote of 99 bps.

Lowe's home improvement store chain is based in Mooresville, N.C.

Christine Van Dusen contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.