Advance Auto sells bonds as Enbridge postpones sale on leak news; banks, cable space widen

By Andrea Heisinger and Cristal Cody

New York, Jan. 11 - The size and number of deals in the high-grade bond market shrank on Wednesday as Advance Auto Parts, Inc. sold bonds while another company decided whether to go through with its offering.

Advance Auto Parts priced $300 million of 10-year debt. It was the auto parts retailer's first sale since 2008.

An offering of notes due 2021 from Enbridge Inc. was announced on Tuesday, but the Canadian transporter of crude oil and liquids postponed its deal indefinitely after spending part of Wednesday talking with bookrunners and trying to decide whether to go ahead with the $550 million trade in light of a natural gas leak reported off the coast of Louisiana.

SABMiller Holdings Inc. gave the terms of its huge $7 billion deal priced in four parts late Tuesday. All of the tranches were sold 10 basis points tighter than official guidance, a source said.

There was also a $1.25 billion sale of two-year floating-rate notes from Germany's KfW.

A sale of perpetual preferred stock was announced by Southern California Edison Co. It's being talked at a minimum size of $250 million.

The high-grade market was coming off the high of the giant SABMiller deal the previous day, and "wasn't that exciting," as one syndicate source said.

Thursday is expected to be a repeat in volume from Wednesday with "maybe a couple of deals," the source said.

"We're not going to see the supply you did earlier in the week," he said, adding, "not that there aren't people ready to buy it."

Issuers had strategically sold debt early in the week before more headlines on Europe's debt crisis could come out.

Bonds were firmer in lighter trading volume on Wednesday. The Markit CDX Series 17 North American investment-grade index ended 2 basis points tighter at a spread of 116 bps.

New issues tighten

SABMiller's bonds traded tighter in the secondary market, with the long-dated bonds better by 11 bps.

Advance Auto Parts' new notes traded about 8 bps tighter.

Macy's Retail Holdings Inc.'s two tranches of bonds came in 3 bps to 6 bps in the secondary market.

Entergy Corp.'s notes also stayed better on Wednesday in trading.

Elsewhere, cable bonds traded wider on the day, a source said.

Comcast Corp. and Time Warner Cable Inc. "are the weakest of the bunch out there," a trader said.

Bank and financial paper widened, with most credits seen 3 bps to 8 bps wider, a source said.

Morgan Stanley was the exception and outperformed the sector, trading 5 bps better.

Overall trading volume fell to about $13 billion on Wednesday from $15 billion on Tuesday.

Treasuries rallied after a solid action of 10-year notes and on continued European debt concerns.

The benchmark 10-year Treasury note yield fell 6 bps to 1.9%. The 30-year bond yield dropped to 2.96% from 3.02%.

Advance Auto Parts' 10-year

Advance Auto Parts sold $300 million of 4.5% 10-year senior notes (Baa3/BBB-) to yield Treasuries plus 260 bps, an informed source said.

The deal was priced at the tight end of guidance in the 265 bps area, plus or minus 5 bps, the source said.

Bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities LLC.

Proceeds are being used to repay debt, including amounts under a revolving credit facility, and for general corporate purposes.

The notes are guaranteed by domestic subsidiaries.

Advance Auto Parts was last in the market with a $300 million sale of 5.75% 10-year debt priced at 200 bps over Treasuries on April 26, 2010.

The notes due 2022 firmed to 253 bps bid, 248 bps offered.

The automotive retailer is based in Roanoke, Va.

Enbridge postpones deal

Enbridge postponed its $550 million offering of notes due 2021 (Baa1/A-) after a reported natural gas leak in one of its pipelines, market sources said.

A small natural gas leak was reported in the company's Stingray Pipeline off the coast of Louisiana in the Gulf of Mexico. This happened after the deal was announced and a conference call took place with the underwriters to determine whether to go forward with the sale, an informed source said.

The offering has been postponed indefinitely, he added.

The debt was being talked in the 150 bps area.

Bank of America Merrill Lynch, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the bookrunners.

Proceeds would be used to repay short-term debt connected with the company's acquisition of a 50% interest in Seawawy Crude Pipeline System, for capital expenditures and for general corporate purposes.

The transporter of crude oil and liquids is based in Calgary, Alta.

SABMiller gives terms

SABMiller Holdings sold $7 billion of paper (Baa1/BBB+/BBB+) in four parts late on Tuesday, according to market sources and a press release.

The $1 billion of 1.85% three-year notes priced at a spread of Treasuries plus 150 bps.

There was also $2 billion of 2.45% five-year debt sold at Treasuries plus 165 bps.

