Primary activity resumes with Johnson & Johnson, Union Pacific deals; MUFG, Goldman Sachs firm

By Aleesia Forni and Cristal Cody

New York, Feb. 25 – Johnson & Johnson led another deluge of new deals to Thursday’s primary as issuers rushed to take advantage of strong market conditions.

General Motors Financial Co. Inc., Union Pacific Corp., Kellogg Co. and JPMorgan Chase & Co. were among the other names bringing more than $16.2 billion of paper to the investment-grade new issue market.

Orders piled into Johnson & Johnson’s $7.5 billion seven-part trade. The final book was more than 3.5 times oversubscribed, with tranches tightening by between 13 basis points and o 20 bps inside initial price thoughts.

The slew of issuers accessing the primary comes on the heels of what was a lull in issuance on Wednesday.

Still, helped by frenzied days of issuance on Monday and Tuesday, this week’s supply sits at around $45 billion so far.

One market source noted that he would “not at all” be surprised to see primary activity to close out the week on Friday due to the highly supportive market backdrop.

New bank and financial paper traded mostly better over the day.

Mitsubishi UFJ Financial Group, Inc.’s 3.85% senior notes due 2026 firmed 4 bps in the secondary market.

Goldman Sachs Group Inc.’s 3.75% senior notes due 2026 headed out 4 bps tighter.

Citigroup Inc.’s 3.7% subordinated notes due 2026 firmed 5 bps.

Morgan Stanley’s 3.875% senior notes due 2026 traded 4 bps better.

Deutsche Bank AG’s 4.1% notes due 2026 eased 7 bps during the session but traded more than 30 bps better since the bank announced a tender offer on Feb. 12 to purchase up to €3 billion of euro-denominated notes and $2 billion of dollar-denominated senior notes.

Deutsche Bank reported on Tuesday that it had completed the Europe tender with the purchase of €1.27 billion of senior debt. The tender for the U.S. securities is open until March 11.

The Markit CDX North American Investment Grade index closed the day 3 bps tighter at a spread of 112 bps.

Johnson & Johnson seven-parter

Johnson & Johnson priced $7.5 billion of senior notes (Aaa/AAA/AAA) in seven parts on Thursday, a market source said.

A $700 million tranche of 1.125% three-year notes sold with a 27 bp spread over Treasuries.

The notes sold at the tight side of the Treasuries plus 30 bps area guidance, which tightened from the Treasuries plus 40 bps area.

A $300 million three-year floater sold at Libor plus 27 bps after being talked at the Libor equivalent to the fixed-rate tranche.

And $1 billion of 1.65% five-year notes sold at Treasuries plus 47 bps.

Guidance was in the Treasuries plus 50 bps area following initial talk in the Treasuries plus 60 bps area.

Also priced was $500 million of 2.05% seven-year notes at 62 bps over Treasuries.

Pricing came at the tight side of the Treasuries plus 65 bps area guidance. Initial talk was in the Treasuries plus 75 bps area.

The company also sold $2 billion of 2.45% 10-year bonds with a spread of Treasuries plus 75 bps.

Price guidance was in the Treasuries plus 75 bps to 80 bps range. The notes were talked in the Treasuries plus 95 bps area.

And $1 billion of 3.55% 20-year bonds sold at Treasuries plus 100 bps.

The bonds were guided in the range of Treasuries plus 100 bps to 105 bps, tightened from talk in the Treasuries plus 120 bps area.

Finally, $2 billion of 3.7% 30-year bonds sold at Treasuries plus 115 bps.

The tranche was guided in the range of Treasuries plus 115 bps to 120 and initially talked in the Treasuries plus 135 bps area.

Proceeds will be used to repay commercial paper and for other general corporate purposes.

BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. are the bookrunners.

The consumer products company is based in New Brunswick, N.J.

JPMorgan five-year notes

Thursday’s primary also hosted JPMorgan Chase, which priced $3.25 billion of five-year fixed- and floating-rate notes (A3/AA+), according to an informed source.

There was a $2.5 billion piece sold at 99.925 to yield 2.556%, or 140 bps over Treasuries.

A $750 million tranche of floating-rate notes sold at par to yield Libor plus 148 bps.

The fixed-rate tranche was talked in the 150 bps area over Treasuries, and the floating-rate tranche was talked at the Libor equivalent to the fixed-rate tranche.

J.P. Morgan Securities LLC is the bookrunner.

The New York City-based financial services company plans to use the proceeds for general corporate purposes.

GM Financial prices tight

In another financial new deal, GM Financial sold $2.75 billion of senior notes (Ba1/BBB-/BBB-), according to an informed source.

There was $1.5 billion of 4.2% five-year notes sold at 99.929 to yield 4.216%, or Treasuries plus 305 bps.

The notes sold at the tightest side of the Treasuries plus 365 bps area guidance. Initial talk was in the 375 bps area over Treasuries.

