Merck sells in six parts; AmEx, Total System price; Merck deal in focus in secondary market

By Aleesia Forni and Andrea Heisinger

New York, May 15 - Merck & Co., Inc. had the marquee sale in Wednesday's high-grade primary, selling $6.5 billion in six tranches.

The sale included maturities in 2016, 2018, 2023 and 2043, with the two shortest-term bonds also having floating-rate tranches.

There was plenty of other activity from American Express Co., Lorillard Tobacco Co. and Total System Services, Inc.

AmEx sold $1.85 billion of five-year notes with both fixed-rate and floating-rate tranches.

Cigarette maker Lorillard priced $500 million of 10-year notes.

Total System Services tapped the market for $1.1 billion of notes split evenly between maturities in 2018 and 2023.

Issuance volume is expected to go downhill the rest of the week.

"I think Merck was probably the largest [for the week]," one market source said.

"We weren't expecting something that large," the source added.

In the preferred stock market, UBS AG sold $1.5 billion of $100-par 10-year fixed-to-floating-rate contingent coupon notes. A trader saw the issue at $99.90 bid.

Entergy Louisiana LLC priced $100 million of $25-par 50-year first mortgage bonds.

A trader said the Entergy offering was "a small deal, no selling group." He pegged the issue at less a dime bid, less a nickel offered in the midday gray market.

The Markit CDX Series 20 North American Investment Grade index was 1 basis point tighter at a spread of 72 bps.

The new issue from Merck garnered a large amount of attention in the secondary market during Wednesday's session.

"Interestingly, it launched, but I'm not seeing any markets," one market source noted late during the session, adding that Merck priced "such a large deal."

However, later near the session's close, the source saw the five-year notes at 45 bps offered and the 10-year notes at 83 bps offered.

In other trading, Tuesday's new issues from Toyota Motor Credit Corp., Hershey Co. and Kimco Realty Corp. were mixed during the session.

Toyota's fixed-rate notes and the new 10-year notes from Kimco Realty traded flat on the day, and Hershey's 10-year bonds traded 5 bps better.

Merck's $6.5 billion

Health-care company Merck priced $6.5 billion of notes (A2/AA/) in six tranches during the day's session, a market source said.

There was $500 million of three-year floating-rate notes priced at par to yield Libor plus 19 bps.

A second part was $1 billion of three-year notes sold at a spread of Treasuries plus 32 bps.

The third part was $1 billion of five-year floaters sold at par to yield Libor plus 36 bps.

A $1 billion tranche of five-year notes was priced at 52 bps over Treasuries. The notes were quoted at 45 bps offered near the end of the session.

The $1.75 billion of 10-year bonds sold at a spread of Treasuries plus 87 bps. A trader saw the notes at 83 bps offered late during the day's trading.

Finally, there was $1.25 billion of 30-year bonds priced at a spread of Treasuries plus 102 bps.

The full terms of the trade were not available at press time.

The bookrunners were BNP Paribas Securities Corp., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds are being used to repurchase common stock and for general corporate purposes, including repayment of outstanding commercial paper and upcoming debt maturities.

Merck was last in the U.S. bond market with a $2.5 billion offering in three tranches on Sept. 10, 2012. That sale included a 1.1% note due 2018 priced at 50 bps over Treasuries, a 2.4% 10-year maturity sold at Treasuries plus 75 bps and a 3.6% 30-year bond priced at 90 bps over Treasuries.

The health-care company is based in Whitehouse Station, N.J.

AmEx prices tight

American Express sold $1.85 billion of five-year notes (A3/BBB+/A+) in two tranches, an informed source said.

An $850 million tranche of five-year floating-rate notes priced at par to yield Libor plus 59 bps.

The second part was $1 billion of 1.55% five-year notes sold at a spread of Treasuries plus 75 bps.

Whispered guidance on the fixed-rate tranches was in the Treasuries plus 80 bps area, with the floaters talked at the equivalent over Libor, the source said.

Citigroup Global Markets Inc., Goldman Sachs & Co., JPMorgan and UBS Securities LLC were the bookrunners.

