Primary comes back to life as Monsanto, Cabot, Mitsubishi, Takeda price; bank, broker wider

By Aleesia Forni and Andrea Heisinger

New York, July 9 - Corporate issuers from both the United States and abroad sold bonds in the investment-grade market on Monday as the tone held over the weekend.

Cabot Corp. was in the market with a $600 million offering in two tranches to help pay for the acquisition of Norit, NV.

Also pricing a two-tranche deal was Monsanto Co. with $500 million of notes due in 2022 and 2042. The long bond set a new record-low coupon rate.

There were two deals from Japanese companies.

Mitsubishi Corp. priced $750 million of five-year notes at the low end of guidance.

Later in the afternoon, Takeda Pharmaceutical Co. priced $3 billion of bonds in two tranches.

There was a split-rated sale from Icahn Enterprises L.P. and Icahn Enterprises Finance Corp. that was priced off of the high-yield syndicate desk. The deal was a $300 million add-on to 8% senior notes due Jan. 15, 2018.

One source who worked on the Takeda deal, which was more than two times oversubscribed, said that the market was "decent" to start the week.

"It wasn't as high as expected, but we got things done," she said.

The Dow Jones Industrial Average ended the day down more than 35 points, another source said, but that didn't mean the market wasn't going to see more deals on Tuesday.

"The market could always be better, right?" the source said. "We might have a couple of things for tomorrow. Today's deals performed well."

There are estimates of $20 billion of new bonds being sold for the week, with nearly $7 billion priced on Monday if deals from emerging markets are included.

Investment-grade bank and brokerage credit default swaps costs rose on Thursday, according to a market source.

Bank of America's CDS costs widened 3 bps to 255 bps bid, 260 bps offered. Citi's CDS costs rose 5 bps to 247 bps bid, 252 bps offered. J.P. Morgan's CDS costs widened 2 bps to 132 bps bid, 137 bps offered.

Brokers also widened. Merrill Lynch's CDS costs were 5 bps wider at 270 bps bid, 280 bps offered. Morgan Stanley's CDS costs rose 5 bps to 355 bps bid, 365 bps offered. Goldman Sachs' CDS costs also widened 5 bps to 265 bps bid, 275 bps offered.

Monsanto prices two tranches

Monsanto priced $500 million of senior notes (A1/A+/A+) in two parts, a source close to the trade said.

There was roughly $3.75 billion on the books, the source said.

The $250 million of 2.2% 10-year notes sold at a spread of 70 bps over Treasuries.

The second part was $250 million of 3.6% 30-year bonds priced at Treasuries plus 100 bps.

A source said that the coupon for the bond was the lowest on record for that maturity.

The previous record had been 3.7% 30-year bond set by McDonald's Corp. in a $750 million deal in two tranches on Feb. 2.

The 10-year notes traded 1 bps tighter at 69 bps bid near the end of the session, a source commented.

The 30-year tranche was also tighter, trading at 98 bps bid.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC ran the books.

Proceeds are being used to repay $486 million of 7.375% notes due on Aug. 15 and for general corporate purposes.

Monsanto was last in the bond market with a $300 million deal of 2.75% five-year notes priced at 60 bps over Treasuries on April 12, 2011.

The company provides agricultural products for farmers and is based in St. Louis.

Cabot's $600 million

Cabot priced $600 million of senior notes (Baa2/BBB+/) in two maturities, an informed source said.

The $250 million of 2.55% notes due 2018 were sold at a spread of Treasuries plus 195 bps.

A $350 million tranche of 3.7% 10-year notes priced at 220 bps over Treasuries.

The five-year tranche was seen at 189 bps offered, while the 10-year notes saw 214 bps offered, a bond source said late in the session.

J.P. Morgan Securities LLC was active bookrunner.

Proceeds are being used to finance a portion of the $1.1 billion acquisition of Norit, NV.

Cabot, a Boston-based maker of specialty chemicals and performance materials, was last in the market with a $300 million deal of 5% seven-year notes priced at 200 bps over Treasuries on Sept. 21, 2009.

Takeda sells $3 billion

Takeda Pharmaceutical priced $3 billion of notes (Aa3/AA-/) in two parts via Rule 144A and Regulation S, an informed source said.

There was about $7 billion on the books for the tranches, the source said.

The $1.5 billion of 1.031% three-year notes priced at a spread of 68 bps over Treasuries. The tranche was priced tighter than guidance in the 75 bps area, the source said.

A $1.5 billion tranche of 1.625% five-year notes sold at Treasuries plus 100 bps. The bonds sold tighter than talk in the 105 bps area.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Nomura Securities International Inc. ran the books.

The U.S. subsidiary of the Japanese pharmaceutical company is based in Osaka.

Mitsubishi's five-years

Mitsubishi priced $750 million of 1.875% five-year notes (A1/A+/) to yield Treasuries plus 135 bps, a source who worked on the deal said.

The deal was sold at the tight end of guidance in the range of 135 bps to 140 bps, the source said.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were bookrunners.

The trading company is based in Tokyo.

Icahn's crossover deal

Icahn Enterprises and Icahn Enterprises Finance priced an upsized, split-rated $300 million add-on to their 8% senior notes due Jan. 15, 2018 (Ba3/BBB-/) at 105.5, an informed source said.

The reoffer price, which came on top of price talk, rendered a 6.786% yield to maturity.

Jefferies & Co. was the bookrunner for this issue, which was upsized from $200 million.

Proceeds will be used for general corporate purposes.

The holding company for a variety of subsidiaries is based in New York City.

The original $1.15 billion issue priced at 99.275 to yield 8 1/8% in January 2010.

Monday's transaction left the total issue size at $2.45 billion.

Northstar preps preferreds

NorthStar Realty Finance will price an add-on to its 8.25% series B cumulative redeemable perpetual preferred stock, the company said in a regulatory filing.

The company sold $40 million of the preferreds in a reopening on March 14 and registered on June 12 to sell up to $62.5 million of the preferreds in an at-the-market offering.

The issue closed down 74 cents, or 3.13%, to $22.90.

The final price, a market source noted, was also around the area the deal is expected to price at, which would vie the paper around a 9% yield.

"The price just tanked," he said, following news of the reopening. "I don't know why they would want to do that."

UBS Securities LLC and Citigroup Global Markets Inc. are bookrunners.

Proceeds will be sued to make investments, to repurchase or pay liabilities and for general corporate purposes.

NorthStar is a New York-based real estate investment trust.

Paul A. Harris and Stephanie N. Rotondo contributed to this review

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