IBM, Halliburton, Kinder Morgan sell multi-tranche deals; new IBM, Piedmont notes trade better

By Aleesia Forni and Andrea Heisinger

New York, July 29 - A strong crop of issuers jumped into Monday's session in the high-grade bond market including Halliburton Co., International Business Machines Corp., Kinder Morgan Energy Partners, LP and Piedmont Natural Gas Co., Inc.

Halliburton tapped the market for $3 billion of senior notes in four parts. The sale included tranches due 2016, 2018, 2023 and 2043.

Meanwhile, IBM brought a $2.15 billion sale in two tranches, including a two-year floating-rate note and a 10-year fixed-rate note. Both were sold tight to initial guidance.

Kinder Morgan sold $1.75 billion of senior notes in three parts. The sale included a long five-year note, a long 10-year note and a reopening of 30-year bonds.

Piedmont priced $300 million of 30-year senior notes.

A two-day Federal Reserve meeting starts on Tuesday and will likely leave the market wanting for issuers Wednesday when an announcement comes in the afternoon.

There are also payroll numbers for July coming out Friday, and the market will be watching that data for signs of when the Fed might start scaling back its economic stimulus program.

The Markit CDX North American Investment Grade index was 1 basis point wider at a spread of 76 bps early Monday.

In secondary market action, the positive tone seen early during the session continued throughout the day, one trader said near the session's close.

The day's new issues from Piedmont Natural Gas and IBM were met with solid demand, as both companies' fixed-rate issues traded tighter near the close.

The 30-year bonds from Piedmont Natural Gas traded 8 bps better late Monday, while IBM's 10-year notes were quoted 4 bps tighter.

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

Bank of America Corp.'s CDS costs were 4 bps higher at 110 bps bid, 115 bps offered. Citigroup Inc.'s CDS costs increased 4 bps to 105 bps bid, 110 bps offered. JPMorgan Chase & Co.'s CDS costs rose 1 bp to 81 bps bid, 86 bps offered. Wells Fargo & Co.'s CDS costs were also 1 bp higher at 65 bps bid, 70 bps offered.

Merrill Lynch's CDS costs rose 4 bps to 97 bps bid, 107 bps offered. Morgan Stanley's CDS costs were up 4 bps at 140 bps bid, 145 bps offered. Goldman Sachs Group, Inc.'s CDS costs were also 4 bps higher at 130 bps bid, 135 bps offered.

Halliburton's four tranches

Halliburton was in the market with a $3 billion sale of senior notes (A2/A/A-) in four tranches, an informed source said.

A $600 million tranche of three-year notes priced at Treasuries plus 43 bps. Initial talk was in the 45 bps area.

The second part was $400 million of five-year notes sold at 63 bps over Treasuries. Guidance was initially in the 65 bps area.

There was also $1.1 billion of 10-year notes priced at a spread of Treasuries plus 93 bps. Talk was initially in the 95 bps to 100 bps range.

Finally, there was a tranche of $900 million 30-year bonds sold at 110 bps over Treasuries. Initial guidance was in the 112.5 bps area.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and RBS Securities Inc. were the bookrunners.

Proceeds, along with cash on hand, will be used to fund the repurchase of common stock shares in a tender offer, along with related fees and expenses.

Halliburton, a Houston-based diversified energy services company, was last in the U.S. bond market with a $1 billion offering of senior notes in two parts on Nov. 8, 2011. That trade included a 3.25% 10-year note sold at 120 bps over Treasuries, and a 4.5% 30-year bond priced at Treasuries plus 140 bps.

IBM prices tight

International Business Machines priced $2.15 billion of notes (Aa3/AA-/A+) in two tranches, an informed source said.

A $650 million tranche of two-year floating-rate notes priced at par to yield Libor plus 3 bps. There was initial talk in the Libor plus 5 bps area.

The second part was $1.5 billion of 3.375% 10-year notes sold at a spread of Treasuries plus 83 bps. Initial guidance was in the mid to high 80 bps area.

A trader quoted the notes at 79 bps bid, 78 bps offered late Monday.

Citigroup, Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used for general corporate purposes.

IBM last tapped the U.S. bond market with a $2.25 billion offering in two tranches on May 2.

The information technology and computer company is based in Armonk, N.Y.

Kinder Morgan's $1.75 billion

Kinder Morgan Energy Partners tapped the market for $1.75 billion of senior notes (Baa2/BBB/BBB) in three tranches, an informed source said.

There was $800 million of 2.65% notes due 2019 sold at a spread of Treasuries plus 130 bps. Initial guidance was in the 150 bps area.

A $650 million tranche of 4.15% notes due 2024 priced at 160 bps over Treasuries. Talk was initially in the 170 bps area.

Finally, there was a reopening of 5% bonds due March 1, 2043 to add $300 million. Pricing was at a spread of Treasuries plus 170 bps.

The tranche was talked in the 185 bps area.

Total issuance for the bonds will be $700 million including $400 million priced at Treasuries plus 185 bps on Feb. 21.

Active bookrunners were BofA Merrill Lynch, Morgan Stanley and Wells Fargo Securities LLC.

Proceeds are being used to repay commercial paper and for general corporate purposes. Those purposes may include purchase of additional membership units of Copano and subsequent repurchase or redemption by Copano of a portion of outstanding 7.125% notes due 2021.

Kinder Morgan, a Houston-based pipeline, last priced bonds in a $1 billion offering in two parts on Feb. 21. That sale included 3.5% 10-year notes priced at 155 bps over Treasuries as well as the 5% 30-year bonds being reopened in Monday's sale.

Piedmont's long bond

Piedmont Natural Gas priced $300 million of 4.65% 30-year senior notes (A3/A/) at a spread of Treasuries plus 100 bps, a market source said.

The notes were quoted 8 bps tighter at 92 bps bid, 89 bps offered by a trader late during the session.

Bookrunners were BofA Merrill Lynch and U.S. Bancorp Investments Inc.

Proceeds are being used to finance capital expenditures, repay medium-term notes at maturity and repay outstanding short-term debt and unsecured notes under a commercial paper program as well as for general corporate purposes.

The natural gas distributor is based in Charlotte, N.C.

Paul Deckelman contributed to this review

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