Southern Copper announces two-part deal as quiet week begins; trading 'light' during session

By Aleesia Forni and Andrea Heisinger

New York, Aug. 27 - There was a single deal announced in the high-grade bond market on Monday as Southern Copper Corp. said it would price notes in two tranches.

The Phoenix-based copper producer, which mostly operates in Latin America, announced it intends to bring two tranches to market with maturities of 10 years and 30 years. The bonds are not expected to be sold until the first week of September.

Sources were hesitant to give any sort of issuance estimate for the week, as there are only a couple of deals expected to price, and likely no offerings after Wednesday.

"It's pretty much shut down already," a source said of the primary market ahead of the Labor Day holiday.

A source said that Germany's KfW is looking to do a benchmark sale of five-year notes this week although timing and size are up in the air.

The same source also said that trading "seemed light on the day, but a little better than I expected."

Illinois Tool Works Inc.'s $1.1 billion 3.9% 30-year notes were quoted at 102 basis points offered near the end of the session after pricing at 105 bps over Treasuries on Aug. 21.

The Markit CDX Series 18 North American Investment Grade index was 1 bps tighter on Monday at a spread of 100 bps.

Investment-grade bank and brokerage credit default swaps costs were mixed on the day, according to a market source.

Bank of America's CDS costs tightened 1 bps to 222 bps bid, 227 bps offered. Citi's CDS costs also tightened 1 bps to 221 bps bid, 226 bps offered. J.P. Morgan's CDS costs were 1 bps wider at 118 bps bid, 123 bps offered.

Merrill Lynch's CDS costs were unchanged at 231 bps bid, 241 bps offered. Morgan Stanley's CDS costs were 1 bps tighter at 312 bps bid, 320 bps offered. Goldman Sachs' CDS costs unchanged at 242 bps bid, 250 bps offered.

Southern Copper's deal

Southern Copper announced a sale of senior notes (Baa2/BBB/BBB) in two tranches, according to a market source and FWP filing with the Securities and Exchange Commission.

The offering includes notes due 2022 and 2042. A source away from the trade said late Monday that pricing is not expected until next week.

Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Morgan Stanley & Co. LLC are bookrunners.

Proceeds are being used for general corporate purposes, including financing a capital expenditure program.

Southern Copper was last in the U.S. bond market with a $1.5 billion offering in two tranches on April 13, 2010. A 5.375% 10-year note from that trade priced at 162.5 bps over Treasuries while a 6.75% 30-year bond sold at 212.5 bps over Treasuries.

The integrated copper producer is based in Phoenix.

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