Solar Star, NRW.Bank tap primary as yields rise; Agilent notes weaken, CDS costs balloon out

By Aleesia Forni and Andrea Heisinger

New York, June 20 - Issuance in the high-grade bond market Thursday was limited to Solar Star Funding LLC alongside a reopening of floating-rate notes from Germany's NRW.Bank.

Solar Star brought a sale that was announced earlier in June. The $1 billion of senior secured notes due 2035 sold under Rule 144A and Regulation S. The size was increased from $700 million, a source said.

NRW added $150 million to its floaters due Jan. 31, 2017. The tap will bring the total issuance to $650 million.

The primary dealt with blowback from Federal Reserve chairman Ben Bernanke's comments made after the conclusion of a two-day Fed meeting of the Federal Open Market Committee on Wednesday.

Bernanke signaled that quantitative easing efforts that include bond buyback could be pared down at the end of the year if unemployment and other economic measures improve.

Those that got shut out of the market Wednesday, when no investment-grade bonds were priced, were able to go Thursday. Some likely put off issuance until the coming week, when market conditions may have time to settle and improve.

"Everyone was looking at yields today," a market source said. "Not a great day out there."

Treasury yields went up overnight after the Fed announcement brought renewed fears to the bond market.

The Markit CDX North American Investment Grade index was 5 basis points wider at a spread of 93 bps on Thursday.

"[Today's session] was a mess," one trader said near the close, as spreads in the high-grade secondary market were wider on the day.

The trader quoted Agilent Technologies, Inc.'s recent deal 17 bps wider compared to Wednesday's close.

Investment-grade bank and brokerage credit default swap costs ballooned out on Thursday, according to a market source.

Bank of America Corp.'s CDS costs were 20 bps wider at 130 bps bid, 140 bps offered. Citigroup Inc.'s CDS costs were 17 bps wider at 120 bps bid, 130 bps offered. JPMorgan Chase & Co.'s CDS costs rose 11 bps to 94 bps bid, 101 bps offered. Wells Fargo & Co.'s CDS costs were 7 bps wider at 72 bid, 79 bps offered.

Merrill Lynch's CDS costs rose 15 bps to 115 bps bid, 125 bps offered. Morgan Stanley's CDS costs widened 24 bps to 170 bps bid, 180 bps offered. Goldman Sachs Group, Inc.'s CDS costs were 23 bps wider at 160 bps bid, 165 bps offered.

Solar Star upsizes

Solar Star Funding sold $1 billion of 5.375% senior secured notes due 2035 (Baa3/BBB-/BBB-) at par to yield 5.375%, an informed source said.

The size was increased from an initial $700 million.

Pricing was at a spread of 295.6 bps over Treasuries.

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

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

Proceeds are being used to fund a portion of construction, start-up and transaction financing costs of the project scheduled to be completed in October of 2015.

Solar Star uses its revenue derived from two crystalline, single-axis tracking photovoltaic plants to support debt payment. The project is being built in Kern and Los Angeles counties in California.

The Solar Star project, and the bond issue, is sponsored by Des Moines-based electric and natural gas pipeline company MidAmerican Energy Holdings Co.

NRW's tap

NRW.Bank reopened its issue of floating-rate notes due Jan. 31, 2017 to add $150 million, a market source said.

The notes (Aa1/AA-/) have a coupon of Libor plus 25 bps and priced at 99.971 to yield Libor plus 26 bps.

Total issuance will be $650 million including $500 million that priced Jan. 26, 2010 under Rule 144A.

Bookrunners were Morgan Stanley & Co. LLC and RBC Capital Markets LLC.

The financial development products and services company is based in Dusseldorf, Germany.

Agilent notes weaken

Tuesday's offering from Agilent Technologies, Inc. traded 8 bps wider compared to levels seen earlier during the session.

A trader quoted the notes at 198 bps bid, 193 bps offered near the end of the session, 17 bps up compared to Wednesday's close.

The $600 million of 3.875% 10-year senior notes were sold at a spread of Treasuries plus 175 bps on Tuesday.

The bioanalytic and electronic measurement technology company is based in Santa Clara, Calif.

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