Target, RBC sell bonds; U.S. ratings downgrade talk unsettles primary; PPL Electric firms

By Andrea Heisinger and Cristal Cody

New York, July 13 - Target Corp. and the Royal Bank of Canada each priced two-tranche deals on Wednesday as highly rated sellers continued to sell debt to eager investors.

Target priced its first deal since exactly one year ago when it priced $1 billion of 10-year notes. Wednesday's sale also totaled $1 billion but in two parts including $650 million of three-year floating-rate notes and $350 million of three-year fixed-rate notes.

The sale from RBC was expanded from one tranche to two to include a reopening of notes. The investment bank priced $1.6 billion consisting of $1.25 billion of five-year notes and $350 million of reopened floaters due 2014.

A split-rated sale from GFI Group, Inc. was announced early in the day. Pricing on the $250 million sale of seven-year notes, which are rated junk by Moody's Investors Service, is expected on Thursday.

The market tone was "not too bad" by late in the day although not optimistic either, a syndicate source said.

"It's not any worse than it has been, but that Moody's downgrade of the U.S. isn't doing us any favors," he said.

Moody's announced on Wednesday that if the government doesn't reach an agreement about raising the debt ceiling, there is the possibility of a downgrade from the Aaa status the United States now holds.

"It will be interesting to see what it does to the market by morning," the source said. "We're already down 80 points."

Corporate bonds for the most part traded "a basis point or two better" on a "lot of volatility" throughout the day, a trader said.

Overall trading volume held steady at about $12 billion on Wednesday.

Bank and financial paper was "closing 3 to 4 [basis points] better," one trader said.

Bank of America Corp.'s five-year notes recovered some initial losses from the previous day but traded 10 bps wider than issuance.

Toronto-Dominion Bank's new five-year notes were flat to 1 bp tighter, a trader said.

No trading was seen in Royal Bank of Canada's five-year notes, which priced late in the day, according to traders.

Target's notes sold earlier on Wednesday firmed 3 bps, a trader said.

The rest of the retail sector was unchanged, including bonds from Wal-Mart Stores Inc.

PPL Electric Utilities Corp.'s new mortgage bonds traded 12 bps stronger in the secondary market, a trader said Wednesday. The new bonds from Marsh & McLennan Cos., Inc. also firmed 4 bps on the bid side.

The Markit CDX Series 15 North American Investment Grade index improved 2 bps to a spread of 96 bps on Wednesday, according to Markit Group Ltd.

Treasuries rallied early but ended flat after Moody's announcement. The benchmark 10-year note yield was unchanged at 2.88%. The 30-year bond yield also was flat at 4.17%.

RBC prices in two parts

RBC sold $1.6 billion of notes (Aa1/AA-) in an expanded two tranches, said a source who worked on the sale.

The bank's floating-rate notes due in April of 2014 were reopened to add $350 million. They priced at 100.0555 with a coupon of Libor plus 30 bps and spread of Libor plus 28 bps.

The floaters were talked in the Libor plus 28 bps area and priced in line with guidance.

This reopening was added as an "opportunistic trade," the source said, adding that it has become popular with investors to layer floating-rate tranches on with fixed-rate deals.

Total issuance is $1.25 billion including $900 million sold on April 12 at par.

A second tranche of the sale was $1.25 billion of 2.3% five-year notes priced at a spread of Treasuries plus 88 bps.

The notes priced at the tight end of talk in the 90 bps area.

The bookrunners were Citigroup Global Markets Inc., RBC Capital Markets LLC and Wells Fargo Securities LLC.

The investment bank is based in Toronto.

Target sells $1 billion

Target priced $1 billion of notes (A2/A+/A) in two parts on Wednesday, a source close to the trade said.

A $650 million tranche of three-year floating-rate notes priced at par to yield Libor plus 17 bps.

The second part was $350 million of 1.125% three-year notes sold at 99.982 to yield 1.131% with a spread of Treasuries plus 53 bps.

The notes feature a change-of-control put at 101.

The bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup and Goldman Sachs & Co.

Proceeds are being used for general corporate purposes.

Target last sold $1 billion of 3.875% 10-year notes on July 13, 2010, at 80 bps over Treasuries.

In the secondary market, the new fixed-rate notes due 2014 firmed to 50 bps bid, 48 bps offered, a trader said.

The discount general merchandise chain is based in Minneapolis.

GFI plans crossover deal

GFI Group announced plans for a $250 million sale of seven-year senior notes with pricing expected Thursday, a market source said.

The notes (Ba2/BBB-/BBB) will be priced under Rule 144A and Regulation S.

Jefferies & Co. is the bookrunner.

Proceeds are being used to repay outstanding amounts including interest under a credit agreement and 7.17% senior notes. Any remainder will be used for general corporate purposes.

GFI attempted to tap the market with a $250 million offering of 10-year notes on Aug. 20, 2010 before withdrawing the deal to look at alternative structures. Company executives had said they would look at selling bonds at a later date.

The brokerage and trade execution company is based in New York.

Financials improve

Bank of America's 3.75% notes due 2016 narrowed 2 bps on the bid side in trading to 215 bps bid, 210 bps offered on Wednesday from 217 bps bid, 211 bps offered the previous day, a trader said.

The notes (A2/A/A-) priced at a spread of Treasuries plus 205 bps on July 7.

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

Toronto-Dominion Bank's 2.5% senior medium-term notes due 2016 also were 1 bp better on the day, a trader said.

The five-year notes (Aaa/AA-) firmed to 84 bps bid, 80 bps offered in the late afternoon. The notes priced on July 7 at Treasuries plus 85 bps.

The bank and financial services company is based in Toronto.

PPL tighter

PPL Electric Utilities' new mortgage bonds tightened more than 10 bps in secondary trading on Wednesday, according to a trader. The 5.2% 30-year first mortgage bonds (A3/A-/A-) firmed to 93 bps bid, 90 bps offered.

The company sold $250 million of the bonds due 2041 at a spread of 105 bps over Treasuries on Tuesday.

The electric subsidiary of PPL Corp. is based in Allentown, Pa.

Marsh & McLennan firms

Marsh & McLennan's rare new deal sold the previous day narrowed in trading to 186 bps bid, 184 bps offered, a trader said Wednesday.

The company sold $500 million of the 4.8% 10-year senior notes (Baa2/BBB-/BBB) to yield Treasuries plus 190 bps.

The professional services and consulting firm is based in New York.

© 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.