A third tranche of $2.5 billion of 3.75% 10-year notes priced at a spread of 185 bps over Treasuries.

Finally, there was $1.5 billion of 4.95% 30-year bonds sold at Treasuries plus 200 bps.

The tranches were priced under Rule 144A and Regulation S.

All of the notes were priced 10 bps tighter than guidance, which was in the case of the three-year tranche, the 160 bps area, the five-year notes the 175 bps area, the 10-year debt the 195 bps area and the 30-year bonds the 210 bps area. There was roughly $25 billion on the books for the trade, a source said.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc., JPMorgan and Morgan Stanley.

Proceeds are being used to repay part of the bank borrowings incurred to finance the acquisition of Fosters Group Ltd. in December of 2011.

The debt is guaranteed by SABMiller plc.

"We were very pleased by the high level of demand from bond investors in response to this offering, and the pricing achieved, which we believe is a reflection of the strengths of the SABMiller Group and our attractive profile of brands and businesses," SABMiller chief financial officer Jamie Miller said in a press release.

In the secondary market, the notes due 2017 traded at 162 bps offered, one trader said.

The notes due 2022 were better, going out at 179 bps bid.

Another trader saw the 10-year notes earlier at 182 bps bid, 177 bps offered.

The bonds due 2042 were tighter, trading late in the day at 187 bps bid and earlier quoted at 189 bps bid, 184 bps offered.

The brewer is based in London.

KfW sells floaters

KfW sold $1.25 billion of two-year floating-rate global notes (Aaa/AAA/AAA) at par to yield Libor plus 18 bps, according to an FWP filing with the Securities and Exchange Commission.

Bookrunners were Citigroup Global Markets Inc. and RBS Securities Inc.

The German government-owned development bank is based in Frankfurt.

SoCal Edison preps preferreds

Southern California Edison, a Rosemead, Calif.-based power company, announced it was issuing at least $250 million of $1,000-par series E cumulative perpetual preference stock in a prospectus filed with the SEC.

Price talk is in the 6.25% area. The dividend will be fixed until 2022 and will then become floating, based on three-month Libor plus original Libor spread.

One trader said he expected the deal to do very well as investors were "clamoring for non-financial paper."

At another desk, a source said the new issue "should perform really well."

"It's one of the better priced deals we've seen in awhile," he said.

Neither source saw any gray markets, and the second source noted that "the $1,000-par gray market develops more slowly."

Barclays Capital, JPMorgan, Morgan Stanley and Williams Capital Group LP are the bookrunners.

Proceeds will be used to repay commercial paper borrowings and for general corporate purposes.

Macy's firms

Macy's new 3.875% notes due 2022 started the day trading at 193 bps offered and the 30-year bonds started at 203 bps offered, a trader said.

Another trader saw the 10-year notes, which priced at 200 bps over Treasuries, at 197 bps bid, 192 bps offered.

The 5.125% bonds due 2042 were quoted at 206 bps bid, 201 bps offered, in from the issue price of 212.5 bps over Treasuries.

Macy's sold $800 million of the senior notes (Baa3/BBB-/BBB-) on Tuesday.

The deal included $550 million of the 10-year notes and $250 million of the 30-year bonds.

The retailer is based in Cincinnati.

Entergy stays firm

Entergy's 4.7% notes due 2017 firmed going out to 370 bps bid, a trader said on Wednesday.

Earlier, another trader saw the bonds at 375 bps bid, 365 bps offered.

Entergy sold $500 million of the senior notes (Baa3/BBB-/) at 387.5 bps over Treasuries on Tuesday.

The electric company is based in New Orleans.

Comcast wider

Comcast's 5.15% senior notes due 2020 widened 5 bps to 130 bps bid, 120 bps offered on Wednesday, a trader said.

Comcast sold the issue in a $1.4 billion sale on Feb. 24, 2010 at 147 bps over Treasuries.

The telecommunications company is based in Philadelphia.

Time Warner Cable weaker

Time Warner Cable's 4% notes due 2021 eased to 197 bps bid, 187 bps offered, 7 bps wider on the day, a trader said.

The notes (Baa2/BBB/BBB) were sold on Sept. 7 in a $1 billion offering at 210 bps over Treasuries.

The entertainment company is based in New York City.

Morgan Stanley better

Morgan Stanley's 5.5% senior notes due 2021 firmed 5 bps to 450 bps bid, 440 bps offered on Wednesday while the rest of the sector widened, a trader said.

The notes were sold on Oct. 27 in a $1 billion offering at a spread of 335 bps over Treasuries.

The investment bank is based in New York.

Stephanie N. Rotondo contributed to this review

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