McKesson, Kinder Morgan, Wyndham price bonds in packed primary; new bonds firm in secondary

By Andrea Heisinger and Cristal Cody

New York, Feb. 23 - McKesson Corp., Kinder Morgan Energy Partners, LP, Waste Management, Inc., American Honda Finance Corp., Wyndham Worldwide Corp. and Caterpillar Financial Services Corp. all sold bonds as part of a surge of new high-grade deals on Wednesday.

McKesson had the largest sale of the day at an upsized $1.7 billion in three parts. The size was increased from $1.5 billion, with $100 million each added to the notes due 2016 and 2021.

Another large sale came from pipeline operator Kinder Morgan. The Houston-based company priced $1.1 billion of bonds due in 2016 and 2041.

Waste Management tapped the market for $400 million of 10-year notes that priced at the tight end of guidance.

A $450 million sale of floating-rate notes due 2012 came from American Honda Finance. The size was increased from $300 million.

Another sale of short-term floaters came from Caterpillar Financial. The company priced $285 million of two-year notes.

Split-rated Wyndham Worldwide priced $250 million of 10-year notes off the high-grade syndicate. They sold much tighter than whispered guidance early in the day.

An upcoming deal was announced by Virgin Media Secured Finance plc. The unit of Virgin Media Inc. plans to sell the equivalent of £750 million of senior secured bonds due 2021.

There were a couple of reasons the high-grade market exploded with deals on Wednesday, sources said at the end of the day.

"People were sitting it out [Tuesday], and today looked good," a market source said.

Predictions of the market shrugging off continuing tensions overseas came true as issuers tapped the market amid falling yields.

"I think the yields were still attractive [to investors]," another source said. "We had some infrequent issuers today - not all names you've heard of."

Nearly all of those in the market were on the low end of the BBB ratings. McKesson, which the source specifically mentioned, last sold bonds on Feb. 9, 2009 in a $700 million offering in two parts. Kinder Morgan last priced a deal totaling $1 billion in two parts on May 12, 2010.

Provided there's still paper left on the calendar, more deals are expected for Thursday, the market source said.

"I don't think we've reached the minimum volume for the week, so let's hope," he said, referring to estimates of $10 billion to $12 billion on the low end.

New bonds trade stronger

Overall investment-grade Trace volume stayed strong on Wednesday, up 8% at more than $13 billion, a source said.

In the secondary market, the new bonds were seen trading mostly stronger.

Kinder Morgan's notes due 2016 firmed more than 10 basis points in trading, sources said.

All three of McKesson's tranches traded stronger in the secondary market, traders said. Waste Management's 10-year notes also were tighter in the secondary.

Bond spreads were weaker on the day. The Markit CDX Series 14 North American investment-grade index eased 2 bps to a spread of 86 bps, according to Markit Group Ltd.

Treasuries widened in the two-year to 10-year spread on a bond sell-off Wednesday after weak bidding in the auction of five-year debt.

The 10-year benchmark note yield rose 2 bps to 3.48%. The 30-year bond made small gains on Wednesday, sending the yield down 2 bps to 4.58%.

The Treasury auctioned $35 billion of five-year notes at a yield of 2.19%.

"Today's five-year auction was a predictably sloppy event, though the expected concession that we believed would materialize never came through," Nomura Securities International strategists said in a research note. "Much like Tuesday's two-year, there was light customer demand with a dealer bid the strongest underpinning of the auction."

Kinder Morgan prices

Kinder Morgan priced $1.1 billion of senior notes (Baa2/BBB/BBB) in two parts by mid-afternoon, a market source said.

The $500 million of 3.5% five-year notes priced at a spread of Treasuries plus 135 bps. They priced at the tight end of guidance in the range of 135 to 140 bps.

The second part was $600 million of 6.375% 30-year bonds priced at 180 bps over Treasuries. They were talked in the range of 180 to 185 bps and priced at the tight end of that.

Morgan Stanley & Co. Inc., RBS Securities Inc. and UBS Securities LLC were active bookrunners.

Proceeds are going to repay short-term debt and for general partnership purposes.

In secondary trading, Kinder Morgan Energy Partners' notes due 2016 firmed to 121 bps bid, 118 bps offered, traders said.

The bonds due 2041 traded mostly flat in the afternoon at 180 bps bid, 177 bps offered.

The pipeline is based in Houston.

McKesson upsizes

Health-care services and information technology provider McKesson sold an upsized $1.7 billion of notes (Baa2/A-/A-) in three maturities, according to a market source late in the day.

