Adobe brings $1.5 billion in debut note sale; Japan Finance plans deal; financials mostly firm

By Cristal Cody and Sheri Kasprzak

New York, Jan. 25 - Investment grade's primary action was led Monday by a significant first bond sale for Adobe Systems Inc. The San Jose, Calif.-based software company brought to market $1.5 billion in notes in two tranches to repay debt related to its recent acquisition of Omniture Inc.

Meanwhile, the market retained a fairly quiet tone, a sellsider pointed out, with little going on in primary.

"It's a pretty typical Monday," he said.

"We're expecting a few things ahead this week, but today there's not much other than the Adobe deal."

The Adobe offering included $600 million in five-year notes and $900 million in 10-year notes.

Price talk for the notes was right in line with pricing, according to the sellsider. Spreads on the five-year note was 93 bps over Treasuries and 120 bps over Treasuries for the 10-year notes.

The company sold 3.25% five-year notes priced at 99.826 to yield 3.288% and 4.75% 10-year notes priced at 99.387 to yield 4.828%. The notes include a make-whole call at any time at Treasuries plus 15 bps.

The offering is the first bond sale for Adobe.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc., Morgan Stanley & Co. Inc., Citigroup Global Markets Inc. and Wells Fargo Securities Inc. are the joint bookrunners.

Proceeds will be used to repay debt related to the company's acquisition of Omniture.

Japan Finance sale planned

Further ahead, Japan Finance Corp. plans to sell guaranteed bonds, said a preliminary prospectus supplement. The exact size of the offering could not be ascertained by press time Monday.

J.P. Morgan Securities Inc. is the bookrunner.

Proceeds from the sale will be used for the daily operations of Japan Bank for International Cooperation.

Japan Finance Corp. is a Tokyo-based company that develops the international economy and society of Japan.

Secondary subdued

Trading in the secondary was fairly quiet on Monday, sources said, with the financial sector coming in mixed as markets stayed on hold for earnings reports.

Overall Trace volume in high-grade trading dropped 16% from Friday's volume to about $11 billion, according to a source.

Treasuries mostly eased, with the yield on the benchmark 10-year Treasury note weaker by 2 bps to 3.63%. The yield on the 30-year Treasury bond also eased to 4.55% from 4.53% on Friday.

The CDX Series 13 North American high-grade index firmed 1 bp to a mid bid-asked spread level of 95 bps.

Other than the Adobe deal, it was "very quiet in primary and secondary," a trader said.

The markets anticipate "a slew of earnings, including Apple which reports after the close today [Monday]."

Companies including Amazon Inc., AT&T Inc. and Johnson & Johnson will report earnings this week.

Meanwhile, the new deal from Adobe Systems tightened in secondary trading on Monday.

Also in the financial sector, outstanding notes from Bank of America Corp. and Citigroup Inc. firmed, while Morgan Stanley's notes due 2019 were seen 21 bps wider, sources said.

Adobe firms in secondary

The new 3.25% bonds due 2015 from Adobe Systems on Monday tightened in secondary trading, a source said.

Adobe's five-year bonds, which priced at Treasuries plus 93 bps, were seen near the market's close at 91 bps bid, 86 bps offered.

In addition, Adobe's 4.75% notes due 2020 were quoted at 120 bps bid, 115 bps offered. The notes priced at Treasuries plus 120 bps.

Meanwhile, one trader said the 10-year notes were closing at 120 bps bid, 117 bps offered.

The $1.5 billion issuance is a "debut issue" for Adobe.

Bank of America firms, Morgan Stanley weaker

While financials were weaker on Friday, the sector firmed somewhat in Monday trading, though Morgan Stanley was the noticeable exception, according to sources.

For example, Bank of America's 6.5% notes due 2016 tightened 10 bps to 137 bps on Monday.

Also, the Charlotte, N.C.-based bank's 7.625% notes due 2019 were seen 10 bps firmer at 189 bps.

In addition, a market source reported that New York-based Citigroup's 6.375% notes due 2014 narrowed 10 bps to 240 bps on Monday.

On the flip side, New York-based Morgan Stanley's 7.3% notes due 2019 were wider 21 bps at 198 bps on Monday.

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