Gilead, HP, USAA Capital price debt as primary tone holds; HP, Gilead widen ahead of deals

By Andrea Heisinger and Cristal Cody

New York, Dec. 6 - Companies in need of funding continued to tap the high-grade debt market on Tuesday with huge deals from Hewlett-Packard Co. and Gilead Sciences, Inc.

The Gilead deal had been expected as a way for the biopharmaceutical company to raise capital ahead of its acquisition of Pharmasset Inc. The $3.7 billion sale was done in four maturities.

HP also priced a multi-tranche deal in three parts totaling $3 billion.

The smallest sale of the day came from USAA Capital Corp. The financial name priced $250 million of five-year paper under Rule 144A and Regulation S.

The tone was "pretty great" at the top of the day, leading Gilead to announce its deal without hesitation, a source said.

"We didn't have anything earth-shattering," the source noted. "No bad headlines really."

There was solid demand for the deals, including Gilead, which one source described as "nicely oversubscribed."

The company had been taking the temperature of the market, as had HP, and decided to act while there was less volatility.

"Investors got a break, so there was interest," a syndicate source said, referring to a new issue concession.

Hewlett-Packard's new notes firmed later in the secondary market. But earlier in the day, the company's existing 4.375% notes due 2021, priced on Sept. 13 at a spread of 240 basis points over Treasuries, traded about "30 basis points wider." That was ahead of the new 10-year notes, which priced 260 bps over, a trader said.

The 4.375% 10-year notes moved out to 245 bps bid, 235 bps offered.

The rest of the sector traded unchanged to about 2 bps weaker, and by late afternoon, bonds "started to get a bit weaker," a trader said.

Gilead Sciences' CDS traded 25 basis points wider as the market waited on the new bonds to price, a trader said.

Another trader saw Gilead's bonds trading tighter on the offer side going out.

USAA Capital's notes were flat in trading.

Corporate bond spreads were mixed with bank and financial paper 5 bps to 15 bps wider, a trader said. The Markit CDX Series 17 North American high-grade index firmed 1 bp to a spread of 122 bps on Tuesday.

The two major financial deals that priced the previous day stayed flat to slightly weaker in the secondary market. Wells Fargo & Co.'s notes traded about 2 bps weaker in trading and no trading activity was seen in CIBC's $2 billion offering.

Investment-grade bank and brokerage credit default swaps costs declined slightly on Tuesday, a source said.

Bank and brokerage CDS costs were seen down 5 bps across the board.

The secondary felt "quieter" on Tuesday, a trader said.

Overall trading volume stayed flat at about $11 billion on Tuesday.

Treasuries fell as confidence grew that a solution will be reached at the European Union summit meeting later in the week. The 10-year note yield rose 4 bps to 2.08%. The 30-year bond yield closed up 8 bps at 3.1%.

Gilead's four-tranche sale

Gilead Sciences priced $3.7 billion of senior notes (Baa1/A-) in four tranches, a source close to the deal said.

A $750 million tranche of 2.4% three-year notes sold at a spread of Treasuries plus 205 bps.

The second part was $700 million of 3.05% five-year notes priced at Treasuries plus 215 bps.

There was a $1.25 billion tranche of 4.4% 10-year notes sold 235 bps over Treasuries.

The final part was $1 billion of 5.65% 30-year bonds priced at Treasuries plus 260 bps.

Bank of America Merrill Lynch and Barclays Capital Inc. were active bookrunners for all of the tranches.

The proceeds are being used to pay a portion of the cash consideration for a tender offer and $11.1 billion merger with Pharmasset, along with related fees and expenses.

Gilead last priced debt in a $1 billion sale of 4.5% 10-year notes at 125 bps over Treasuries on March 23.

In the secondary market, the five-year notes traded at 190 bps offered, a source said.

The 10-year notes were seen at 207 bps offered.

The 30-year bonds traded at 225 bps offered.

The biopharmaceutical company is based in Foster City, Calif.

HP sells $3 billion

Hewlett-Packard sold $3 billion of global debt (A2/BBB+/A) in three tranches late in the day, a market source said.

Full terms were unavailable at press time.

The $650 million of three-year notes priced at a spread of Treasuries plus 225 bps.

There was an $850 million tranche of five-year paper sold at a spread of 240 bps over Treasuries.

The final part was $1.5 billion of 10-year notes priced at Treasuries plus 260 bps.

Bookrunners were Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

The proceeds are being used to repay commercial paper and for general corporate purposes.

HP last priced bonds in a $4.5 billion deal in five tranches on Sept. 13. The 3% five-year paper from that deal priced at 215 bps over Treasuries while a 4.375% tranche of 10-year notes sold at 240 bps over Treasuries.

In trading late afternoon, the three-year notes were seen at 220 bps offered.

The five-year notes traded 10 bps tighter at 230 bps bid, 220 bps offered.

The 10-year notes also came in to 253 bps bid, 243 bps offered.

The computer and technology company is based in Palo Alto, Calif.

USAA's private deal

USAA Capital sold $250 million of 2.25% five-year senior notes (Aa1/AA+) to yield 135 bps over Treasuries, a market source said.

The notes were sold under Rule 144A and Regulation S.

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC were bookrunners.

The notes traded flat on Tuesday afternoon at 135 bps bid, 132 bps offered, a trader said.

The issuer offers insurance, banking and credit card services through subsidiaries and is based in San Antonio.

Senior Housing gives terms

Senior Housing Properties Trust gave the terms of its $300 million of 6.75% 10-year notes priced late on Monday to yield 7%, according to an FWP with the Securities and Exchange Commission.

The notes (Baa3/BBB-) were sold at Treasuries plus 496.5 bps.

Bank of America Merrill Lynch, RBC Capital Markets LLC, UBS Securities LLC and Wells Fargo Securities LLC were bookrunners.

The proceeds are being used to repay amounts under a revolving credit facility and for general corporate purposes, including acquisition of properties and repayment of all or a portion of 8.625% senior notes due Jan. 15, 2012.

Senior Housing Properties' notes were last seen tighter at 475 bps bid, 465 bps offered, a trader said.

The real estate investment trust is based in Newton, Mass.

Wells Fargo wider

Wells Fargo's 2.625% notes due 2016 traded Tuesday at 177 bps bid, 172 bps offered, a trader said.

The issue (A2/A+) priced in a $1.5 billion offering at a spread of Treasuries plus 175 bps.

The financial services company is based in San Francisco.

CIBC trading

No trading activity was seen in the U.S. secondary market in CIBC's new three-year covered bonds (Aaa/AAA) sold late Monday.

"Zero," a trader said Tuesday afternoon in reference to the issue.

CIBC sold the notes at mid-swaps plus 68 bps.

The financial services company is based in Toronto.

Paul Deckelman contributed to this review

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