The size was originally at a minimum of $1.5 billion, with $500 million in each tranche, a source said.

The $600 million tranche of 3.25% five-year notes priced at a spread of Treasuries plus 115 bps.

A second part was $600 million of 4.75% 10-year notes that sold at 130 bps over Treasuries.

The final tranche was $500 million of 6% 30-year bonds that priced at a spread of Treasuries plus 150 bps.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were the bookrunners.

Proceeds are going toward general corporate purposes, including repayment of borrowings under a senior bridge term loan agreement.

McKesson's tranches were active and tighter in the secondary market, traders said.

The notes due 2016 traded tighter at 108 bps bid, 104 bps offered.

The tranche of notes due 2021 firmed to 117 bps bid, 115 bps offered, a trader said.

McKesson's last tranche of bonds due 2041 tightened in trading to 137 bps bid, 133 bps offered.

The company is based in San Francisco.

Waste Management's 10-year

Waste Management priced $400 million of 4.6% 10-year notes (Baa3/BBB/BBB) to yield Treasuries plus 118 bps, said a source away from the sale.

They sold at the tight end of guidance in the 120 bps area, the source said.

Deutsche Bank Securities Inc. and RBS Securities were the bookrunners.

Proceeds are being used to repay $147 million of outstanding 7.65% senior notes maturing in March, plus interest of about $5.6 million. The remainder will be used for general corporate purposes including working capital, capital expenditures and funding of potential acquisitions and business investments.

The deal is guaranteed by subsidiary Waste Management Holdings, Inc.

Waste Management's 4.6% 10-year notes were seen trading tighter in the secondary market at 113 bps bid, 108 bps offered, a trader said.

Another trader saw the notes due 2021 slightly tighter on the bid side at 112 bps bid, 110 bps offered.

The company handles the collection, transfer, recycling and disposal of waste and is based in Houston.

Wyndham sells split-rated deal

Wyndham Worldwide priced $250 million of split-rated 5.625% 10-year notes (Ba1/BBB-) to yield 225 bps over Treasuries, a market source said.

Whispered price talk was in the 250 bps area and then revised down to 237.5 bps, a source said.

Bank of America Merrill Lynch, Credit Suisse Securities LLC and JPMorgan were the bookrunners.

Proceeds are being used to reduce debt, including the repurchase of $115.78 million of 3.5% convertible notes due 2012 in a tender offer; for the repayment of borrowings under a revolving credit facility and for general corporate purposes.

In late secondary trading, Wyndham's notes due 2021, which priced at 99.139, were seen at 99.50 offered, a trader said.

Another source said the notes were seen at 99 5/8 bid, par 1/8 offered, or 220 bps bid, 215 bps offered.

The hospitality company is based in Parsippany, N.J.

American Honda sells floaters

American Honda Finance sold an upsized $450 million of floating-rate notes due 2012 (A1/A+) by early afternoon at par to yield Libor plus 22 bps, an informed source said.

The size of the deal was increased from $300 million, the source said.

The bookrunners were Bank of America Merrill Lynch, Deutsche Bank and JPMorgan.

The U.S. financing arm of Honda Financial Services is based in Torrance, Calif.

CAT Financial's short bonds

Caterpillar Financial Services priced $285 million of two-year medium-term floating-rate notes (A2/A/A) at par to yield Libor plus 16 bps, according to an FWP filing with the Securities and Exchange Commission.

SG Americas Securities LLC was the bookrunner.

The financing arm of heavy equipment maker Caterpillar is based in Nashville.

Virgin Media plans deal

Virgin Media Secured Finance is planning a sale of the equivalent of £750 million of 10-year senior secured notes, according to a press release and market sources on Wednesday.

The notes (Baa3/BBB-/BBB-) are part of a multi-tranche deal that also includes euro-denominated notes, a source said.

Price talk for the dollar-denominated bonds was at 187.5 to 200 bps late on Wednesday.

They are being priced under Rule 144A and Regulation S.

BNP Paribas Securities Corp. and Deutsche Bank are active bookrunners. HSBC Securities Inc., RBS Securities, JPMorgan and UBS Securities LLC are passives.

Proceeds are being used to repay portions of A and B tranches under a senior credit facility.

The entertainment company is based in London.

CDS costs weaker

The cost of credit default swaps to protect holders of brokerage house/investment bank paper was still weak on Wednesday, a source said.

Banks were seen 2 to 4 bps wider. The CDS costs for brokers was 2 to 3 bps wider.

Stephanie N. Rotondo contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.