Verizon, BP, IBM, banks price in flood of deals; new bonds tighten; Time Warner Cable firms

By Andrea Heisinger and Cristal Cody

New York, Oct. 27 - Corporate names returned to the investment-grade bond market in a big way on Thursday as some good news came out of the summit of euro zone leaders.

It seemed some sort of compromise was reached to aid Greece in its debt woes and several issuers were ready to go at the open, sources said.

There was about $11.95 billion of new high-grade corporate debt sold for the day, not including sales in the emerging markets space.

The largest deal of the day, and also the last one to price, came from Verizon Communications Inc. The New York City-based company sold $4.5 billion of notes in four tranches late in the day.

BP Capital Markets plc priced $2 billion of notes in two parts in a deal that was about five times oversubscribed as investors scrambled for high-quality paper.

International Business Machines Corp. also saw high demand for its $1.85 billion sale in two tranches.

There was a reopening of 5.5% notes due 2021 by Morgan Stanley. The banking giant added $1 billion to the paper, which will now have $2.5 billion outstanding.

There was another financial name in the market as U.S. Bancorp priced $1.25 billion of five-year paper. Regional bank SunTrust Banks, Inc. sold $750 million of debt due 2017.

Spreads on financial paper have decreased in recent days as more have tapped the market amid increased confidence in the sector following third-quarter earnings announcements.

CSX Corp. sold $600 million of notes due 2042 in a deal that had a do-not-grow provision on it.

"The market saw a window open and went for it," a source said of the huge influx of new corporate paper. "These issuers needed financing for some reason. They're out of blackout, they're going to go."

Other issuers are expected to gauge the market tone starting on Monday to see if they want to go.

"I would say there's a moderate backlog," a syndicate source said.

The Markit CDX Series 17 North American high-grade index firmed 13 basis points to a spread of 113 bps.

Trading was "all over the place" on Thursday, one trader said.

Overall trading volume grew 16% to nearly $14 billion on Thursday.

All the new issues were active in the secondary market, traders said.

Time Warner Cable Inc.'s bonds traded 15 basis points better on the day while the stock dropped after the company reported third-quarter earnings that missed expectations.

The telecom sector was seen trading overall 10 bps to 15 bps better, a trader said.

"AT&T, Comcast are 10 [bps] better," the trader said.

Treasuries extended losses on the long end of the curve with the benchmark 10-year note yield jumping to 2.39% from 2.2%. The 30-year bond yield climbed to 3.45% from 3.22%.

Verizon prices $4.5 billion

Verizon Communications sold $4.5 billion of senior notes (A3/A-/A) in four tranches late in the day, a source who worked on the trade said.

The $750 million of 1.25% three-year notes were sold at a spread of Treasuries plus 75 bps.

A second tranche was $1.25 billion of 2% five-year notes priced at Treasuries plus 95 bps.

There was a $1.75 billion tranche of 3.5% 10-year paper priced at 120 bps over Treasuries.

Finally, there was $750 million of 4.75% 30-year bonds sold at Treasuries plus 137.5 bps.

The deal was talked at a minimum of $2 billion and the size increased based on investor demand, a source said.

Bookrunners were Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and UBS Securities LLC.

Proceeds will be used to retire all or a portion of $600 million of 6.875% notes due 2012, $1 billion of 7.375% notes due 2012, $350 million of 6.125% notes due 2013, $500 million of 6.125% notes due 2012 and $1 billion of 6.875% notes due 2012, along with repayment of commercial paper.

Verizon's new notes due 2021 traded 5 bps tighter at 115 bps bid, 110 bps offered, a trader said.

The bonds due 2041 firmed in secondary trading to 133 bps bid, 128 bps offered, traders said.

Another trader saw the 30-year bonds at 134 bps bid, 130 bps offered.

The broadband and telecommunications company is based in New York City.

BP sees huge demand

BP Capital Markets sold $2 billion of notes (A2/A) in two parts, a source who worked on the trade said.

"It was huge," the source said of the interest from investors. "There was about $10 billion on the books. People were really looking forward to this deal."

The $1 billion of 2.248% five-year paper was sold at a spread of Treasuries plus 107 bps. The notes were sold at the tight end of guidance in the 110 bps area.

A $1 billion tranche of 3.561% 10-year notes priced at 117 bps over Treasuries. The notes priced at the tight end of talk in the 120 bps area.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., HSBC Securities (USA) Inc. and Mitsubishi UFJ Securities (USA) Inc.

Proceeds are being used for general corporate purposes.

BP Capital Markets last sold debt in a $3.7 billion offering in three parts on March 8. The 3.2% five-year note from that sale was priced at 100 bps and a 4.742% 10-year tranche at 120 bps.

In the secondary markets, BP Capital Markets' five-year notes traded tighter at 105 bps bid, 103 bps offered, a trader said.

