CSX, Rentenbank head to subdued primary; Time Warner bonds mixed in secondary

By Cristal Cody and Aleesia Forni

Virginia Beach, July 16 – Two issuers headed to Wednesday’s primary market during another muted session for investment-grade bonds.

CSX Corp. priced a $1 billion offering of senior notes in 10- and 40-year tranches, both pricing at the tight end of talk.

Meanwhile, Germany's Landwirtschaftliche Rentenbank came to market with a $500 million add-on to its existing notes due 2021.

In other market action, Freddie Mac announced that it would not issue Reference Notes during the month of July.

The day’s new deals bring the week’s total supply to around $7 billion.

One source noted that the market seems to be taking “a bit of a breather” this week, and that he believes the week’s supply is “unlikely” to hit earlier expectations of $15 billion to $20 billion.

“Could see some action tomorrow,” he noted.

Investment-grade bond spreads remained tight over the session after easing on Tuesday, market sources said.

The Markit CDX North American Investment Grade series 22 index firmed 1 basis point to a spread of 57 bps.

The two tranches of notes that CSX priced traded wrapped around issuance to about 1 bp tighter, a trader said.

Time Warner Inc.’s senior notes (Baa2/BBB/BBB+) brought in May were mixed in the secondary market on reports the company rejected a takeover offer of about $80 billion in cash and stock from Rupert Murdoch’s 21st Century Fox Inc., sources said.

CSX brings two-parter

The primary market saw CSX price $1 billion of senior notes (Baa2/BBB+/) in tranches due 2024 and 2054 on Wednesday, according to a market source.

The company sold $550 million of 3.4% 10-year notes at 99.915 to yield 3.41%, or Treasuries plus 88 bps.

There was also $450 million of 4.5% 40-year bonds priced with a spread of Treasuries plus 120 bps.

The notes sold at 99.337 to yield 4.536%.

The tranche of notes due 2024 from CSX firmed to 87 bps bid, 86 bps offered in aftermarket trading, a trader said.

The company’s notes due 2044 headed out wrapped around issuance at 120 bps bid, 117 bps offered, the trader said.

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

Proceeds will be used to redeem the company’s 8.375% secured equipment notes due Oct. 15, 2014 and for general corporate purposes, which may include repayment of debt, repurchases of CSX’s common stock, capital investment, working capital requirements, improvements in productivity and other cost reductions at CSX’s major transportation units.

The transportation company is based in Jacksonville, Fla.

Rentenbank adds-on

Germany's Landwirtschaftliche Rentenbank priced a $500 million add-on to its existing 2.375% seven-year notes at mid-swaps plus 6 bps on Wednesday, according to a market source.

The notes (Aaa/AAA/AAA) priced at 100.72.

Credit Agricole, Goldman Sachs & Co. and TD Securities were the bookrunners.

The total issue size is now $1 billion, including $500 million priced on March 14 at mid-swaps plus 15 bps.

The German development agency for agribusiness is based in Frankfurt.

Time Warner flat to tighter

Time Warner’s 2.1% notes due 2019 traded mostly unchanged at 59 bps bid, 54 bps offered, according to a trader.

The notes were quoted closing the day at 99.33 to yield 2.245% following no trades on Tuesday, a source said.

Time Warner sold $650 million of the five-year notes at Treasuries plus 60 bps, or 99.948, to yield 2.111% on May 20.

The company’s 3.55% notes due 2024 tightened to 115 bps bid, 110 bps offered, the trader said.

The 10-year notes ended lower on Wednesday at 98.73 to yield 3.704% from 100.31 to yield 3.511% on Tuesday.

Time Warner sold $600 million of the notes at Treasuries plus 135 bps in the May offering. The 10-year notes priced at 99.908 to yield 3.561%.

The media and entertainment company is based in New York.

Bank/brokerage CDSs mostly down

Investment-grade bank and brokerage CDS prices were mostly lower on Wednesday, according to a market source.

Bank of America Corp.’s CDS costs ended 3 bps lower at 64 bps bid, 67 bps offered. Citigroup Inc.’s CDS costs declined 3 bp to 62 bps bid, 65 bps offered. JPMorgan Chase & Co.’s CDS costs were 1 bp higher at 55 bps bid, 57 bps offered. Wells Fargo & Co.’s CDS costs were flat at 43 bps bid, 48 bps offered.

Merrill Lynch’s CDS costs closed 3 bps lower at 68 bps bid, 72 bps offered. Morgan Stanley’s CDS costs lowered 2 bps to 64 bps bid, 69 bps offered. Goldman Sachs Group, Inc.’s CDS costs declined 1 bp to 70 bps bid, 75 bps offered.

Paul Deckelman contributed to this review.

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