Home Depot, Boston Properties, Kerry Group price as tone improves; new issues tighten in trading

By Aleesia Forni and Andrea Heisinger

New York, April 2 - The high-grade bond market got a jump start on Tuesday with sales from Home Depot, Inc., Boston Properties LP and Ireland's Kerry Group.

This modest supply was greater than the single deal done in Monday's session by International Flavors & Fragrances, Inc.

Home improvement retailer Home Depot sold $2 billion in two parts. The trade was split evenly between maturities of 2023 and 2043, both of which priced in line with talk.

Real estate investment trust Boston Properties sold $500 million of 10-year notes. There was roughly $2.7 billion of investor demand for the bonds, a source close to the sale said.

Ireland-based Kerry Group priced an upsized $750 million of 10-year notes via Rule 144A and Regulation S. The size was increased from $500 million. There was about $2.5 billion on the books for the trade, a source said.

A sale of five-year notes was announced by International Finance Corp. with pricing expected on Wednesday.

Barclays Bank plc is expected to price its planned sale of 10-year contingent capital notes in Wednesday's session. The sale was announced on March 28.

Digital Realty Trust Inc. was reportedly in the market with an upsized $225 million of perpetual redeemable preferred stock. The size was increased from $100 million.

"I thought price talk on that was kind of weak," a trader said, noting that talk was around 5.875%. "It doesn't look like there is a selling group."

The trader said the paper had been at $24.60 bid in the early morning gray market, but that it was closer to $24.75 bid at midday.

The high-grade bond market's tone was "much better" than Monday, a market source said after the close of Tuesday's session.

"We had people waiting to go off the bat," the source said. "Some couldn't go yesterday."

The new issues from Home Depot, Boston Properties and Kerry Group were all trading tighter in the secondary market, according to one trader.

Both tranches of Home Depot's offering were quoted 4 bps better, while Boston Properties' notes firmed 3 bps.

Kerry Group saw its notes trade 2.5 bps better near the end of the session.

Home Depot's two-parter

Home Depot priced $2 billion of senior notes (A3/A-/) in tranches due 2023 and 2043 on Tuesday, a market source said.

The $1 billion of 2.7% 10-year notes sold at a spread of Treasuries plus 85 bps. The notes were talked in the 85 bps area, the source said.

A market source quoted the notes 4 bps better at 81 bps bid near Tuesday's close.

A $1 billion tranche of 4.2% 30-year bonds priced at 110 bps over Treasuries. Guidance was in the 110 bps area.

The notes traded 4 bps better at 106 bps bid late Tuesday.

Barclays, BofA Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were bookrunners.

Proceeds are being used for general corporate purposes, including common share repurchases.

The Atlanta-based home improvement retailer was last in the U.S. bond market with a $2 billion trade of notes in two parts on March 28, 2011. That offering included a 4.4% 10-year note priced at 97 basis points over Treasuries and a 5.95% 30-year bond sold at 147 bps over Treasuries.

Kerry upsizes

Kerry Group was in the day's session with an upsized $750 million sale of 3.125% 10-year notes (Baa2/BBB+/) sold at Treasuries plus 137.5 bps, a source close to the trade said.

The notes were quoted 2.5 bps better at 135 bps bid near the end of Tuesday's session.

Initial price talk was in the Treasuries plus mid-100 basis points area, the source said, defining it as the 150 bps to 162.5 bps range. The size was increased from $500 million.

The sale was done under Rule 144A and Regulation S.

BofA Merrill Lynch, BNP Paribas Securities Corp., Citigroup Global Markets Inc. and RBS Securities Inc. were bookrunners.

The food ingredient and flavor maker, and consumer foods distributor is based in Tralee, Ireland.

Boston Properties' 10-years

Boston Properties sold $500 million of 3.125% senior notes due 2023 (Baa2/A-/BBB) to yield Treasuries plus 133 bps, an informed source said.

Whispered guidance was in the Treasuries plus 150 bps area, the source said.

In the secondary market, the notes were quoted 3 bps better at 130 bps bid, 128 bps offered.

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

Proceeds are being used for general corporate purposes, possibly including investment opportunities and debt reduction.

Boston Properties last sold notes in a $1 billion offering of 3.85% paper due Feb. 1, 2023 on May 31, 2012 at 230 bps over Treasuries.

The real estate investment trust for office properties is based in Boston.

Barclays 10-years prepped

Barclays Bank is expected to price its previously announced contingent capital notes (/BBB-/BBB-) due in April of 2023 on Wednesday, a market source said at the end of Tuesday's session.

There is an automatic note write-down if a capital adequacy triggering event occurs.

Bookrunners are Barclays, BNP Paribas Securities Corp., BofA Merrill Lynch, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

The unit of financial services company Barclays plc is based in London.

IFC plans bond

International Finance announced a sale of five-year notes (Aaa/AAA/), a market source said.

Pricing is expected on Wednesday, the source said.

Bookrunners are Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Nomura Securities International Inc.

The World Bank member and lender to the private sector in developing countries is based in Washington, D.C.

Digital Realty's preferreds

Digital Realty Trust was in the day's session with a $225 million of series G cumulative perpetual redeemable preferred stock, according to a market source and prospectus filed with the Securities and Exchange Commission.

The size of the trade was initially $100 million.

Joint bookrunners are BofA Merrill Lynch, Morgan Stanley & Co. Inc. and Wells Fargo Securities LLC.

The San Francisco-based real estate investment trust intends to list the new series of preferreds on the New York Stock Exchange under the ticker symbol "DLRPG."

Proceeds will be contributed to the operating partnership, which will use the funds to temporarily repay revolving credit facility borrowings, to acquire additional properties, to fund development opportunities and for general corporate purposes, including repurchasing or redeeming debt or preferred securities or a combination thereof.

Stephanie N. Rotondo contributed to this review

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