Roche sells mega deal, Canadian National Rail, Goodrich also price; DuPont new bonds widen

By Andrea Heisinger and Paul Deckelman

New York, Feb. 18 - On of the largest high-grade corporate bond issues ever done in U.S. dollars was sold Wednesday by Roche, along with smaller deals from Canadian National Railway Co. and Goodrich Corp.

A multi-tranche FDIC-backed issue from JPMorgan Chase & Co. was announced but not priced.

All eyes were on the Roche issue, totaling $16 billion, and sources said it will continue to be watched in trading.

In the secondary sphere on Wednesday, a market source said the CDX Series 11 North American high-grade index was unchanged on the day at a mid bid-asked spread level of 212 bps.

Advancing issues fell behind decliners, by a nearly nine-to-seven margin.

Overall market activity, reflected in dollar volumes, rose by nearly 27% from the levels seen on Tuesday.

Spreads in general tightened Wednesday as Treasury yields rose; for instance, the yield on the benchmark 10-year issue pushed up by 10 bps at 2.75%.

Much of the focus among secondary market players was in waiting for Roche's absolutely humongous six-part issue, which did not price until late in the session. Roche was seen to have sucked much of the air out of the room for other secondary market activity.

However, the new EI DuPont de Nemours Co. bonds priced on Tuesday were heard to have widened substantially from those initial levels.

Other recently priced names seen trading actively around included Cisco Systems Inc., Marathon Oil Corp., and Unilever plc.

Roche sells $16 billion

In one of the largest corporate deals ever done, healthcare and pharmaceutical company Roche sold $16 billion in six tranches late Wednesday.

Full terms were not available at press time because of the timing and size of pricing.

Two of the tranches were floating-rate notes, which were added a day after the sale was announced.

A $3 billion tranche of one-year floaters priced at a coupon of three-month Libor plus 100 basis points, while a $750 million issue of two-year notes priced at three-month Libor plus 200 bps.

The remaining tranches were fixed rate.

A $2.5 billion of three-year notes priced at Treasuries plus 335 bps, which was in line with price talk of 325 to 350 bps.

The $2.75 billion of five-year notes priced at Treasuries plus 335 bps, also in line with price guidance of 325 to 350 bps.

A $4.5 billion tranche of 10-year notes priced at Treasuries plus 345 bps. This was near the middle of price talk of 337.5 to 362.5 bps.

The final tranche was $2.5 billion of 30-year notes priced at Treasuries plus 365 bps. The pricing was at the tight end of talk of 362.5 to 387.5 bps.

Roche deal biggest of 2009

The six-tranche, $16 billion issue from Roche is the largest so far in 2009 for a corporate deal. Citigroup Inc. sold $12 billion of notes in four tranches on Jan. 23, but they were done under the umbrella of the Federal Deposit Insurance Corp. Temporary Liquidity Guarantee Program.

Mega deals such as the one from Roche largely went by the wayside in the second half of 2008 as market conditions deteriorated.

GlaxoSmithKline plc sold a $9 billion, four tranche issue on May 5, 2008, which was previously considered by the market to be the high point for U.S. dollar-denominated corporate deals.

The Roche deal was "the largest corporate done in recent memory," a market source said. Syndicate desks were using the Glaxo deal as a benchmark, he said.

"It's almost impossible to definitively say it's the largest ever," he said. "There may have been something 10 years ago, but we're looking at more recently."

He said prior to the Glaxo issue, the benchmark was a $6.9 billion offering done in 2007 by AstraZeneca plc.

While the biggest recent deals, neither holds the all-time record. Among larger deals, WorldCom Inc., for example, priced $10.1 billion of dollar-denominated bonds in 2001, along with tranches in pounds and euros.

The Roche issue was announced Tuesday and initially totaled $8 billion in four tranches. Two tranches of floating-rate notes were added Wednesday.

Goodrich sells $300 million

Aerospace and defense company Goodrich sold $300 million of 6.125% 10-year notes at 99.224 to yield 6.23% with a spread of Treasuries plus 350 bps.

There's a possibility of $119.9 million of this being used to pay for notes maturing on May 15, according to a prospectus filed with the Securities and Exchange Commission.

J.P. Morgan Securities, Banc of America Securities LLC and UBS Investment Bank ran the books.

