AutoZone, KfW, IFC price bonds; U.S. Bank offers preferred stock; AutoZone, Lowe's tighten

By Andrea Heisinger and Cristal Cody

New York, April 17 - Issuance was again measured in the primary on Tuesday as AutoZone, Inc. priced a small deal accompanied by others from sovereign names.

The auto parts retailer sold $500 million of 10-year notes in a deal that had a do-not-grow clause.

Germany's KfW priced $4 billion of three-year global notes, and there was also a sovereign deal of $2 billion of five-year global notes from International Finance Corp. The latter sale went overnight from Monday, a source said.

U.S. Bancorp announced and then priced $1.085 billion of fixed-to-floating-rate perpetual preferred stock shares at par of $25.

Goldman Sachs Group Inc. followed in the footsteps of other financial companies by announcing first-quarter earnings at the top of the day. Goldman had earnings of $2.1 billion for the quarter, which was a decrease from $2.74 billion in the same period a year ago. Earnings per share were at $3.92.

The market tone got a boost from continued bank earnings that beat analyst expectations and a successful sale of bonds from Spain, a market source said.

"It was decent, improved throughout the day," the source said.

Another source was not confident that issuance would ramp up because of the positive headlines.

"There's not much that's going to be happening for the rest of the week," the source said. "People are just going to wait until next week."

The Markit CDX Series 18 North American investment-grade index firmed 2 basis points to a spread of 99 bps.

AutoZone's new 3.7% notes due 2022 traded about 6 bps better in the secondary market.

Lowe's Companies Inc.'s tranches due 2017, 2022 and 2042 priced the previous day tightened 5 bps to 7 bps in trading.

Investment-grade bank and brokerage credit default swaps costs declined on Tuesday.

Banks were tighter. Bank of America's CDS costs firmed 12 bps to 260 bps bid, 270 bps offered. Citi's CDS costs tightened 16 bps to 234 bps bid, 239 bps offered.

Brokers firmed. Merrill Lynch's CDS costs fell 11 bps to 278 bps bid, 288 bps offered.

Morgan Stanley's CDS costs traded 14 bps better at 358 bps bid, 363 bps offered. Goldman Sachs' CDS costs firmed 7 bps to 264 bps bid, 269 bps offered.

Treasuries closed moderately lower. The benchmark 10-year note yield rose 1 bp to 1.99%. The 30-year bond yield closed up 1 bp to 3.14%.

AutoZone prices 10-years

AutoZone priced $500 million of 3.7% 10-year senior notes (Baa2/BBB/BBB) at a spread of Treasuries plus 170 bps, a source close to the trade said.

The notes were sold at the tight end of talk in the 175 bps area, plus or minus 5 bps, the source said, adding that the deal was "about seven times oversubscribed."

"It went really well," the source noted.

Bookrunners were J.P. Morgan Securities LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes.

AutoZone's 3.7% notes due 2022 firmed in secondary trading to 164 bps bid, 160 bps offered, a trader said. Another trader saw the notes at 162 bps offered.

The auto parts and accessories retailer is based in Memphis.

KfW's three-year notes

KfW sold $4 billion of 0.625% three-year global notes on Tuesday at 99.683, according to an FWP with the Securities and Exchange Commission and a market source.

The notes (Aaa/AAA/AAA) were priced to yield 0.732% with a spread of Treasuries plus 32.8 basis points, or mid-swaps plus 5 bps. The paper is non-callable.

Barclays Capital Inc., Morgan Stanley & Co. Inc. and UBS Securities LLC ran the books.

Co-managers were BNP Paribas Securities Corp., Citigroup Global Markets Inc., Daiwa Capital Markets Europe, Deutsche Bank Securities Inc., FTN Financial Securities Corp., Goldman Sachs International, Jefferies & Co., Nomura Securities, RBC Capital Markets LLC and TD Securities (USA) LLC.

The deal is guaranteed by the government of Germany.

The government-backed bank is based in Frankfurt.

IFC prices $2 billion

International Finance sold $2 billion of 1% five-year global notes (Aaa/AAA/) to yield mid-swaps minus 12 bps, or Treasuries plus 16.3 bps, a market source said.

Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Nomura Securities were bookrunners.

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

U.S. Bancorp's preferreds

U.S. Bancorp priced $1.085 billion, or 43.4 million shares, of series G noncumulative perpetual preferred stock (A3/BBB+/BBB), according to an FWP with the SEC.

The $25-par shares will be issued as depositary shares representing 1/1,000th of an interest in the preferred shares. Dividends will be fixed at 6% until April 15, 2017, at which time the rate will be calculated yearly at three-month Libor plus 4.86125%.

There is a $162.75 million overallotment option.

The company will apply to list the preferreds on the New York Stock Exchange under the ticker symbol "USBPN."

Morgan Stanley & Co. Inc., Goldman Sachs & Co. and U.S. Bancorp Investments Inc. are the bookrunners.

Proceeds will be used for general corporate purposes, which may include the redemption of certain callable trust preferred securities, including, but not limited to, the USB Capital XI 6.60% TRUPs and the USB Capital XII 6.30% preferreds.

U.S. Bancorp is based in Minneapolis.

Ontario adds to floaters

The Province of Ontario added $50 million to its issue of floating-rate medium-term notes due in April of 2015, according to an FWP filing with the SEC.

The notes (Aa1/AA-/) were sold at par plus accrued and unpaid interest with a coupon of Libor plus 15 bps.

Total issuance is $500 million including $350 million issued on February 29 and $100 million priced on April 13.

Goldman Sachs International was bookrunner.

The issuer is based in Toronto.

Lowe's firms

Lowe's three-tranche offering of $2 billion of senior notes (A3/A-/BBB+) on Monday traded better in the secondary market, traders said on Tuesday.

The tranche of 1.625% notes due 2017 firmed to 74 bps bid, 73 bps offered. Lowe's sold $500 million of the five-year notes at a spread of Treasuries plus 80 bps.

The tranche of 3.12% notes due 2022 tightened to 108 bps bid, 105 bps offered. The issue priced in a $750 million offering at 115 bps over Treasuries.

The final tranche of 4.65% bonds due 2042 tightened to 150 bps bid, 149 bps offered, one trader said. Another trader saw the bonds at 152 bps bid, 148 bps offered.

Lowe's sold the 30-year bonds at Treasuries plus 155 bps.

The home improvement retailer is based in Mooresville, N.C.

Stephanie N. Rotondo contributed to this review

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