3M, Total, Caterpillar among high-grade deals; demand remains high; Alleghany's bonds tighten

By Aleesia Forni and Andrea Heisinger

New York, June 21 - The investment-grade market was bursting with bond deals on Thursday on low rates and upbeat sentiment out of the Federal Reserve meeting.

High-quality names like Caterpillar Inc., Target Corp., Total Capital International and 3M Co. mixed with BBB rated issuers Packaging Corp. of America, BioMed Realty, LP, Pioneer Natural Resources Co., Alleghany Corp. and Western Gas Partners, LP.

Caterpillar brought a $1.5 billion sale in three tranches, including floating-rate notes.

Total Capital priced $1.5 billion of five-year bonds.

Discount retailer Target was in the market with a $1.5 billion sale of 30-year bonds, and 3M sold an upsized $1.25 billion of notes due 2017 and 2022.

The 3M and Caterpillar sales each saw fierce demand, as did others.

"All the deals today were blowouts, to be honest," a syndicate source said.

Notes have priced tighter than guidance in the high-grade market during the past couple of weeks.

"There's good demand that leverages the price," the source said.

Most of Thursday's deals were smaller than $1 billion, including $400 million of 10-year notes from Packaging Corp. and a $250 million sale of 10-year notes from BioMed Realty.

Pioneer Natural Resources priced $600 million of 10-year notes to reduce debt under a credit facility. The deal was upsized from $500 million.

Insurance company Alleghany priced $400 million of 10-year senior notes, and Western Gas Partners sold $520 million of 10-year split-rated paper.

A deal of $25-par senior notes was priced by BGC Partners Inc. after it went overnight from Wednesday and was doubled in size to $100 million.

The high volume of deals was partly due to issuers mostly taking Wednesday off to see what announcement would come from the Fed's Federal Open Market Committee meeting. Another round of quantitative easing hasn't been taken off the table, and that along with the extension of Operation Twist brought some optimism to a market that's been alternately bogged down by news out of the euro zone and boosted by record-low Treasury yields.

Wells Fargo & Co. was the only corporate issuer in the high-grade market on Wednesday with a $2.75 billion offering in two tranches.

Friday should be quiet despite any momentum that may have built up on Thursday, a market source said.

"It should be pretty quiet," the source said. "I really don't think we'll see anything."

In the secondary market, Packaging Corp. and Target traded within 5 basis points of their original spreads, while Alleghany tightened 10 bps.

The Markit CDX Series 18 North American Investment Grade index widened 4 bps on Thursday to a spread of 118 bps.

3M sets record lows

3M priced an upsized $1.25 billion of bonds (Aa2/AA-/) in two maturities, a source who worked on the deal said.

The size of the trade was increased from $1 billion on demand, the source said.

The $650 million of 1% five-year notes sold at a spread of Treasuries plus 37 bps. The notes sold tighter than talk in the 45 bps to 50 bps range.

A $600 million tranche of 2% 10-year notes priced at 55 bps over Treasuries. The tranche also sold tighter than guidance in the 70 bps area.

The source said there was about $2.6 billion of demand for the five-year tranche and $2.3 billion for the 10-year notes.

Both tranches set new record-low coupons for their maturities, sources said.

The five-year tranche bested the 1.25% that International Business Machines Corp. set in a $2.5 billion deal on Feb. 1, according to Prospect News data.

The previous low coupon for a 10-year note was 2.3%. That was set by Procter & Gamble Co. on Feb. 1 and later tied by Colgate-Palmolive Co. in a deal on April 30.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC were the bookrunners.

3M is a multinational conglomerate based in Maplewood, Minn.

Caterpillar sells $1.5 billion

Caterpillar priced $1.5 billion of senior notes (A2/A/A) in three tranches, an informed source said.

There was about $9 billion of demand for the deal, the source said.

The $500 million of 0.95% three-year notes priced at 99.979 to yield 0.957% with a spread of Treasuries plus 55 bps. The notes were priced tighter than talk in the 65 bps area.

A second part was $500 million of 1.5% five-year paper sold at a spread of Treasuries plus 80 bps. The notes were priced tighter than guidance in the 90 bps area.

There was also $500 million of 2.6% 10-year bonds priced at a spread of 103 bps over Treasuries. The 10-year notes were sold much tighter than talk in the 115 bps area.

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

Proceeds are being used for general corporate purposes.

The heavy equipment maker is based in Peoria, Ill.

Total's five-year notes

Total Capital International sold $1.5 billion of 1.55% guaranteed five-year notes at a spread of Treasuries plus 87.5 bps, a source away from the trade said.

The notes (Aa1/AA-/) were priced at 99.813 to yield 1.589%.

The bookrunners were Barclays Capital Inc., Morgan Stanley and RBS Securities Inc.

Proceeds are being used for general corporate purposes.

