Microsoft, Allstate, US Bancorp, Anheuser-Busch, others flood primary; Becton, Microsoft gain

By Andrea Heisinger and Paul Deckelman

New York, May 11 - New deals piled up as the day progressed, leading to one of the busiest sessions in recent memory. Microsoft Corp., Simon Property Group, LP, Southern Co., US Bancorp, Black Hills Corp., Becton, Dickinson & Co., Allstate Corp., Anheuser-Busch Cos., Inc. and San Diego Gas & Electric Co. were among the names to price deals.

The Microsoft sale marked the first time the AAA rated name tapped the corporate debt market, a source said. As expected, the deal was wildly popular with investors and priced accordingly.

The volume of new deals is expected to continue in the immediate future as issuers look to get in before the Memorial Day holiday.

In the secondary sphere on Monday, a market source said the CDX Series 12 North American high-grade index was wider, out by 7 basis points at a mid bid-asked spread level of 150 bps.

Advancing issues led decliners, widening their lead to a better than four-to-three ratio.

Overall market activity, reflected in dollar volumes, fell 16% from Friday's levels.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue narrowed by 11 bps to 3.17%

With a heavy new-issue calendar, the secondary market was fixated on how that new paper did once it was freed. Credits doing well included Becton Dickinson and Microsoft. But the recent CBS Corp. two-part deal was seen having weakened.

Microsoft taps market for first time

In what a source said is its first foray into the corporate debt market, Microsoft sold $3.75 billion in three tranches late Monday.

The sale of senior unsecured notes was announced early, but unfolded slowly throughout the day.

The deal consisted of $2 billion of 2.95% five-year notes priced at Treasuries plus 95 basis points, $1 billion of 10-year notes at 105 bps over Treasuries, and $750 million of 30-year notes also sold at Treasuries plus 105 bps.

Price talk in the morning was in the low 100 bps area, a market source said. There was significant interest in the deal, another market source said, citing about $10 billion on the books by early afternoon.

J.P. Morgan Securities and Morgan Stanley & Co. were active bookrunners for the software and computer technology company based in Redmond, Wash.

Full terms of the sale were not available at press time because of the lateness of pricing.

Anheuser-Busch offers $3 billion

Anheuser-Busch sold $3 billion of notes in three tranches late Monday in a deal done via Rule 144A.

It was eventually divided into three tranches, although originally expected to consist of five- and 10-year notes. A 30-year tranche was added after the launch.

The $1.55 billion of five-year notes priced at Treasuries plus 337.5 bps, while the $1 billion of 10-year notes sold at Treasuries plus 375 bps. The $450 million tranche of 30-year notes priced at Treasuries plus 390 bps.

The St. Louis-based alcoholic beverage company tapped Banc of America Securities LLC, BNP Paribas Securities, Barclays Capital, Deutsche Bank Securities and J.P. Morgan Securities as bookrunners.

Full terms were not available at press time.

Allstate sells $1 billion

Insurance giant Allstate sold $1 billion of senior notes in two tranches Monday.

The $300 million of 6.2% five-year notes priced at 420 bps over Treasuries, while the $700 million of 7.45% 10-year notes sold at Treasuries plus 430 bps.

They are using proceeds for general purposes, including facilitating repayment of $750 million senior notes due Dec. 1.

Bookrunners for the deal from the holding company, based in Northbrook, Ill., were Barclays Capital, Goldman Sachs & Co. and J.P. Morgan Securities.

US Bancorp offers non-FDIC notes

US Bancorp sold $1 billion of 4.2% five-year notes Monday without the guarantee of the FDIC. They were priced at 215 bps over Treasuries.

The sale comes on the heels of a $1,084,873 offering of three-year notes May 7 that were backed by the FDIC. They were sold at Treasuries plus 36.5 bps.

Goldman Sachs and Morgan Stanley & Co. were bookrunners.

Simon Property prices five-year

Simon Property Group, the mall developer and operator based in Indianapolis, priced $600 million of 6.75% five-year notes to yield 7%. They priced at a spread of Treasuries plus 497 bps.

Price talk was at a yield in the low 7% area, a source close to the deal said.

Citigroup Global Markets, Deutsche Bank Securities, Goldman Sachs & Co. and UBS Investment Bank were bookrunners.

Becton Dickinson sells two tranches

Medical technology company Becton Dickinson sold $750 million in two tranches of senior unsecured notes. The size was not changed from that announced in a 424B2 Securities and Exchange Commission filing.

The $500 million of 5% 10-year notes priced at 190 bps over Treasuries, as did the $250 million of 6% 30-year notes.

The Franklin Lakes, N.J., company is using about $400 million of the proceeds to repay debt and contribute to a pension plan, with the remainder for general corporate purposes.

Goldman Sachs & Co. and Morgan Stanley & Co. ran the books.

San Diego Gas prices mortgage bonds

San Diego Gas & Electric priced $300 million of 6% 30-year first mortgage bonds early Monday at Treasuries plus 185 bps.

