Barrick prices; Heineken, Flowers Foods do first bond deals; bank, financial paper cheapens

By Andrea Heisinger and Cristal Cody

New York, March 29 - There were fewer issuers in the investment-grade bond market on Thursday than the previous day, but none of them were sovereigns.

Canada's Barrick Gold Corp. sold $2 billion of notes in 10- and 30-year tranches. Heineken NV priced $500 million of 10-year paper in its inaugural dollar-denominated bond offering.

Massachusetts Mutual Life Insurance Co. priced $500 million of five-year paper.

First-time bond issuer Flowers Foods, Inc. sold $400 million of 10-year senior notes to repay debt, among other uses.

There was a $1.25 billion deal of five-year covered bonds by Norway's SpareBank 1 Boligkreditt AS.

An issue of preferred stock announced Wednesday by Digital Realty Trust Inc. priced Thursday after being upsized.

American Capital Agency Corp. priced $150 million of 8% series A cumulative redeemable preferreds.

Thursday was predicted as being one of the week's highest-volume days, but the market tone took a dive at the close on Wednesday and perhaps made some potential issuers hesitate about pricing.

Bond yields remain low, which has enticed some companies into the market, a syndicate source said.

Another source who worked on some of the day's deals said the market was "not on fire" and that it was "softer throughout the day."

"No one really knows why," the source said. "It's hard to pinpoint."

Friday is expected to be quiet on the primary side of the market after four days of steady issuance.

Corporate bonds overall traded flat to weaker over the day on Thursday. The Markit CDX Series 18 North American Investment Grade index eased 2 basis points to a spread of 93 bps.

Barrick Gold's two tranches traded better in the secondary.

No secondary trading was seen initially in the new notes from Heineken or Flowers Foods, according to traders.

"Sometimes the issue is so oversubscribed, we don't see the bonds trade, they're all gone," one trader said.

Secondary activity has been quiet the past few days, sources said.

"There's a lot of people out on spring break, so I think that has something to do with it," a trader said.

Bank and financial paper remains wider in trading over the week.

"There's been a little bit of cheapening in the last couple of days," according to a trader.

Morgan Stanley's notes widened 13 bps on the day.

Bank of America Corp.'s notes are 20 bps wider since the previous week.

General Electric Capital Corp.'s 4.65% notes due 2021 are out 19 bps since Monday.

Government bonds gained on Thursday. The 10-year Treasury note yield dropped 4 bps to 2.16%. The 30-year bond yield fell to 3.27% from 3.31%.

Barrick sells two tranches

Barrick Gold sold $2 billion of notes (Baa1/A-/) in two tranches, an informed source said.

The $1.25 billion of 3.85% 10-year paper sold at a spread of Treasuries plus 170 bps. The tranche priced at the tight end of talk in the 175 bps area, plus or minus 5 bps, the source said.

There was a second tranche of $750 million of 5.25% 30-year bonds priced at 200 bps over Treasuries. The bonds also sold tight to guidance in the 205 bps area, plus or minus 5 bps.

The deal had about $4 billion on the books, the informed source said.

Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. LLC and RBC Capital Markets LLC ran the books.

The deal was done under Rule 144A and Regulation S.

Barrick Gold was last in the market with a $4 billion deal in four parts on May 24, 2011. The 4.4% 10-year notes from that offering sold at 130 bps over Treasuries, and the 5.75% 30-year bonds sold at 150 bps.

In the secondary market, Barrick Gold's 3.85% notes due 2022 traded tighter at 168 bps bid, 164 bps offered, a trader said.

The 5.25% 30-year tranche was seen going out at 193 bps offered.

The gold mining company is based in Toronto.

Heineken's $750 million deal

Heineken sold an upsized $750 million of 3.4% 10-year notes (Baa1/BBB+/) to yield 127 bps over Treasuries, a source close to the deal said.

The books had between $2.75 billion and $2.8 billion on them, the source said.

The paper sold tighter than initial guidance in the 140 bps area and at the lowest end of revised talk in the 130 bps area, plus or minus 3 bps, the source said.

It was Heineken's first dollar-denominated bond offering, the source said. The size was increased from $500 million.

The source said the syndicate desks used outstanding comparable bonds from companies like Anheuser-Busch InBev, Diageo plc and SABMiller plc as guidance on this inaugural deal.

The bookrunners were Barclays Capital Inc., Citigroup and JPMorgan.

The paper was priced under Rule 144A and Regulation S.

Heineken's notes traded at 126 bps bid, 124 bps offered in the gray market, a trader said.

The notes were not seen trading in the secondary market late afternoon, another trader said.

The brewer is based in Amsterdam.

