Teck Resources sells after Greek austerity passes; financials tighten, Bank of America firms

By Andrea Heisinger and Cristal Cody

New York, June 29 - There was a lone deal in the investment-grade bond market on Wednesday as Teck Resources Ltd. brought a three-part sale following the Greek vote in favor of austerity measures.

Canada-based Teck priced $2 billion of notes due in 2017, 2022 and 2041. The notes each priced at the tight end of guidance in response to high demand from investors.

Initially, no bond sales had been expected during the session because of the scheduled vote by Greece's parliament. After those measures were passed in the morning, Teck decided to enter the market, a source said.

More votes by the Greek parliament are set for Thursday to deal with the timing of the austerity measures, and the investment-grade primary market is again expected to have minimal issuance ahead of the long holiday weekend.

"We had a couple [of deals] pushed back," said a syndicate source. The source added that with quarter end, the second Greek vote and the long July 4 weekend looming, most companies will likely hold off on pricing until the coming week.

"There's supply but it's probably not going to come going into a long holiday weekend," the source said.

Secondary trading was "healthy" on Wednesday, one bond source said. "For quarter-end, there's a fair amount of activity out there, a reasonable good sign spreads are tightening on healthy volume."

Overall trading volume stayed strong at about $13 billion.

The Markit CDX Series 15 North American investment-grade index firmed 3 basis points to a spread of 95 bps, according to Markit Group Ltd.

Spreads were "tighter on the day. Markets are better by 3 to 5 basis points," the source said. "Financials outperformed."

Teck's notes were seen trading 5 bps to 6 bps tighter, according to a trader.

Bank and financial paper firmed 3 bps to 7 bps in trading on the back of Bank of America Corp.'s settlement of litigation over mortgage-backed securities from its Countrywide unit, an informed bond source said. Bank of America's debt traded even tighter than the financials as a whole - its credit default swaps firmed about 15 bps on the day and the bonds traded 14 bps tighter.

Treasuries finished lower on a weak seven-year note auction and as investors moved into riskier assets. The 10-year note's yield rose to 3.11% from 3.03%. The 30-year bond's yield rose 6 bps to 4.38%.

Teck sells $2 billion

Teck Resources sold $2 billion of senior notes (Baa2/BBB/BBB) in three maturities late in the day, an informed source said.

The trade was "many, many times" oversubscribed, the source said, adding that there were many high-quality accounts involved.

The bookrunners had been doing go, no-go calls with the company for the last few days, and by Wednesday the environment was "more stable than it has been," the source said.

The bonds "priced 5 basis points tighter than initial guidance," an informed bond source said. "It was brought to market pretty quickly."

A $300 million tranche of 3.15% notes due 2017 was priced at a spread of Treasuries plus 150 bps. The notes priced at the low end of guidance in the 155 bps area.

A second tranche was $700 million of 4.75% notes due 2022 sold at 165 bps over Treasuries. The tranche was priced at the tight end of talk in the 170 bps area.

The final part was $1 billion of 6.25% 30-year bonds priced a spread of Treasuries plus 190 bps. This tranche was priced at the tight end of guidance in the 195 bps area.

The notes will be freed for trading in the secondary market on Thursday, the source said.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds will be used for general corporate purposes including anticipated capital spending for project development in coal, copper and energy businesses, and for debt repayment.

The deal is guaranteed by Teck Metals Ltd.

In the secondary market, the tranche of 5.5-year notes firmed to 144 bps bid, 139 bps offered, a trader said.

The 10.5-year tranche tightened to 160 bps bid, 155 bps offered.

The 30-year bonds also narrowed in trading, firming at the close of the day to 185 bps bid, 180 bps offered.

The diversified resource company for mining and mineral development is based in Vancouver, B.C.

Bank of America comes in

Charlotte, N.C.-based Bank of America's notes firmed in trading after the company announced a settlement with investors over claims related to its mortgage-backed loans from its Countrywide subsidiary.

Bank of America's 5% notes due 2021 tightened 14 bps to 190 bps over Treasuries on Wednesday, a bond source said.

"Pretty heavy trading volume," the source said. "Almost $100 million exchanged hands on that issue."

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