Canadian National upsizes deal

Canadian National Railway sold an upsized $550 million of 5.55% 10-year notes at 99.881 with a spread of Treasuries plus 295 bps. A source close to the deal said a yield was not available.

The size was increased from $500 million.

Citigroup Global Markets and J.P. Morgan Securities were bookrunners.

JPMorgan Chase to do FDIC notes

JPMorgan Chase announced an issue of FDIC-backed notes in a Securities and Exchange Commission filing Wednesday.

The deal is reportedly in four tranches, a market source said.

It may not have priced because of the size and timing of the Roche offering, which J.P. Morgan Securities was a bookrunner on.

J.P. Morgan is bookrunner for the sale.

Day revolves around Roche

Two smaller deals priced, but the focus was on the giant Roche bond sale Wednesday, a market source said.

"It was pretty impressive," he said. "There was other stuff going on, but it was small compared to this."

The lateness of the pricing meant levels were not available in the secondary. Those trading levels are what will be watched Thursday.

"It will be interesting to see where it breaks tomorrow," a syndicate source said of the deal's tranches.

"There are a lot of new issues from the last couple of weeks that are behind [where they priced]. There's been a lot of deterioration in spreads in the last couple of days.

The market tone was mostly unchanged from Tuesday when it was seen down despite the number of issues that were priced.

"We may see a couple more tomorrow and Friday riding on [the issues] pricing today," a source said. "Most of the Roche tranches did pretty good, but they are rated pretty good too."

DuPont drops back

A market source said he had heard that Du Pont's new 5.75% notes due 2019 were being offered at 335 bps over comparable Treasuries, with no bids seen.

The Wilmington, Del.-based chemicals giant priced $500 million of the bonds on Tuesday at a spread of 312.5 bps bid.

That was also the pricing level for the other tranche of the two-part, $900 million deal - the $400 million of 4.75% notes due 2015. The source did not see those bonds trading around.

Cisco improves from Tuesday

A market source saw Cisco Systems' recently priced 5.90% bonds due 2039 trading at 243 bps over. That was a 20-bps tightening from Tuesday's level in the lower 260s for the $2 billion of the bonds, although they remain wide of the 225 bps level at which the bonds priced on Feb. 9.

The San Jose, Calif.-based networking and communications technology provider's $2 billion of 4.95% notes due 2019, which also priced on Feb. 9, at a spread of 200 bps over, were meantime seen Wednesday at 239 bps, improved from Tuesday's levels but still wide of their initial pricing.

Marathon Oil trades tighter

A trader quoted Marathon Oil's new 7½% notes due 2019 at 476 bps over. That was a little tighter than the 487.5 bps level at which the Houston-based energy company priced its $800 million of bonds on Feb. 11.

The other half of that $1.5 billion two-part mega-deal, the $700 million of 6.50% notes due 2014, which also priced on Feb. 11 at 487.5 bps over, were seen having improved to 461 bps.

Unilever trading weakly

Unilever Capital Corp.'s 4.80% notes due 2019 were being quoted around 209 bps over - far wide of the 180 bps over at which the Anglo-Dutch consumer products giant priced its $750 million of the bonds on Feb. 9.

However, the other half of that bond deal -- $750 million of 3.65% notes due 2014, which priced at 170 bps, were not seen trading around.

Financials trade wider

Among the more established bonds, financial issues were seen continuing to struggle in a carryover from Tuesday's market action, in line with a continued fall in bank-sector shares.

A trader saw Bank of America Corp.'s 5.65% notes due 2018 having widened to 498 bps, versus 487 bps on Tuesday.

Goldman Sachs Group Inc.'s 7.50% notes due 2019 widened out some 50 bps on the session to 451 bps over, while the New York-based investment bank-turned commercial bank's 5.35% notes due 2016 were quoted out 45 bps around the 460 bps level.

However, J.P. Morgan Chase & Co.'s bonds were seen mixed on the day; while its 5.60% notes due 2011 widened out by 50 bps to the 350 bps mark, the New York-based financial house's 5.90% notes due 2011 tightened by nearly that same amount, to end at the 360 bps level.

Financial CDS costs keep rising

A trader who follows the credit-defaults swaps market meantime said that the cost of protecting holders of big-bank paper as well as brokerage bonds against an event of default widened by 5 bps to 15 bps, pretty much across the board.

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