KfW, Kommuninvest price as market awaits Verizon deal; Verizon widens as telecom sector firms

By Cristal Cody and Aleesia Forni

Virginia Beach, Va., Sept. 10 - Though the high-grade primary market saw a small number of new deals price on Tuesday, the planned eight-part record-breaking deal from Verizon Communications Inc. continues to be the "talk of the town."

The session saw the company announce price talk on top of original guidance, which was announced on Monday.

Sources expect Verizon's deal to consist of three-year fixed- and floating-rate notes and five-year fixed- and floating-rate notes.

There will also be tranches of seven-, 10-, 20- and 30-year bonds.

One syndicate source said the deal's size could come in at "more than $35 billion" on Tuesday, while another source is expecting the company to sell $46 billion to $49 billion of bonds.

The deal is expected to price early during Wednesday's session and is set to shatter Apple Inc.'s previous bond record.

The computer and mobile communications device company currently holds the record of $17 billion, which priced in six tranches in April.

In primary action on Tuesday, Germany's KfW hit the session's primary with a $3 billion issue of 2.75% notes due 2020 at mid-swaps plus 23 basis points, an informed source said.

The session also saw Sweden's Kommuninvest i Sverige AB sell $1 billion of 0.625% notes due 2015 at mid-swaps plus 3 bps.

There was also a reopened issue of global medium-term senior unsecured floating-rate notes from General Electric Capital Corp.

The company priced $100 million of the notes due July 12, 2016 at 100.149 to yield Libor plus 60 bps, according to an FWP filing with the Securities and Exchange Commission.

FMS Wertmanagement also announced plans to sell an offering of notes during the session, according to a 424B5 filing with the SEC.

High-grade bonds went out moderately tighter in the secondary market, according to traders.

The Markit CDX Series 20 North American Investment Grade index fell 1 bp to a spread of 78 bps on Tuesday.

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

In the secondary market, Verizon's 2.45% notes due 2022 (Baa1/BBB+/A-) widened to 168 bps bid, 163 bps offered over the day, a trader said.

The technology, media and telecommunications sector "is slightly better today overall, while Verizon is a couple bps wider," the trader said.

Another trader said the Verizon notes "stayed around the same level" most of the day and last saw the issue offered at 164 bps.

In the morning session on Tuesday, the notes were quoted in the 166 bps area.

Verizon sold $1.75 billion of the notes in November at a spread of Treasuries plus 75 bps.

The issue has widened more than 30 bps since the New York City-based telecommunications company announced it will purchase Vodafone Group plc's 45% stake in Verizon Wireless.

In other telecom market activity, AT&T Inc.'s 2.625% notes due 2022 (A3/A-/A) traded at 145 bps bid, 140 bps offered late Tuesday, according to a trader.

The Dallas-based communications company sold $1.5 billion of the notes in December at a spread of 105 bps.

Verizon eyes megadeal

All eyes were yet again on Verizon on Tuesday, as the company set talk for its planned eight-tranche offering of senior unsecured notes, according to market sources.

Books closed at 3 p.m. on Tuesday, and the deal is expected to price early Wednesday.

Talk on the three-year paper is 165 bps, 190 bps on the five-year, 215 bps on the seven-year, 225 bps on the 10-year, 250 bps on the 20-year and 265 bps on the 30-year.

Talk on the three- and five-year floating tranches will be the Libor equivalent.

The "attractive" price talk helped books close with orders of more than $80 billion, one market source said.

Proceeds will be used to finance the company's acquisition of Vodafone's 45% ownership in Verizon Wireless.

The notes will feature a make-whole call and a 101% poison put.

J.P. Morgan Securities LLC, Barclays, BofA Merrill Lynch and Morgan Stanley & Co. LLC are the active bookrunners.

Passive bookrunners are Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Mizuho Securities USA Inc., Mitsubishi UFJ Securities, RBC Capital Markets LLC, RBS Securities Inc. and Wells Fargo Securities LLC.

Co-managers are Deutsche Bank Securities Inc. and Santander Investment Securities Inc.

Verizon is a New York City-based telecommunications company.

KfW brings deal

During Tuesday's session, KfW sold $3 billion of 2.75% notes due Oct. 1, 2020 (Aaa/AAA/AAA) at mid-swaps plus 23 bps, according to an informed source.

Pricing was at 99.752 to yield 2.789%.

The bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC.

The German government-owned development bank is based in Frankfurt.

Kommuninvest sells $1 billion

Meanwhile, Kommuninvest priced $1 billion of 0.625% notes due Sept. 18, 2015 on Tuesday at mid-swaps plus 3 bps, an informed source said.

Citigroup Global Markets Inc., HSBC Securities and Nomura Securities were the bookrunners.

Pricing was done under Rule 144A and Regulation S.

Kommuninvest offers funding to municipalities of Sweden and is based in Orebro.

GE taps floaters

GE Capital reopened an issue of global medium-term senior unsecured floating-rate notes, series A, due July 12, 2016 to add $100 million on Tuesday, according to an FWP with the Securities and Exchange Commission.

The notes have a coupon of Libor plus 65 bps and were priced at 100.149 to yield Libor plus 60 bps.

Total issuance will be $1.6 billion, including $1.5 billion previously priced.

Morgan Stanley & Co. LLC was the underwriter.

The funding arm of General Electric Co. is based in Norwalk, Conn.

Dell quiet

Secondary market activity was light in Dell Inc.'s split-rated bonds after Fitch Ratings cut the company's credit rating to BB- from BB+ and its senior unsecured debt to B+ from BB+ on Tuesday, according to market sources.

Dell's 4.625% notes due 2021 (Baa1/BBB/B+) were offered at 97.875 earlier in the day, according to a trader.

"Haven't seen anything," one trader said late afternoon. "Barely any Trace trades on it - no round lots at all."

Dell sold $400 million of the notes at 99.541 in March 2011.

The company's bonds widened 3 bps to 5 bps on Monday after Carl Icahn said he would no longer block the $25 billion buyout offer from company founder Michael Dell and private equity firm Silver Lake to take the Round Rock, Texas-based computer and technology company private.

Dell shareholders vote on the leveraged buyout offer at a special meeting on Thursday. Fitch said in the downgrade announcement that it expects Dell shareholders to approve the deal.

Bank CDS costs decline

Investment-grade bank and brokerage CDS costs declined on Tuesday, a market source said.

Bank of America Corp.'s CDS costs firmed 2 bps to 103 bps bid, 107 bps offered. Citigroup Inc.'s CDS costs fell 2 bps to 96 bps bid, 100 bps offered. JPMorgan Chase & Co.'s CDS costs firmed 2 bps to 86 bps bid, 90 bps offered. Wells Fargo & Co.'s CDS costs tightened 2 bps to 60 bps bid, 64 bps offered.

Merrill Lynch's CDS costs declined 1 bp to 99 bps bid, 105 bps offered. Morgan Stanley's CDS costs firmed 3 bps to 135 bps bid, 140 bps offered. Goldman Sachs Group, Inc.'s CDS costs fell 3 bps to 125 bps bid, 129 bps offered.

Paul Deckelman and Paul A. Harris contributed to this review

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