High-grade primary market hosts flurry of issuance; Home Depot, HSBC mostly unchanged

By Aleesia Forni and Cristal Cody

Virginia Beach, Sept. 8 – An onslaught of new issuance hit the investment-grade primary market on Tuesday to open the shortened week.

Taking full advantage of the better market tone, nine borrowers raised $12.71 billion during the session.

Automatic Data Processing Inc. and Bank of Tokyo Mitsubishi UFJ Ltd. each entered the primary with $2 billion new issues, respectively.

Home Depot Inc., meantime, sold $1.5 billion of notes in two parts after scrapping plans for a two-year floating-rate tranche of notes prior to the deal’s launch.

Also on Tuesday, Canadian Pacific Railway Co. issued $1.2 billion of notes in a sale that included a rare 100-year bond, and Santander UK Group Holdings plc sold $1.5 billion of subordinated notes in two parts between 20 basis points and 25 bps tighter than talk.

The busy session also hosted new issues from Goldman Sachs Group Inc., KeyCorp, John Deere Capital Corp. and Indianapolis Power & Light Co.

The flurry of deals priced during the session follows a nearly empty calendar last week, with only $1 billion priced prior to the Labor Day holiday weekend, and a slow month of August that hosted $50.28 billion of supply.

Looking forward, the busy primary is expected to continue throughout the week, with around $30 billion of issuance predicted.

Investment-grade credit spreads recovered on Tuesday and firmed 3 bps to 4 bps over the day.

The Markit CDX North American Investment Grade index headed out 4 bps tighter at a spread of 79 bps.

The index has ranged from a low spread of 60.4 bps to a high spread of 87.9 bps over the past 12 months, according to a Barclays Bank plc report on Tuesday.

In secondary trading, Home Depot’s existing bonds were unchanged to about 2 bps tighter.

Goldman Sachs’s existing paper traded flat on the short end to about 5 bps tighter on the long end.

HSBC Holdings plc’s 4.25% subordinated notes due 2025 were mostly unchanged in late afternoon trading.

Bank of Tokyo does deal

In primary happenings, Bank of Tokyo Mitsubishi priced $2 billion of notes (A1/A) on Tuesday in three tranches, according to an informed source.

Included in the sale was $500 million of 2.15% notes due Sept. 14, 2018 priced with a 113 bps spread over Treasuries.

The issue sold at the tight end of guidance set in the Treasuries plus 115 bps area, tightened from talk in the Treasuries plus 125 bps area.

Also, $500 million of floating-rate notes due Sept. 14, 2018 sold at par to yield Libor plus 102 bps.

Guidance was at the Libor equivalent to the fixed-rate tranche due 2018.

Finally, $1 billion of 2.75% notes due Sept. 14, 2020 sold at Treasuries plus 125 bps.

The notes were guided in the Treasuries plus 130 bps area following initial talk in the Treasuries plus 135 bps area.

Bookrunners for the Rule 144A and Regulation S sale were Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and MUFG.

The retail and commercial banking arm of Mitsubishi UFJ Financial Group is based in Tokyo.

ADP sells $2 billion

Automatic Data Processing priced $2 billion of senior notes (Aa3/AA) in five- and 10-year tranches on Tuesday, according to a market source and an FWP filed with the Securities and Exchange Commission.

The sale included $1 billion of 2.25% five-year notes priced with a spread of Treasuries plus 75 bps. The issue sold at 99.911 to yield 2.269%.

Pricing was at the tight end of the Treasuries plus 80 bps area guidance. Initial talk was set in the 95 bps area over Treasuries.

Also, $1 billion of 3.375% 10-year notes sold at 99.891 to yield 3.388%, or 120 bps over Treasuries.

The notes sold at the tight end of guidance set in the 125 bps area over Treasuries following initial talk in the 140 bps area.

Bookrunners are BofA Merrill Lynch, JPMorgan, BNP Paribas Securities Corp., Citigroup, Morgan Stanley and Wells Fargo Securities LLC.

Proceeds will be used to effect previously announced share repurchases over the next 12 to 24 months and for general corporate purposes.

The company provides business outsourcing and computing services to automobile and heavy equipment dealers. The company is based in Roseland, N.J.

Goldman two-parter prices

Also on Tuesday, Goldman Sachs Group sold a $1.75 billion offering of senior notes (A3/A-/A) due 2020 in fixed- and floating-rate tranches, according to a market source.

There was $1.25 billion of 2.75% fixed-rate notes priced at 99.796 to yield 2.794%, or Treasuries plus 127 bps.

A $500 million tranche of five-year floating-rate notes priced at par to yield Libor plus 120 bps.

Both tranches sold at the tight end of guidance.

Goldman Sachs & Co. is the bookrunner.

Proceeds will be used for general corporate purposes.

The financial services company is based in New York City.

John Deere taps market

John Deere Capital priced $1.5 billion of notes (A2/A) in four tranches on Tuesday, according to a market source.

A $350 million tranche of two-year notes sold at par to yield Libor plus 45 bps.

A $500 million 1.75% three-year tranche sold at 99.902 to yield 1.785%, or 75 bps over Treasuries.

The notes were guided in the Treasuries plus 77 bps area, tightened from talk in the Treasuries plus low-80 bps area.

Also, $325 million of 2.45% five-year notes priced at 99.935 to yield 2.464% with a spread of 95 bps over Treasuries.