The proceeds are going for several uses including becoming part of general treasury funds and working capital purposes, supporting electric and natural gas procurement program, replenishing amounts for utility plant improvements and repaying commercial paper.

The natural gas and electric utility, based in San Diego, tapped Calyon, Morgan Stanley and UBS Investment Bank to run the books.

Southern prices small deal

Utility name Southern Co. sold $350 million of 4.15% five-year notes early Monday at Treasuries plus 212.5 bps. It was one of the first deals to price during the busy session.

The Atlanta-based company is using proceeds to repay a portion of outstanding short-term debt and for general corporate purposes.

Citigroup Global Markets, Goldman Sachs and UBS Investment Bank ran the books.

Black Hills sells five-years

Black Hills sold a $250 million deal of 9% five-year senior unsecured notes at par to yield 9%, a market source said. They priced at a spread of Treasuries plus 697.9 bps.

The notes are being used to repay outstanding debt from the diversified energy company, based in Rapid City, S.D.

Credit Suisse Securities and RBS Securities ran the books.

Kowloon-Canton offers $750 million

From outside the United States, China's Kowloon-Canton Railway priced $750 million of 5.125% 10-year notes at Treasuries plus 195 bps.

It priced at the tight end of talk, which a market source said was 195 to 205 bps. The deal was done via Rule 144A and Regulation S.

Citigroup Global Markets, Deutsche Bank Securities and HSBC Securities were bookrunners.

'Flood' to continue

The hearty amount of new deals coming into the high-grade market is not expected to cease anytime soon, market sources said late Monday as they were mopping up.

"I think we'll be fairly flooded this week," a syndicate source said. "It should be busy. I'm hearing away from us it's going to be busy, too."

While one source said there was "no particular reason" that it was so busy Monday, others had a couple of possible suspects.

The airing of the results of a government stress test on banks on May 7 led to a fair amount of deals pricing Friday, which spilled over into the beginning of the week.

"We got past the stress tests and there were a lot of things in the queue waiting for that," a syndicate source said.

Market tone was up at the start of Monday, which also helped, as did names such as Microsoft jumping into the market. That deal alone may have urged others to give a "go" today, a source said.

Another reason for the wealth of bond sales, the source said, is "people trying to get in before the Memorial Day holiday" which is approaching in the next couple of weeks.

Both of those factors will likely mean a busy week ahead, as sources said their calendars have a fair amount of possible sales along with some that aren't set in stone, as one source said.

"It was a Monday, which is typically busy," she said, explaining the hectic day. "There was no other real reason that it was busy today."

Becton Dickinson better

A trader said he had seen no levels on some of the new bonds, including the issues from Southern Co., San Diego Gas & Electric, and Anheuser Busch.

However, he saw Becton Dickinson's 5% notes due 2019 having tightened to a spread over comparable Treasury issues of 183 bps. The company had priced the $500 million of bonds earlier in the session at 190 bps as part of a $750 million two-part issue.

The other tranche of bonds -- $250 million of 6% bonds due 2039, which had also priced at 190 bps over - was not immediately seen trading around.

Microsoft moves up

Microsoft's three-part mega-deal was seen having moved up both before and after the pricing. Before pricing terms hit the market, a trader saw the company's new issue trading "20 bps tighter across the board in the 'gray market.'"

Another trader a bit later on quoted the new bonds - the software giant's first U.S. corporate bond issue - as having firmed from their pricing level, with the $2 billion of 2.95% notes due 2014 having tightened to 87 bps bid, 80 bps offered from 95 bps over at the pricing.

The $1 billion of new 4.20% notes due 2019, which priced at 105 bps over, had tightened to 95 bps bid, 90 bps offered, while the $750 million of 5.20% bonds due 2039, which had also priced at 105 bps over, firmed in the secondary to 98 bid, 90 offered.

US Bancorp issue is steady

The trader also saw US Bancorp's new 4.20% non-FDIC-backed notes due 2014 little changed at 215 bps bid, 210 bps offered.

The company had earlier priced $1 billion of the bonds at 215 bps over.

CBS bonds trade off

A trader saw both tranches of CBS Corp.'s new bonds, which priced Friday, several points lower on a dollar-price basis.

He saw the New York-based media giant's new 8.20% notes due 2014, $400 million of which priced at 98.796 to yield 8½%, trading Monday at 97¼ bid, 98 offered.

Meanwhile, its $350 million of 8.875% notes due 2019 were quoted at 94½ bid, 95¼ offered - well down from the 97.585 level at which they had priced to yield 9¼%.

Dow bonds also down

The trader also saw Dow Chemical Co.'s new bonds trading off. The Midland, Mich.-based chemical manufacturer's $1.75 billion of 7.60% notes due 2014 were trading at 595 bps bid, 575 bps offered on Monday, versus the 550 bps level at which they priced Thursday to yield 7.676%.

Its $3.25 billion of 8.55% notes due 2019, which had priced at 525 bps over to yield 8.581%, went home Monday at 590 bps bid, 570 bps offered.

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