Merck brings massive sale; Berkshire, Albemarle, Aspen price; financials firm; IBM tightens

By Andrea Heisinger and Cristal Cody

New York, Dec. 7 - Merck & Co. Inc., Berkshire Hathaway Finance Corp., Questar Corp., Albemarle Corp., Aspen Insurance Holdings Ltd. and Southwest Gas Corp. priced paper on Tuesday in the second high-volume day in a row.

The largest sale of the day was from Merck. It priced with little fanfare and got done fairly quickly. The pharmaceutical company priced $2 billion in two tranches, both at the tight end of early guidance.

Berkshire Hathaway was one of the first sales to get done. The holding company priced $500 million of guaranteed five-year notes at the tight end of talk.

Most of the other deals for the day, with the exception of Merck, were also priced in short order.

Natural gas provider Questar sold $250 million of five-year notes, and specialty chemical maker Albemarle priced $350 million of 10-year notes.

The smallest trade came from Southwest Gas. The Las Vegas-based company priced $125 million of 10-year notes.

Aspen Insurance priced a $250 million issue of 10-year notes.

On the preferred stock side, there was an $80 million sale from Hudson Pacific Properties, Inc.

There could be more new issue volume coming on Wednesday, but after that deals are expected to die down.

"I think we've seen a lot of deals, but they're all really small," a syndicate source said. "That's not anything bad, it's just that everyone's taking advantage of the low rates for repays or whatever."

In the secondary market, Berkshire Hathaway's notes firmed 11 basis points on the offer side, and the financial sector overall was stronger, a trader said.

"Financials closing 5 to 10 better depending on spots in the curve," the trader said.

Overall investment-grade Trace volume jumped 50% to about $14.5 billion, a market source said.

The Markit CDX Series 14 North American investment-grade index narrowed 1 bp on Tuesday to a spread of 90 bps, according to Markit Group Ltd.

"The market opened 3 to 5 better and closed back on the day a couple basis points better," a trader said.

The new debt from Questar and Southwest Gas tightened in secondary trading, and International Business Machines Corp.'s 2% notes due 2015 sold the previous day firmed 7 bps, traders said.

Cable and media bonds tightened 4 bps on the day, while Time Warner Cable Inc.'s senior notes sold in November were flat, sources said.

Stocks rallied while investors fled Treasuries and sent yields soaring. The 10-year benchmark note yield ended the day up 21 bps at 3.14% on low supply demand and President Obama's proposed plan reached with Republicans to extend tax cuts. The 30-year bond yield eased 13 bps to 4.37%.

Merck's $2 billion deal

Drug maker Merck sold $2 billion of notes (A1/AA) in two parts, a market source said later in the afternoon.

The size of the sale had been projected at no more than $2.5 billion, a source said, adding that there was "significant interest" in the bonds.

Unlike some large sales, this one was priced with minimal pain, a source said, maybe because there were only two lead bookrunners.

"It's a solid name," the source said. "They didn't break any [borrowing] records, but it was good anyway."

The $850 million of 2.25% five-year notes priced at a spread of Treasuries plus 57 bps. They were talked in the 60 bps area and priced at the tight end of that.

A second tranche was $1.15 billion of 3.875% 10-year notes sold at a spread of 77 bps over Treasuries. The notes priced at the tight end of guidance in the 80 bps area.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were the bookrunners.

Proceeds will be used for general corporate purposes.

Merck last priced bonds in an upsized $4.25 billion deal in four tranches on June 22, 2009. The 4% six-year notes from that sale sold at 137.5 bps over Treasuries, and the 5% 10-year tranche was priced at Treasuries plus 140 bps.

The pharmaceutical company is based in Whitehouse Station, N.J.

Berkshire Hathaway prices

Berkshire Hathaway Finance priced $500 million of 2.45% five-year senior notes (Aa2/AA+) at a spread of Treasuries plus 85 bps, a source away from the sale said.