Flowers' 10-year

Flowers Foods sold $400 million of 4.375% 10-year senior notes (Baa2/BBB-/) at a spread of Treasuries plus 225 bps, a market source away from the trade said.

This was the company's first bond deal, an informed source said.

The bookrunners were Bank of America Merrill Lynch and Deutsche Bank Securities Inc.

Proceeds will be used to repay long-term debt under a revolving credit facility and for future acquisitions, general corporate purposes and working capital.

Flowers provides direct store and warehouse delivery of food and baked goods and is based in Thomasville, Ga.

MassMutual's five-year

Massachusetts Mutual Life Insurance sold $500 million of 2% five-year notes (Aa2/AA/AA) to yield Treasuries plus 110 bps, a source said.

The paper sold at the tight end of guidance in the range of 110 bps to 115 bps.

The deal was done under Rule 144A and Regulation S.

The bookrunners were Citigroup and Credit Suisse Securities (USA) LLC.

The Springfield, Mass.-based insurance company last priced bonds in a $750 million deal of 30-year paper on May 27, 2009.

SpareBank's covered bonds

SpareBank 1 Boligkreditt priced $1.25 billion of 2.3% covered bonds due 2017 to yield Treasuries plus 133.4 bps, a source close to the offering said.

The notes (Aaa//AAA) were priced under Rule 144A and Regulation S.

Barclays, Credit Suisse, Deutsche Bank and HSBC Securities (USA) Inc. were the bookrunners.

SpareBank priced $1.25 billion of 2.625% five-year covered bonds at 85.7 bps over Treasuries on May 23, 2011.

The commercial bank is based in Stavanger, Norway.

Digital Realty prices

Digital Realty Trust priced a $175 million offering of 6.625% series F cumulative redeemable perpetual preferred stock, market sources said.

Price talk was between 6.625% and 6.75%. The company was expected to sell at least $100 million of the new preferreds

Digital Realty will apply to list the new preferreds on the New York Stock Exchange under the ticker symbol "DLRPF."

"It should be doing well," a trader said before the close. He quoted the issue at $24.77 bid, $24.80 offered in the gray market.

After the bell, a market source placed the paper at $24.75 bid, $24.80 offered.

Bank of America Merrill Lynch, Citigroup, Morgan Stanley and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be contributed to the company's operating partnership, which will then use the funds to temporarily pay down borrowings under a global revolving credit facility, to acquire additional properties, to fund development and redevelopment opportunities and for general corporate purposes, including the possible repurchase or redemption of outstanding debt or preferreds.

Digital Realty is a San Francisco-based real estate investment trust focused on data center and technology buildings.

American Capital's preferreds

American Capital Agency announced a sale of $150 million of 8% series A cumulative redeemable preferreds on Thursday.

The deal came at the low end of talk.

"There's not much happening on it," a source said around midday. "It seems like it's going to be a small deal."

He pegged the preferreds at $24.70 bid in the gray market.

Another market source said the issue had "been very slow to develop. Nothing is really trading."

Citigroup, UBS Securities LLC and Wells Fargo are the bookrunners.

American Capital will apply to list the preferreds on the Nasdaq Global Select Market under the ticker symbol "AGNCPA."

Proceeds will be used to acquire additional agency securities as market conditions warrant and for general corporate purposes.

American Capital is a Bethesda, Md.-based REIT that invests in agency passthrough securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity. The company is externally managed and advised by American Capital AGNC Management, LLC, an affiliate of American Capital, Ltd.

Financials cheapen

Bank and financial paper has widened in trading Wednesday and Thursday, a trader said.

Morgan Stanley's 5.5% notes due 2021 had been tightening.

"They got to a spread of 329 [bps] on the bid side last week. This morning they're out to 350 [bps], and they're wider now at 363 [bps]," the trader said.

The New York-based investment bank sold $1 billion of the notes (A2/A/A) on Oct. 27 at a spread of 335 bps over Treasuries.

Bank of America's 5.7% senior notes due 2022 started the session on Wednesday at 260 bps bid.

"Now, they're cheaper at 274 [bps] bid side," the trader said on Thursday. "They got as narrow as 254 [bps] last week."

The Charlotte, N.C.-based financial services company reopened the issue (Baa1/A-/A) on Feb. 2 in a $750 million offering at a spread of 325 bps over Treasuries.

General Electric Capital's 4.65% notes due 2021 traded at 158 bps bid on Thursday.

"Yesterday, they were 152 [bps], and the tightest I saw before that was 139 [bps] last Monday," the trader said. "They're out 19 basis points from the very tights."

GE Capital reopened the issue (Aa2/AA+) on Jan. 4 to sell $1 billion of the notes at Treasuries plus 240 bps.

The funding arm of General Electric Co. is based in Fairfield, Conn.

Stephanie N. Rotondo contributed to this review

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