Cliffs Natural sells $1 billion, Teva and AGL Capital price deals; Bank of America widens

By Sheri Kasprzak and Cristal Cody

New York, March 16 - Wednesday was an active day for the investment-grade primary after a slow start to the week, with several major offerings that coming down the pipeline.

Heading up the action was Cliffs Natural Resources Inc., a Cleveland-based iron ore mining company.

The company sold $1 billion of senior notes, including a $300 million add-on to its $500 million of 6.25% 2040 notes.

The deal also comprised $700 million of 4.875% notes due April 1, 2021, priced at 99.897 to yield 4.888% with a spread of Treasuries plus 170 basis points.

The 2040 add-ons have a 6.25% coupon priced at 99.573 to yield 6.282% with a spread of Treasuries plus 190 bps.

Both bonds feature a make-whole call. The 2021 notes are callable at Treasuries plus 25 bps and the 2040 notes at Treasuries plus 40 bps.

Merrill Lynch, Pierce, Fenner & Smith Inc.; J.P. Morgan Securities LLC; and Citigroup Global Markets Inc. were the joint bookrunners for the Securities and Exchange Commission-registered notes.

Proceeds will be used for general corporate purposes, including the pending acquisition of Consolidated Thompson Iron Mines. If the acquisition does not close, the 2021 notes are subject to mandatory redemption at 101%.

Overall, investment-grade trading volume on Trace was flat Wednesday compared to the day before at about $12.4 billion, a market source said.

In the secondary market, high-grade bonds were pretty much 2 bps to 5 bps "weaker across the board," a trader said.

Trading was volatile and bonds tracked equities on the worsening news out of Japan, sources said.

"That created a lot of movement back and forth and in the middle of the day, we sold out a little bit because everybody was trying to figure out what the heck was going on," a trader said.

Bank of America Corp.'s new bonds priced on Monday moved out in secondary trading on Wednesday, a trader said.

Financial paper overall also widened 2 bps to 5 bps in trading, a trader said.

The Markit CDX Series 15 North American investment-grade index was weaker again on Wednesday. The index eased 3 bps to a spread of 92 bps, according to Markit Group Ltd.

Treasuries ended higher a third day on volatile trading from growing fears of Japan's nuclear crisis, pushing yields down 5 bps to 10 bps on longer duration bonds.

The benchmark 10-year Treasury note's yield fell 10 bps to 3.2%. The 30-year bond yield ended at 4.38%, narrowing from 4.45%.

The Federal Reserve Bank of New York said in a statement that it had to push back its scheduled round of asset buybacks by an hour due to market volatility. The Federal Reserve purchased $6.58 billion in Treasuries due 2015 through 2016 as part of the $600 billion quantitative easing program to stimulate the economy.

Teva brings $750 million

Elsewhere, Teva Pharmaceuticals Finance III BV priced $750 million of senior unsecured notes in two tranches, said a term sheet.

The offering included $500 million of floating-rate notes, which are due March 21, 2014, and bear interest at three-month Libor plus 50 bps. The notes (A3/A-/) are not callable.

The deal also included $250 million of 1.7% notes due March 21, 2014. Those notes (A3/A-/) are priced at 99.942 to yield 1.72% with a spread of Treasuries plus 73 bps. Those notes feature a make-whole call at Treasuries plus 12.5 bps.

The notes are guaranteed by Teva Pharmaceutical Industries Ltd.

Barclays Capital Inc.; Goldman, Sachs & Co.; and Morgan Stanley & Co. Inc. were the joint bookrunners.

Proceeds will be used to repay a portion of the amount under a syndicated credit facility, which matures in January 2014 and was used to finance the redemption and conversion of its 1.75% convertible senior debentures in February 2011, as well as to repay certain other unsecured credit facilities.

Based in Petah Tikva, Israel, Teva is a pharmaceutical company.

AGL sells $500 million

In other pricing news, AGL Capital Corp. brought to market $500 million of senior notes Wednesday, upsized from $400 million, said a term sheet.

The notes (Baa1/BBB-/A-) are due March 15, 2041, and have a 5.875% coupon priced at 99.833 to yield 5.887%. The spread came in at 150 bps over Treasuries.

The notes feature a make-whole call at Treasuries plus 25 bps.

The joint bookrunners are Goldman, Sachs & Co.; Morgan Stanley & Co. Inc.; RBS; and Bank of America Merrill Lynch.

Proceeds will be used to assist the company with the completion of its merger with Nicor Inc.

AGL Capital, based in Atlanta, is a subsidiary of AGL Resources Inc., an energy services holding company.

Cliffs Natural Resources weak

In the secondary market, Cliffs Natural Resources' bonds widened on the bid side, a trader said.

The notes due 2021, which priced at 170 bps over Treasuries, traded late in the day at 173 bps bid, 168 bps offered, a trader said.

The bonds due 2040 priced at 190 bps over and traded at 193 bps bid, 190 bps offered.

Bank of America wider

Bank of America's new 3.625% five-year notes (A2/A/A+) that it sold on Monday at a spread of Treasuries plus 172 bps moved out in the secondary, according to a trader.

The notes were seen wider Wednesday afternoon at 185 bps bid, 180 bps offered.

The bank and financial services company is based in Charlotte, N.C.

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