They were sold in a quick sale at the tight end of guidance in the 87.5 bps area.

Goldman Sachs & Co. was the bookrunner.

Proceeds will be used to satisfy and retire existing debt.

The deal is guaranteed by Berkshire Hathaway Inc.

Traders saw the notes 11 bps firmer on the offer side in the secondary market.

"Last I saw, they were 77, 74," one trader said Tuesday afternoon.

The investment manager is based in Omaha.

Questar offers $250 million

Salt Lake City-based Questar priced $250 million of 2.75% five-year notes (A3/A) at a spread of Treasuries plus 110 bps, said a source who worked on the deal.

Barclays Capital Inc. and JPMorgan were active bookrunners.

Proceeds are being used to repay short-term debt.

The notes immediately firmed in the secondary market and were seen trading at 100 bps bid, 93 bps offered, a source said.

The issuer is a natural gas holding company.

Southwest Gas' small deal

Southwest Gas sold $125 million of 4.45% 10-year senior notes (Baa2/BBB) at a spread of Treasuries plus 140 bps, according to a source and an FWP filing with the Securities and Exchange Commission.

U.S. Bancorp Investments Inc. and KeyBanc Capital Markets Inc. were the bookrunners.

The company plans to use $75 million in connection with the repayment of $200 million of outstanding 8.375% senior notes maturing on Feb. 15, 2011.

In secondary trading, the new notes were stronger, firming to 135 bps bid, 130 bps offered, a trader said.

The natural gas utility is based in Las Vegas.

Albemarle sells $350 million

Albemarle sold $350 million of 4.5% 10-year senior notes (Baa2/BBB) to yield Treasuries plus 148 bps, a source away from the trade said.

Bank of America Merrill Lynch, JPMorgan and UBS Securities LLC were the bookrunners.

Proceeds are being used to fund pension obligations and repay debt. Any remaining proceeds will be used for general corporate purposes.

No secondary market activity was seen Tuesday afternoon in the new offering, a source said.

"Yesterday, it looked like 144, 143 in the gray."

The specialty chemical company is based in Baton Rouge, La.

Aspen prices 10-year notes

Aspen Insurance Holdings sold $250 million of 6% 10-year senior notes (Baa2/BBB+) at a spread of Treasuries plus 290 bps, an informed source said.

Citigroup Global Markets Inc. and Deutsche Bank Securities were the bookrunners.

Proceeds are going toward general corporate purposes.

The holding company for insurance and reinsurance subsidiaries is based in Bermuda.

Hudson Pacific's preferreds

Hudson Pacific Properties priced $80 million, or 3.2 million shares, of perpetual series B cumulative redeemable preferred stock at par of $25, according to an FWP filing with the SEC.

The 8.375% shares are callable on or after Dec. 10, 2015 at par plus accrued dividends.

There is an over-allotment option for 400,000 shares to be used within 30 days.

The bookrunners were Wells Fargo Securities LLC, Bank of America Merrill Lynch, Barclays Capital and Morgan Stanley & Co. Inc.

The owner and operator of office, media and entertainment real estate is based in Los Angeles.

IBM firms

IBM's 2% notes due 2015 sold on Monday firmed in the secondary market, a trader said.

The company priced $1 billion of the five-year notes (Aa3/A+) at Treasuries plus 55 bps.

"The new IBMs are trading around 48," the trader said.

The notes were quoted at 49 bps bid, 48 bps offered.

"They closed yesterday wrapped around 51," the trader said.

The computer company is based in Armonk, N.Y.

Time Warner flat

Cable and media bonds are "probably 4 basis points better," one trader said.

Elsewhere in the sector, Time Warner Cable's 4.125% senior notes due 2021 (Baa2/BBB/) were flat at 155 bps over Treasuries on Tuesday, a source said.

The company sold the notes on Nov. 9 at a spread of Treasuries plus 155 bps.

The cable TV operator is based in New York.

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