Heinz prices $10 billion megadeal for Kraft merger; Barclays tightens; Citi, Goldman stable

By Aleesia Forni and Cristal Cody

Virginia Beach, June 23 – H.J. Heinz Co. sold a $10 billion seven-part megadeal on Tuesday, highlighting another strong session for investment-grade bonds.

Heinz priced the deal to help fund the roughly $46 billion merger of the company with Kraft Foods Group Inc., which will be renamed Kraft Heinz Foods Co.

The behemoth offering was swamped with orders, reaching more than a $40 billion book shortly after midday, a market source said.

Tranches of the deal sold between 15 basis points to 25 bps tight of initial price thoughts.

The session also hosted a new deal from Pershing Square Holdings, Ltd. The company priced $1 billion of seven-year senior notes in line with talk.

Tuesday’s activity pushes the week’s total supply to roughly $12.76 billion, halfway towards what is expected to be around a $25 billion week.

Bank and financial paper traded unchanged to tighter over the day.

Barclays plc’s 2.875% notes due 2020 firmed 4 bps in secondary trading.

Citigroup Inc.’s 3.3% senior notes due 2025 were mostly unchanged.

Goldman Sachs Group Inc.’s 3.55% senior notes due 2025 headed out flat.

The Markit CDX North American Investment Grade series 23 index was unchanged at a spread of 65 bps.

Heinz acquisition financing

H.J. Heinz Co. priced a $10 billion seven-part bond offering (Baa3/BBB-/) on Tuesday, according to a market source.

The sale included a $1 billion 1.6% two-year note priced at 99.937 to yield 1.632%, or Treasuries plus 95 bps.

Guidance was set in the Treasuries plus 100 bps area, having tightened from talk in the Treasuries plus 110 bps area.

A second tranche was $1.5 billion of 2% three-year notes sold with a spread of 100 bps over Treasuries.

The notes sold at 99.8 to yield 2.069%.

Pricing was at the tight end of the Treasuries plus 105 bps area guidance. Initial talk was set in the Treasuries plus 120 bps area.

The company also sold $1.5 billion of 2.8% five-year notes at 99.773 to yield 2.849% with a spread of Treasuries plus 115 bps.

Price guidance was in the Treasuries plus 120 bps area, firmed from initial talk in the Treasuries plus 140 bps area.

There was also a $1 billion 3.5% seven-year note sold at 99.764 to yield 3.538%. The notes priced at Treasuries plus 140 bps.

Pricing was at the tight end of the Treasuries plus 145 bps area guidance, which tightened from the Treasuries plus 165 bps area talk.

A $2 billion 3.95% 10-year note priced at 99.867 to yield 3.966% with a spread of Treasuries plus 155 bps.

The tranche sold at the tight end of guidance set in the Treasuries plus 160 bps area. Initial talk was set in the Treasuries plus 180 bps area.

Also priced was $1 billion of 5% 20-year notes at 99.049 to yield 5.076%, or Treasuries plus 185 bps.

Price guidance was in the Treasuries plus 190 bps area, tightening from initial talk in the Treasuries plus 210 bps area.

Finally, $2 billion of 5.2% 30-year notes sold with a spread of 200 bps over Treasuries. Pricing was at 99.606 to yield 5.226%.

The tranche sold at the tight end of the Treasuries plus 205 bps area guidance, which had firmed from talk in the 225 bps area over Treasuries.

Plans for two- and three-year floating-rate tranches were dropped prior to the deal’s launch.

Proceeds will be used for the merger with Kraft Foods.

Barclays, J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Wells Fargo Securities LLC are bookrunners for the Rule 144A and Regulation S deal.

Heinz is a Pittsburgh-based food processing company. Kraft is a Northfield, Ill.-based food company.

Pershing Square

Also on Tuesday, Pershing Square Holdings priced $1 billion of 5.5% senior notes (/BBB/BBB+) due July 15, 2022 at par with a spread of 333.6 bps over Treasuries, according to market sources.

Deutsche Bank Securities Inc. and UBS Securities LLC managed the sale, which was done via Rule 144A and Regulation S.

The net proceeds from the offering will be used to make investments or hold assets in accordance with the company’s investment policy, including by way of rebalancing transactions with other funds managed by Pershing Square Capital Management LP, as well as to fund operating expenses.

The investment company is based in New York.

Barclays firms

Barclays’ 2.875% notes due 2020 firmed 4 bps on Tuesday to 143 bps bid in late afternoon trading, a market source said.

Barclays sold $1 billion of the notes (Baa3/BBB/A) on June 1 at Treasuries plus 142 bps.

The financial services company is based in London.

Citigroup stable

Citigroup’s 3.3% senior notes due 2025 traded flat to 1 bp weaker in the 143 bps area, according to a market source.

Citigroup sold $1.5 billion of the notes (Baa2/A-/A) on April 22 at Treasuries plus 135 bps.

The investment bank is based in New York.

Goldman unchanged

Goldman Sachs’ 3.5% notes due 2025 were unchanged on the day at 158 bps bid, a source said.

Goldman sold $800 million of the notes (Baa1/A-/A) in a March 25 reopening at 145 bps plus Treasuries.

The notes originally priced on Jan. 20 in a $1.7 billion offering at Treasuries plus 170 bps.

The financial services company is based in New York City.

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