Intel sells $7 billion for Altera acquisition; credit spreads widen; UnitedHealth firms

By Aleesia Forni and Cristal Cody

Virginia Beach, July 22 – A hodgepodge of investment-grade names came to the primary market to raise more than $14.47 billion of new issuance on Wednesday.

Intel Corp. was the highlight of the session, bringing to market a $7 billion issue of senior notes to help fund its acquisition of Altera Corp. – a transaction valued at about $16.7 billion.

The “highly anticipated” four-part trade sold between 15 basis points and 25 bps tighter than initial price thoughts, a market source said.

In other primary happenings, International Bank for Reconstruction and Development (World Bank) priced $3.5 billion of global bonds, while FMS Wertmanagement sold a $1.5 billion new issue.

Both offerings came at the tight end of price guidance.

Other issuers including Kansas City Southern Railway Co., Fifth Third Bancorp and Valspar Corp. also priced deals on Wednesday despite the continued weaker market backdrop.

Comerica Inc. offered an upsized $525 million two-tranche new issue. Details were unavailable at press time.

The flurry of primary activity pushes the week’s total new issuance to nearly $34 billion, closing in on what was predicted to be around $35 billion to $40 billion of supply.

Investment-grade credit spreads softened over the day with the Markit CDX North American Investment Grade index 2 bps wider at a spread of 69 bps on Wednesday.

UnitedHealth Group Inc.’s new senior notes (A3/A+/A-) that priced on Monday were quoted tighter in trading earlier in the session.

Intel acquisition financing

Intel sold $7 billion of senior notes (A1/A+/A+) in four tranches during Wednesday’s session to help fund its acquisition of Altera, according to a market source.

A $1.75 billion 2.45% note due 2020 sold at 99.906 to yield 2.47%, or Treasuries plus 80 bps.

Price guidance was set in the Treasuries plus 85 bps area after having tightened from the Treasuries plus 100 bps area.

Also, $1 billion of 3.1% notes due 2022 sold at 99.956 to yield 3.107% with a spread of 105 bps over Treasuries.

Pricing was at the tight end of the Treasuries plus 110 bps area guidance. The tranche was initially talked in the Treasuries plus 130 bps area.

The Santa Clara, Calif.-based company sold $2.25 billion of 3.7% notes due 2025 with a spread of Treasuries plus 140 bps, at the tight end of guidance set in the 145 bps area over Treasuries. Initial talk was in the 155 bps area over Treasuries.

The notes sold at 99.851 to yield 3.718%.

Finally, $2 billion of 4.9% bonds due 2045 sold at 99.922 to yield 4.905%, or Treasuries plus 185 bps.

The notes priced at the tight end of the Treasuries plus 190 bps area guidance, which firmed from talk in the Treasuries plus 205 bps area.

BofA Merrill Lynch and Wells Fargo Securities LLC are the bookrunners.

Intel is a semiconductor chip maker. Altera is a semiconductor company based in San Jose, Calif.

World Bank global notes

International Bank for Reconstruction and Development (World Bank) priced a $3.5 billion offering of 2.5% 10-year global notes on Wednesday at mid-swap plus 14 bps, at the tight end of talk set in the mid-swaps plus 15 bps area, according to a market source and a company news release.

The notes (Aaa/AAA/AAA) priced at 99.693 to yield 2.535%.

The bookrunners are Barclays, Deutsche Bank Securities Inc., HSBC Securities and TD Securities.

The issuer is based in Washington, D.C.

FMS prices tight

Also on Wednesday, FMS Wertmanagement priced a $1.5 billion offering of 1.25% three-year global notes (Aaa/AAA/AAA) at mid-swaps flat, according to a market source and an FWP filing with the Securities and Exchange Commission.

The notes priced at the tight end of talk set in the mid-swaps plus 1 bp area.

Pricing was at 99.889 to yield 1.288% with a spread of 23.1 bps over Treasuries.

Barclays, BofA Merrill Lynch, HSBC and Societe Generale are the lead managers for the Munich-based financial services company’s deal.

Proceeds will be used to refinance existing liabilities in order to replace maturing, short-term money market instruments with long-term funding, and any remaining proceeds will be used for general corporate purposes.

Fifth Third taps market

Another financial issuer, Fifth Third Bancorp, also entered Wednesday’s primary.

The Cincinnati-based company priced $1.1 billion of 2.875% five-year senior notes (Baa1/BBB+/A) at Treasuries plus 123 bps, or 99.871 to yield 2.903%.

Guidance was set in the Treasuries plus 125 bps area after having tightened from initial talk in the Treasuries plus 135 bps area.

The joint bookrunners are Citigroup Global Markets Inc., Deutsche Bank Securities, Fifth Third Securities Inc. and Morgan Stanley & Co. LLC.

Proceeds will be used for general corporate purposes.

Kansas City Southern deal

Kansas City Southern Railway, meantime, priced on Wednesday a $500 million issue of 4.95% 30-year senior notes (Baa3/BBB-/BBB-) in line with talk at Treasuries plus 190 bps, according to a market source and a 424B3 filing with the SEC.

The notes sold at 99.733 to yield 4.967%.

BofA Merrill Lynch, Citigroup and Morgan Stanley are the bookrunners.

Proceeds will be used to repay outstanding commercial paper, to repurchase shares of common stock and for general corporate purposes.

The notes are fully and unconditionally guaranteed by Kansas City Southern.

Based in Kansas City, Mo., the transportation holding company has railroad investments in the United States, Mexico and Panama.

Valspar prices tight

Valspar priced $350 million of 3.95% senior notes due Jan. 15, 2026 on Wednesday with a spread of Treasuries plus 168 bps, according to a FWP filed with the SEC.

The notes (Baa2/BBB) sold at the tight end of guidance set in the 170 bps area over Treasuries. Initial talk was set in the range of Treasuries plus 185 bps to 190 bps.

Pricing was at 99.56 to yield 4.002%.

BofA Merrill Lynch, HSBC Securities, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the bookrunners.

Proceeds will be used to repay borrowings under the company’s term loan credit facility and for general corporate purposes.

The coating and paint manufacturer is based in Minneapolis.

JPMorgan preferreds price

The preferred space saw JPMorgan Chase & Co. price $1.1 billion of 6.15% $25-par series BB noncumulative perpetual preferred stock (expected ratings: Baa3/BBB-/BBB-) at par on Wednesday, according to a market source.

J.P. Morgan Securities LLC is the bookrunner. Joint lead managers include BofA Merrill Lynch, Citigroup, Morgan Stanley, UBS Securities LLC and Wells Fargo Securities.

Dividends will be payable quarterly. The preferreds become redeemable on or after Sept. 1, 2020 at par plus accrued dividends.

Additionally, the bank can redeem the preferreds in whole within 90 days of a regulatory capital treatment event.

The New York-based company will apply to list the new securities on the New York Stock Exchange.

Proceeds will be used for general corporate purposes.

UnitedHealth improves

UnitedHealth’s 1.9% notes due 2018 tightened to 77 bps offered in secondary trading earlier on Wednesday, a market source said.

The company sold $1.5 billion of the notes on Monday at Treasuries plus 85 bps.

UnitedHealth’s 2.7% notes due 2020 improved to 93 bps offered, better than where the company priced the $1.5 billion tranche at Treasuries plus 100 bps.

UnitedHealth’s 4.75% bonds due 2045 were quoted in trading at 156 bps offered.

The company sold $2 billion of the bonds at 165 bps over Treasuries.

UnitedHealth is a diversified health company based in Minnetonka, Minn.

Stephanie N. Rotondo contributed to this review

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