Proceeds are being used for general corporate purposes, including repayment of debt maturing in 2013.

The charge and credit card and travel services company is based in New York.

Lorillard sells 10-year notes

Lorillard Tobacco was in the market with a $500 million sale of 3.75% 10-year senior notes (Baa2/BBB-/BBB) priced at Treasuries plus 180 bps, according to an informed source and an FWP filing with the Securities and Exchange Commission.

Initial price talk on the sale was in the high 100 bps over Treasuries area, the source said.

The active bookrunners were Barclays, Goldman Sachs and Wells Fargo Securities LLC. Passives were Fifth Third Securities Inc., JPMorgan and RBS Securities Inc.

Proceeds are being added to the company's general funds and used for general corporate purposes.

There is a guarantee on the notes from Lorillard, Inc.

The Greensboro, N.C.-based cigarette maker was last in the U.S. bond market with a $500 million sale of five-year notes on Aug. 16, 2012.

Total's $1.1 billion

Total System Services was in the market with a $1.1 billion sale of senior notes (Baa3/BBB+/) due 2018 and 2023, a market source said.

A $550 million tranche of 2.375% five-year notes sold at a spread of Treasuries plus 155 bps.

The second tranche was $550 million of 3.75% 10-year bonds priced at 190 bps over Treasuries.

JPMorgan was the active bookrunner while Mitsubishi UFJ Securities (USA) Inc. was passive.

Proceeds are being used to pay for a portion of the $1.4 billion acquisition of NetSpend Holdings, Inc. along with related fees and expenses.

There is a mandatory call at 101 on the 10-year notes if the merger is not done by Nov. 15.

The payment solutions provider is based in Columbus, Ga.

UBS does hybrid

UBS priced $1.5 billion of 4.75% $100-par fixed-to-floating-rate contingent coupon notes (expected ratings: BBB-/BBB+) due May 22, 2023, a market source said.

UBS Securities LLC was the global coordinator and arranger. The bookrunners were Barclays, BBVA, Credit Agricole, Danske, HSBC Securities, ING, Banca IMI, Lloyds Securities, Mizuho Securities LLC, RBS Capital LLC, Santander, UBS Securities and UniCredit.

The notes can be called on May 22, 2018. After that date, the coupon is reset to the prevailing five-year mid-market swap rate plus 376.5 bps.

The notes are convertible into equity upon the earlier of the bank's common equity tier 1 ratio falling below 5% or upon the occurrence of a viability event.

UBS is a Zurich-based bank with a U.S. headquarters in New York.

Entergy's $25-par bonds

Entergy Louisiana sold $100 million of 4.7% $25-par first mortgage bonds due June 1, 2063, according to an FWP filed with the SEC.

Morgan Stanley & Co. LLC and Wells Fargo are the joint bookrunners.

The Jefferson, La.-based energy provider will apply to list the notes on the New York Stock Exchange.

Proceeds will be used for general corporate purposes.

Toyota unchanged

Toyota Motor Credit's $750 million of 0.8% three-year notes were unchanged on Wednesday at 42 bps bid, 37 bps offered, according to a trader.

The notes sold at a spread of Treasuries plus 42 bps.

Tuesday's two-part sale also included a $750 million tranche of three-year floating-rate notes priced at par to yield Libor plus 29 bps.

The funding arm of Toyota Motor Corp. is based in Torrance, Calif.

Kimco flat

Kimco Realty's $350 million of 3.125% 10-year notes, which priced during Tuesday's session at a spread of 125 bps over Treasuries, traded unchanged on the day.

The notes were quoted at 125 bps bid, 122 bps offered early during the session.

The real estate investment trust for neighborhood and community shopping centers is based in New Hyde Park, N.Y.

Hershey tightens

In other secondary action, Hershey's recent $250 million 2.625% 10-year notes traded 5 bps better at 67 bps bid, 66 bps offered on Wednesday.

The notes sold on Tuesday to yield Treasuries plus 72 bps.

The maker of chocolate and confectionery products is based in Hershey, Pa.

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.