The tranche of 10-year notes was seen stronger at 111 bps bid, 108 bps offered.

The issuing arm of oil company BP plc is based in Middlesex, England.

IBM's two-tranche deal

International Business Machines priced $1.85 billion of notes (Aa3/A+/A+) in two parts after a tranche of longer-dated notes was added, an informed source said.

There was just under $6 billion in demand for the paper, the source said, owing to the company's high credit ratings.

The $1.35 billion of 0.875% three-year notes priced at a spread of Treasuries plus 40 bps. The notes were sold at the tightest end of guidance in the 40 to 45 bps range.

A $500 million tranche of 2.9% 10-year paper sold at a spread of Treasuries plus 62.5 bps. It also priced at the tight end of talk in the 65 bps area, plus or minus 2.5 bps.

Barclays Capital Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC were bookrunners.

The proceeds are being used for general corporate purposes.

In secondary trading, the three-year notes firmed to 38 bps bid, a trader said.

The 10-year notes were seen at 61 bps bid, 57 bps offered, a trader on another desk said.

Earlier, the 10-year tranche was seen in the gray markets at 60 bps bid, 58 bps offered, a third trader said.

The three-year notes traded in the gray markets at 40 bps bid, 36 bps offered.

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

Morgan Stanley's reopening

Morgan Stanley reopened its 5.5% notes due 2021 to add $1 billion, a market source said.

The notes (A2/A/A) were priced at a spread of Treasuries plus 335 bps.

The total issuance is $2.5 billion, including $1.5 billion priced on July 21 at 250 bps.

Morgan Stanley & Co. LLC was bookrunner.

In the secondary market, Morgan Stanley's 5.5% notes due 2021 firmed to 331 bps bid, 326 bps offered, a trader said.

The financial services company is based in New York City.

U.S. Bank offers five-year

U.S. Bancorp sold $1.25 billion of 2.2% five-year notes (Aa3/A+/AA-) to yield Treasuries plus 108 bps, according to a source close to the trade.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., U.S. Bancorp Investments Inc. were bookrunners.

The company last priced $1 billion of 4.125% notes due 2021 on May 19.

U.S. Bancorp's notes due 2016 firmed 3 bps to 105 bps bid, 102 bps offered in the secondary market, a trader said.

Another trader saw the notes 1 bp tighter at 104 bps bid, 101 bps offered later in the day.

The financial services holding company is based in Minneapolis.

SunTrust sells $750 million

SunTrust Banks sold $750 million of 3.5% senior notes due 2017 (Baa1/BBB/BBB+) to yield Treasuries plus 235 bps, according to an FWP filing with the Securities and Exchange Commission.

SunTrust Robinson Humphrey Inc. and Credit Suisse Securities (USA) LLC were bookrunners.

The proceeds are being used for general corporate purposes.

The financial services company is based in Atlanta.

CSX sells $600 million

CSX priced $600 million of 4.75% senior notes due 2042 (Baa3/BBB/BBB) to yield Treasuries plus 145 bps, an informed source said.

Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC were bookrunners.

The proceeds will be used to repay the principle and interest of 6.3% notes due March 15, 2012 and for general corporate purposes, including debt repayment, stock repurchase, capital expenditures, working capital, productivity improvement and cost reduction.

Going out, the bonds were quoted tighter in the secondary market at 139 bps bid, 136 bps offered, a trader said.

The transportation company is based in Jacksonville, Fla.

Time Warner Cable firms

Time Warner Cable's bonds traded stronger on Thursday after the company reported that earnings rose in the third quarter, but missed analysts' forecasts.

The company said revenue increased 3.7% to $4.9 billion, while earnings rose to $1.08 per share from $1.00 per share a year ago.

In the secondary market, Time Warner Cable's 4% notes due 2021 (Baa2/BBB/BBB) firmed 15 bps to 152 bps bid, 142 bps offered, a trader said.

The notes were quoted wider at 180 bps bid, 170 bps offered on Oct. 19.

Time Warner Cable sold the notes at a spread of Treasuries plus 210 bps on Sept. 7.

The entertainment company is based in New York City.

CDS costs plunge

Bank and brokerage credit default swaps costs declined on Wednesday, indicated greater investor confidence in the financial sector, a trader said.

In bank CDS costs, Bank of America's traded 40 bps lower at 295 bps bid, 310 bps offered. Wells Fargo's CDS costs fell 17 bps to 123 bps bid, 130 bps offered.

On the brokerage side, Goldman Sachs' CDS costs dropped 50 bps to 240 bps bid, 255 bps offered. Merrill Lynch's CDS costs ended 40 bps lower at 340 bps bid, 360 bps offered. Morgan Stanley's CDS costs firmed 40 bps to 300 bps bid, 315 bps offered.

Paul Deckelman contributed to this review

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