And $1.25 billion of 5.25% 10-year bonds sold at 99.639 to yield 5.297%, or Treasuries plus 360 bps.

Guidance was in the 365 bps area over Treasuries following initial talk in the Treasuries plus 375 bps area.

Plans for a five-year floater were dropped prior to the deal’s launch.

Credit Agricole, JPMorgan, Lloyds Securities, Mizuho Securities and Societe Generale are the joint bookrunners.

General Motors Financial is the Fort Worth-based finance subsidiary of General Motors Co.

Kellogg offering

And Kellogg was in Thursday’s primary with a $1.4 billion offering of senior notes (Baa2/BBB/BBB) in two tranches, according to a market source and an FWP filed with the Securities and Exchange Commission.

The Battle Creek, Mich.-based issuer sold $750 million of 3.25% 10-year notes with a spread of Treasuries plus 157 bps, at the tight side of guidance set in the 160 bps area over Treasuries.

Initially, talk was in the 180 bps area over Treasuries.

Pricing was at 99.896 to yield 3.262%.

Also, $650 million of 4.5% 30-year bonds sold at Treasuries plus 200 bps. The notes sold at 99.003 to yield 4.561%.

Guidance was in the Treasuries plus 205 bps area after having firmed from initial price thoughts in the Treasuries plus 220 bps area.

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., JPMorgan and Wells Fargo Securities LLC are the bookrunners.

The maker of cereal and convenience foods will use the proceeds to fund a tender offer and to repay commercial paper borrowings.

Union Pacific notes

Elsewhere, Union Pacific sold $1.35 billion of senior notes (A3/A) in new and reopened tranches, according to a market source.

A $500 million 10-year tranche sold at Treasuries plus 115 bps. Pricing was at 99.058 to yield 2.859%.

Also, a $600 million 4.05% 30-year note sold at 98.682 to yield 4.127%, or 155 bps over Treasuries.

The offering also included a $250 million add-on to the company’s existing 4.375% notes due Nov. 15, 2065. The tranche sold at 95.106 to yield 4.627% with a spread of Treasuries plus 205 bps.

The original $400 million of notes priced June 16, 2015 at 96.043 to yield 4.577%, or Treasuries plus 170 bps.

All tranches of the sale sold at the tightest side of guidance.

Citigroup, Credit Suisse Securities (USA) LLC, JPMorgan and Morgan Stanley are the joint bookrunners.

Proceeds from the offering will be used for general corporate purposes, including the repurchase of common stock.

The railroad transportation company is based in Omaha.

Intact, RBC price

In the Canadian primary market on Thursday, Intact Financial Corp. priced C$250 million of 3.77% 10-year senior medium-term notes at 99.983 to yield 3.772% and a spread of 255 bps over the interpolated Government of Canada bond curve.

Royal Bank of Canada brought an upsized C$750 million of non-cumulative rate reset preferred shares with a 5.5% annual dividend for the initial period ending Aug. 24, 2021.

The bank sold 30 million shares of the series BM non-viability contingent capital preferred stock in the offering that was upsized from C$300 million, or 12 million shares.

“That was impressive,” one source said. “It’s a retail market, and some [wondered] if the market may not be able to absorb all the market’s capital requirements for the preferred shares.”

Mitsubishi tight

Mitsubishi UFJ Financial Group’s 3.85% notes due 2026 headed out about 4 bps tighter at 203 bps bid on Thursday, a market source said.

The company sold $2.5 billion of the notes (A1/A) in a $5 billion three-tranche offering on Tuesday at a spread of Treasuries plus 215 bps.

The financial services company is based in Tokyo.

Goldman firms

Goldman Sachs Group’s 3.75% notes due 2026 improved 4 bps from Wednesday's session to 196 bps bid, according to a market source.

Goldman sold $1.75 billion of the notes (A3/BBB+/A) on Monday at 203 bps over Treasuries as part of a $3.6 billion three-tranche offering.

The financial services company is based in New York City.

Deutsche Bank softens

Deutsche Bank’s 4.1% notes due 2026 eased 7 bps in secondary trading on Thursday to 282 bps bid, according to a market source.

Deutsche Bank sold $750 million of the notes (A3/BBB+/A) on Jan. 8 at a spread of Treasuries plus 200 bps.

The bank is based in Frankfurt.

Citigroup stronger

Citigroup’s 3.7% notes due 2026 firmed 5 bps during the day to 178 bps bid, a market source said.

Citigroup sold $2 billion of the notes (Baa1/BBB+/A) on Jan. 5 at a spread of Treasuries plus 148 bps.

The financial services company is based in New York.

Morgan Stanley improves

Morgan Stanley’s 3.875% notes due 2026 traded 4 bps tighter on Thursday at 188 bps bid, a market source said.

Morgan Stanley sold $3 billion of the notes (A3/BBB+/A) on Jan. 22 at 185 bps over Treasuries.

The financial services company is based in New York City.

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