Florida Gas Transmission prices bonds; appetite for deals remains high; RBC, industrials firm

By Andrea Heisinger and Cristal Cody

New York, July 8 - After two days of steady volume, new deals fell off on Thursday as supply waned. There was one straight investment-grade issue from Florida Gas Transmission Co. LLC and a few on the emerging markets side.

Florida Gas priced $850 million of notes in two tranches late in the afternoon. The deal consisted of $350 million of five-year notes and $500 million of 10-year notes, both priced tighter than guidance. The size was also increased from a minimum of $500 million.

Royal Bank of Canada released the terms of its $1 billion of notes due 2015 that were priced late the previous day.

There are no bond deals expected to price on Friday, but one source said that "one could sneak in there."

"There's been a lot of supply already this week," he said.

New corporate debt from Time Warner Inc. and Royal Bank of Canada firmed in Thursday afternoon trading, sources said.

The industrial sector also tightened in the secondary market, with bonds from BP plc and Anadarko Petroleum Corp. stronger, according to sources.

"It's in line with equities, and the continuing claims was very benign," a trader said.

The Labor Department said Thursday that initial claims for unemployment benefits fell 21,000 to 454,000 for the latest week.

Stocks continued their weeklong rally on Thursday, with the Dow Jones Industrial Average up 120.71 points, or 1.2%, at 10,138.99.

Overall investment-grade Trace volume rose slightly, at 3%, to just over $11 billion, a source reported.

"Not bad," a trader said.

The CDX Series 14 North American investment-grade index tightened for a second day on Thursday. The index firmed 3 basis points to a mid bid-asked spread of 113 bps, a source said.

Corporate bonds were "definitely firmer today," a source said. "Seemed everything was tighter."

The yield on the benchmark 10-year Treasury note broke the 3% barrier on Thursday, ending the day up 5 bps at 3.03% on the lower unemployment claims and the steady rally in stocks.

The yield on the 30-year bond rose to 4.01% from 3.96%.

"Things still look very expensive to me even despite the little downtrend today," said Mary Ann Hurley, a fixed-income trader for D.A. Davidson & Co. "People are looking to buy on the back up. As the consumer credit number showed late this afternoon, the economy is still just very, very weak."

Florida Gas prices

Florida Gas Transmission priced $850 million of notes (Baa2/BBB) in two tranches late in the afternoon, a source who worked on the deal said.

The $350 million of 4% five-year notes priced at Treasuries plus 220 bps.

The tranche sold well below initial guidance in the 237.5 bps area, the source said.

A second tranche was $500 million of 5.45% 10-year notes priced at 245 bps over Treasuries.

These notes also priced below talk in the 262.5 bps area.

Demand was about $4.5 billion total, with $2 billion on the books for the five-year notes and upwards of $2.5 billion for the 10-year notes, a source said.

The deal was priced under Rule 144A. Its size was increased from a planned minimum amount of $500 million.

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

The natural gas pipeline is based in Houston.

Appetite continues

Bond deals on the investment-grade side continued to be in demand on Thursday, with the Florida Gas Transmission deal coming in five times oversubscribed. This comes after the $3 billion deal from Time Warner had about $10 billion on the books, a source who worked on that sale said.

The 10-year notes from the Florida sale had more demand than the five-year notes, and those two maturities were the most popular with the Time Warner sale as well.

"The 30-year has become tough to sell just because rates are so low," a source said of investment-grade bonds in general. "But we still got $1 billion done on Time Warner."

Other deals earlier in the week, like Kroger Co. and LaFarge SA, were also upsized and highly oversubscribed.

As for more new deals coming to the market for the week, it's unlikely there will be much sold on Friday.

A syndicate source at a large desk said they were "out for the week" but that supply is likely to be replenished in the coming week.

RBC gives terms

Royal Bank of Canada gave the terms for its $1 billion of notes that priced late on Wednesday. The 2.625% global senior notes due 2015 (Aaa/AA-/AA) priced to yield Treasuries plus 90 bps, according to an FWP filing with the Securities and Exchange Commission.

The bookrunners were Goldman, Sachs & Co., JPMorgan and RBC Capital Markets.

The bank is based in Montreal and Toronto.

Time Warner firms

Time Warner's three tranches of senior notes and debentures (Baa2/BBB/BBB) that priced on Wednesday firmed in secondary trading, according to a source.

The 3.15% senior notes due 2015, which priced at Treasuries plus 140 bps, traded at 116 bps on Thursday.

Time Warner's second tranche of 4.7% senior notes due 2021 firmed to 162 bps in the secondary. The notes priced at Treasuries plus 175 bps.

The third tranche that Time Warner sold - 6.1% debentures due 2040 - also was stronger in trading at 198 bps, the source said. The debentures were sold at Treasuries plus 215 bps.

The media and entertainment company is based in New York.

RBC tightens

Royal Bank of Canada's new debt firmed in afternoon trading, a source said.

The $1 billion of 2.625% global notes due 2015 were priced to yield Treasuries plus 90 bps.

Late in the day, the five-year notes tightened in the secondary to 80 bps bid, 76 bps offered, the source said.

Industrials better

Industrial corporate bonds tightened late in the day, a trader said.

"The market's tighter 2 to 3 basis points, going off into intraday highs."

BP's bonds were "up another point across the board," he said.

London-based BP agreed in June to fund a $20 billion fund to compensate victims of the Gulf of Mexico oil spill.

Bonds from the Woodlands, Texas-based Anadarko Petroleum, which owns 25% of the oil well where the drilling rig that BP operated exploded in April, also have firmed in trading this week, according to sources.

The company's 5.95% notes due 2016 gained strength for a second day on Thursday and tightened to 519 bps from 567 bps on Wednesday, a source said.

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