Pricing was at the tight end of guidance set in the Treasuries plus 97 bps area. Talk was in the Treasuries plus low-100 bps area.

There was also $325 million of 3.4% 10-year notes sold with a spread of Treasuries plus 125 bps. Pricing was at 99.723 to yield 3.433%.

The issue sold at the tight end of the Treasuries plus 127 bps area guidance after having tightened from talk in the Treasuries plus low-140 bps area.

Citigroup, Goldman Sachs and HSBC Securities were the bookrunners.

The funding arm of agriculture and industrial equipment maker Deere & Co. is based in Moline, Ill.

Home Depot prices tight

Meantime, Home Depot Inc. priced a $1.5 billion two-part offering of senior notes (A2/A/A), according to a market source and an FWP filing with the SEC.

The offering included $500 million of two-year floating-rate notes sold at par to yield Libor plus 37 bps.

Pricing was at the tight end of the Libor plus 40 bps area guidance.

Also, a $1 billion tranche of 3.35% 10-year notes sold at 99.857 to yield 3.367%, or 117 bps over Treasuries.

The notes were guided in the 120 bps area over Treasuries following talk in the range of 130 bps to 135 bps over Treasuries.

Plans for a two-year fixed-rate note, which was talked in the range of Treasuries plus 55 bps to 60 bps, were dropped prior to the deal’s launch.

BofA Merrill Lynch, Deutsche Bank Securities Inc., JPMorgan and Morgan Stanley are the joint bookrunners.

Proceeds will be used for general corporate purposes, including the funding of the company’s acquisition of Interline and repurchasing shares of common stock.

Home Depot is an Atlanta-based home improvement retailer.

Santander sells notes

Santander UK Group Holdings was also in Tuesday’s market with a $1.5 billion two-part offering of tier 2 subordinated notes (Baa2/BB+/A-), a market source said.

The company sold $1 billion of 4.75% notes due 2025 at 99.724 to yield 4.785%, or 260 bps over Treasuries.

Also priced was $500 million of 5.625% notes due 2045 with a 270 bps spread over Treasuries. Pricing was at 99.412 to yield 5.666%.

Both tranches sold at the tight end of guidance.

Bookrunners for the Rule 144A and Regulation S sale are Santander, Citigroup, Deutsche Bank, Morgan Stanley and UBS Securities LLC.

The provider of banking and financial products and services is based in London.

Canadian Pacific taps market

Canadian Pacific Railway priced $1.2 billion of notes (Baa1/BBB+) in two tranches on Tuesday, according to a market source.

The issuer sold $300 million of 4.8% 20-year bonds at 99.541 to yield 4.836% with a spread of Treasuries plus 185 bps.

The notes sold at the tight end of guidance set in the 190 bps area over Treasuries after having firmed from talk in the 190 bps area over Treasuries.

A $900 million 6.125% 100-year bond sold at par, or 313.9 bps over Treasuries.

Guidance was set in the range of 6.125% to 6.25% following initial price thoughts in the 6.25% area.

Plans for an add-on to the company’s 4.8% notes due 2045 were dropped prior to the deal’s launch.

The bookrunners are Morgan Stanley, BofA Merrill Lynch, HSBC Securities, JPMorgan, RBC Capital Markets LLC, Citigroup and Wells Fargo.

Proceeds will be used for general corporate purposes.

The railroad operator is based in Calgary, Alta.

KeyCorp prices

The session also saw KeyCorp price $1 billion of 2.9% senior medium-term notes, series N, due Sept. 15, 2020 with a spread of 137.5 bps over Treasuries, according to an FWP filed with the SEC.

The notes (Baa1/BBB+/A-) priced on Tuesday at 99.982 to yield 2.904%.

Pricing was at the tight end of talk set in the 140 bps area over Treasuries.

KeyBanc Capital Markets, Goldman Sachs, JPMorgan and Morgan Stanley are the joint bookrunners.

Proceeds will be used for general corporate purposes.

The financial services company is based in Cleveland.

Indianapolis Power active

Rounding out the day’s new deals, Indianapolis Power & Light priced on Tuesday $260 million of 4.7% first mortgage bonds (A2/BBB+/BBB+) at Treasuries plus 175 bps, a market source said.

The notes sold at the tight end of guidance set in the 180 bps area over Treasuries.

Bookrunners were BofA Merrill Lynch and U.S. Bancorp Investments Inc.

The electric company is based in Indianapolis.

Home Depot unchanged

Home Depot’s 4.25% notes due 2046 were flat in secondary trading at 136 bps bid, a market source said.

The company sold $1.25 billion of the bonds (A2/A/A) on May 28 at Treasuries plus 135 bps.

The home improvement retailer is based in Atlanta.

Goldman flat

Goldman Sachs’ existing 2.6% notes due 2020 were unchanged on the day at 110 bps bid in the secondary market, a source said.

Goldman sold a $700 million add-on to the notes on March 25 at a spread of Treasuries plus 112 bps. The notes originally priced in a $1 billion offering on Jan. 20, 2015 at 135 bps over Treasuries.

HSBC stable

HSBC’s 4.25% notes due 2025 traded mostly flat from Friday at 218 bps bid, a market source said.

The notes were seen about 1 bp softer earlier in the day at 214 bps offered.

HSBC sold $1.5 billion of the notes (A2/A+) on Aug. 10 at a spread of Treasuries plus 212 bps.

The banking and financial services company is based in London.

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