The deal is guaranteed by Total SA.

Total was last in the market with a $2 billion offering with maturities in 2017 and 2022 on Feb. 14. The 1.5% five-year notes from that deal were priced at 78 bps over Treasuries.

The oil and gas company is based in Courbevoie, France.

Target sells long bond

Target sold $1.5 billion of 4% 30-year bonds (A2/A+/A-) at a spread of Treasuries plus 145 bps, a market source said.

Bank of America Merrill Lynch, Barclays and JPMorgan were the active bookrunners.

The deal widened 4 bps in the secondary to 149 bps bid, 146 bps offered, a market source said near the end of the day.

Proceeds are being used for general corporate purposes.

Target was last in the market with a $2.5 billion offering in two tranches on Jan. 9.

The discount merchandise chain is based in Minneapolis.

Pioneer upsizes

Pioneer Natural Resources priced an upsized $600 million of 3.95% 10-year senior notes (Baa3/BBB-/) at a spread of 240 bps over Treasuries, a source who worked on the trade said.

The deal size was increased from $500 million.

The active bookrunners were Citigroup and Deutsche Bank.

Proceeds are being used to reduce debt under a credit facility and to pay certain fees and expenses related the offering.

The oil and gas exploration and production company is based in Irving, Texas.

Alleghany prices 10-year notes

Alleghany was in the market with a $400 million sale of 4.95% 10-year senior notes (Baa2/BBB/) at 335 bps over Treasuries, a source close to the deal said.

The bonds tightened in the secondary to 325 bps bid, 323 bps offered, a market source said.

The bookrunners were Morgan Stanley, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

Alleghany, a New York-based insurance company, was last in the market with a $300 million sale of 5.625% 10-year notes on Sept. 15, 2010 priced at 295 bps over Treasuries.

Packaging Corp.'s $400 million

Packaging Corp. of America sold $400 million of 3.9% 10-year senior notes (Baa3/BBB/) at a spread of Treasuries plus 230 bps, a market source said.

The bonds traded 4 bps wider in the secondary at 149 bps bid, 146 bps offered, a market source said.

Bank of America Merrill Lynch, Deutsche Bank and Wells Fargo were the bookrunners.

Proceeds, together with cash on hand and/or borrowings under a revolving credit facility, are being used to redeem or acquire and retire $400 million of 5.75% notes due 2013.

The containerboard and corrugated products producer is based in Lake Forest, Ill.

BioMed sells guaranteed notes

BioMed Realty sold $250 million of 4.25% 10-year senior notes (Baa3/BBB-/) to yield 275 bps over Treasuries, an informed source said.

Wells Fargo was the active bookrunner.

Proceeds are being used to repay a portion of debt under an unsecured line of credit and for other general corporate purposes and working capital.

The deal is guaranteed by BioMed Realty Trust, Inc.

The San Diego-based real estate investment trust for lab and office space for the life science industry was last in the market with a $400 million issue of 3.85% five-year notes on March 23, 2011 at 195 bps over Treasuries.

Western Gas downsizes

Western Gas Partners sold a downsized $520 million of 4% 10-year senior notes (Baa3/BB+/BBB-) to yield Treasuries plus 250 bps, a market source said.

The size was initially $525 million.

RBS was the active bookrunner.

Proceeds are being used to repay amounts under a revolving credit facility and to pay down notes payable to Anadarko.

The midstream energy asset company is based in the Woodlands, Texas.

BGC doubles preferreds' size

BGC Partners priced $100 million of 8.125% $25-par 30-year senior notes, a trader told Prospect News.

Price talk was 8.125% to 8.25%, the trader said. The deal was upsized from $50 million.

There is a $15 million over-allotment option.

The company has applied to list the notes on the New York Stock Exchange under the ticker symbol "BGCA."

Wells Fargo was the bookrunner.

Proceeds will be used to repay short-term borrowings under an unsecured revolving credit facility and for general corporate purposes.

BGC is a New York-based brokerage company primarily servicing the wholesale financial and property markets.

JPMorgan wider

The secondary saw the $3 billion 6.3% issue due 2019 from JPMorgan Chase & Co. widen 2 bps to 189 bps bid.

JPMorgan priced the 10-year bonds on April 16, 2009 at 305 bps over Treasuries.

Nova Scotia tightens

Also in the secondary, Bank of Nova Scotia's 1.85% notes due 2015 tightened 1 bps on Thursday to 72 bps bid, according to a market source.

The bank priced the $1 billion issue at 147 bps over Treasuries in January.

Merrill Lynch tightens

Merrill Lynch's 6.875% notes due 2018 tighten 5 bps to 402 bps bid near the end of New York's session.

On April 22, 2008, the bank priced $5.5 billion of the 10-year notes at 320 bps over Treasuries.

Stephanie N. Rotondo contributed to this report

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