Coca-Cola prices notes with sub-Libor coupon; Marriott reopens notes; trading ends week muted

By Andrea Heisinger

New York, March 9 - The investment-grade bond market wasn't done with new deals on Friday despite unemployment numbers coming out and the large number of issues priced earlier in the week.

Coca-Cola Co. and Marriott International, Inc. each priced paper.

The largest deal of the day, and one of the biggest for the week, was Coke's $2.75 billion of three tranches. There was already more than $4 billion of demand on the books as of early afternoon, but the final book size wasn't available.

"I'm not sure why they priced, but the demand was there," a source away from the trade said.

Marriott reopened an issue of notes due 2019 sold in February to add $200 million.

Payroll numbers and unemployment were better than expected for February when figures were released early in the day. A market source said that may have been the tipping point leading Coca-Cola to raise money for the repayment of commercial paper.

"They basically got really low rates, so why not, right?" the source said.

There was some discrepancy on whether the week's issuance was a record total or not. The record, according to a market source, was $42.9 billion issued during a week in March 2009.

According to data compiled by Prospect News, issuers priced $38.15 billion of notes during the week.

The primary side of the market is expected to see a decline in volume.

"We're hearing about $15 billion next week," a source said after the market close. "It could be a bunch of smaller deals and not as many big ones like Phillips [66] or HP."

The past week was "really saturated" the source said, referring to the huge number of deals the primary absorbed.

New issue premiums also jumped from the previous week, meaning some companies may think twice about selling bonds. The previous week saw issuers paying between zero and 15 basis points. That increased to between 15 bps and 30 bps.

"I wouldn't call it a spike, but they definitely went up," a market source said.

A deal was priced by Kimco Realty Corp. in the preferred stock market. The $400 million of perpetual preferred stock was announced and priced late on Thursday.

First Potomac Realty Trust announced it will add on to its 7.75% cumulative redeemable perpetual preferred shares.

Secondary ends week quietly

The secondary market saw overall trading volume drop by the end of the day.

"It was about $8.5 billion," a source said, "typical for a Friday."

The Coca-Cola bonds priced too late to see trading, although the new three-year notes were seen offered in the gray market about 5 basis points better than where they priced.

Some of Thursday's deals were seen in the secondary, although only offers were given for many of the notes early in the day.

Simon Property Group LP's three notes from its $1.75 billion deal were wider in next-day trading.

The new five-year notes from Xerox Corp. was offered about 20 bps better than where it priced, a trader said.

The two notes from URS Corp.'s $1 billion deal were seen trading better in the morning.

Treasury yields were wider for the third day in a row, although longer maturities fared better.

A source said the three- and five-year notes were 2 bps wider than Thursday at 0.44% and 0.88%, respectively. The 10-year note was also seen 2 bps worse at 2.03%. The yield on the 30-year bond was out 1 bp at 3.18%.

Coke's $2.75 billion deal

Atlanta-based soft drink company Coca-Cola sold $2.75 billion of notes (Aa3/A+/A+) in three tranches, a market source said.

The $1 billion of two-year floating-rate notes priced at par to yield Libor minus 5 bps. The coupon priced in line with guidance in the range of Libor minus 2 bps to 5 bps.

A $1 billion tranche of 0.75% three-year notes sold at a spread of Treasuries plus 35 bps. The notes sold in line with guidance in the 35 bps area.

There was also a $750 million tranche of 1.65% six-year notes priced at Treasuries plus 80 bps. The tranche priced at the tight end of talk in the 82 bps area.

The bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and UBS Securities LLC.

Proceeds are being used to repay outstanding commercial paper.

Coca-Cola last priced $2 billion of notes in five- and 10-year maturities on Aug. 3, 2011.

Marriott reopens

Marriott International reopened its 3% series K senior notes due 2019 to add an upsized $200 million, an informed source said.

The size of the reopening was increased from $150 million, the source said.

The notes (Baa2/BBB/BBB) were priced at Treasuries plus 172 bps, which was in line with talk in the 172 bps area.

Total issuance is $600 million including $400 million sold on Feb. 22 at 175 bps over Treasuries.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC ran the books.

Proceeds are being used for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchase or repayment of outstanding commercial paper borrowings.

The lodging company is based in Bethesda, Md.

Kimco's preferreds

Kimco Realty priced $400 million of 6% class I cumulative redeemable perpetual preferred stock, according to a prospectus filed with the Securities and Exchange Commission.

There is a $60 million over-allotment option.

The deal was originally announced Thursday and price talk was set at 6.125%. However, early in Friday's session, a trader said that talk had been revised to 6%.

Pricing came after the market closed Thursday.

Pre-pricing, a trader placed the issue at $24.80. Post-pricing, a source quoted the paper at $24.85 bid, $24.90 offered.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., UBS Securities and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be used for general corporate purposes, including the reduction of borrowings under a revolving credit facility maturing in October 2015 by at least $225 million and the redemption of shares of preferred stock when they become callable.

Kimco is a New Hyde Park, N.Y.-based real estate investment trust.

First Potomac doing add-on

First Potomac Realty Trust will price an add-on to its 7.75% series A cumulative redeemable perpetual preferreds, according to a prospectus filed with the SEC.

The company originally issued $115 million of the preferreds on Jan. 18.

Wells Fargo Securities is the bookrunner.

Proceeds will be contributed to the company's operating partnership in exchange for preferred partnership units. The operating partnership will then use the funds to repay a portion of an outstanding balance under the company's unsecured revolving credit facility and for working capital and general corporate purposes.

First Potomac is a Bethesda, Md.-based REIT.

Simon Property moves out

The three new notes making up Simon Property's latest bond issue lost ground in trading on Friday, a source said.

The 2.15% five-year tranche was priced at 130 bps over Treasuries and quoted at an offer of 131 bps.

Those notes fared better than the 3.375% notes due 2022, which were 3 bps wider at a bid of 143 bps over Treasuries. The paper sold at 140 bps.

The 4.75% 30-year bonds were beat up the worst, quoted at an offer 5 bps wider than their price of 160 bps over Treasuries.

The REIT is based in Indianapolis.

URS offered tighter

San Francisco-based engineering firm and government contractor URS saw its new notes due 2017 and 2022 tighten on the offer side Friday morning, a trader said.

The $400 million of 3.85% five-year notes were quoted 9 bps better on the offer side at 291 bps over Treasuries. The paper was priced at 300 bps.

The $600 million of 5% 10-year notes also priced at 300 bps over Treasuries and were 8 bps tighter on the offer side at 292 bps.

Stephanie N. Rotondo contributed to this review

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