Berkshire sells jumbo acquisition issue; Discovery upsizes; Duke firms; credit spreads widen

By Aleesia Forni and Cristal Cody

New York, March 8 – Another medley of issuers tapped the investment-grade primary market on Tuesday, accessing the market during a session that saw stocks snap a five-day gaining streak and oil prices slip.

Berkshire Hathaway Inc. led the session, bringing to market $9 billion of bonds in seven tranches, all priced 20 basis points to 25 bps inside initial price thoughts.

The bonds will be used to help repay debt incurred as part of the company’s acquisition of Precision Castparts Corp.

Discovery Communications LLC upsized its 10-year new issue to $500 million and attracted a book that saw more than $2 billion of orders, and Commonwealth Bank of Australia offered $2.5 billion of notes in three parts.

In total, issuers brought more than $16 billion of new high-grade paper to market on Tuesday, pushing the week’s supply to $25.2 billion in just two sessions.

In the secondary market, investment-grade energy bonds traded mostly better.

Duke Energy Corp.’s bonds firmed about 1 bp on the bid side in aftermarket trading.

Earlier in the day, bonds from ConocoPhillips Co. and Exxon Mobil Corp. traded 5 bps to 8 bps tighter in the secondary market.

Credit spreads widened over the day. The Markit CDX North American Investment Grade index closed 5 bps weaker at a spread of 99 bps.

Berkshire M&A deal

In the largest issue priced this week so far, Berkshire Hathaway and Berkshire Hathaway Finance Corp. sold a combined $9 billion of senior notes (A2/AA) in seven parts on Tuesday, according to an informed source.

Berkshire Hathaway Finance sold $750 million of 1.45% two-year notes at 99.961 to yield 1.47%, or Treasuries plus 60 bps.

The notes sold at the tightest side of the Treasuries plus 65 bps area guidance, which tightened from talk in the Treasuries plus 80 bps area.

Also, Berkshire Hathaway Finance priced $1 billion two-year floaters at Libor plus 55 bps after the tranche was talked at the Libor equivalent to the fixed-rate piece.

Berkshire Hathaway Finance priced $1.25 billion 1.7% three-year notes with a spread of 70 bps over Treasuries. The notes sold at 99.924 to yield 1.726%.

Guidance was in the Treasuries plus 75 bps area, and the notes were initially talked in the Treasuries plus 95 bps area.

And Berkshire Hathaway Finance issued $500 million three-year floaters at par to yield Libor plus 69 bps. The notes were talked at the three-year note’s Libor equivalent.

Berkshire Hathaway Inc., meantime, priced $1 billion 2.2% five-year notes at 99.788 to yield 2.245%, or Treasuries plus 90 bps.

Pricing came at the tight end of the Treasuries plus 95 bps area guidance, which tightened from the Treasuries plus 115 bps area.

Berkshire Hathaway also priced $2 billion of 2.75% seven-year notes at 99.728 to yield 2.793%. The notes sold with a spread of Treasuries plus 115 bps.

Guidance was in the Treasuries plus 120 bps area. Talk was initially in the Treasuries plus 140 bps area.

And Berkshire Hathaway priced $2.5 billion 3.125% 10-year notes at 99.906 to yield 3.136% with a 130 bps spread over Treasuries.

The issue came at the tightest end of guidance in the Treasuries plus 135 bps area, firming from talk in the Treasuries plus 155 bps area.

BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC and Wells Fargo Securities LLC are the joint bookrunners.

Proceeds will be used to repay the company’s $10 billion bank loan used to finance a portion of the acquisition of Precision Castparts and to refinance its $300 million of 2.2% notes due Feb. 11, 2016.

Berkshire Hathaway is an Omaha-based holding company for subsidiaries.

CBA prices

Also on Tuesday, Commonwealth Bank of Australia priced $2.5 billion of senior notes (Aa2/AA-/AA-) in three parts, a market source said.

A $750 million 2.05% tranche of three-year notes sold at 99.87 to yield 2.095%, or Treasuries plus 108 bps.

Pricing came at the tight side of the Treasuries plus 110 bps area guidance, which tightened from the Treasuries plus 120 bps area.

Also, $750 million three-year floaters sold at par to yield Libor plus 106 bps after being talked at the Libor equivalent to the fixed-rate piece.

And $1 billion of 2.55% five-year notes sold with a 125 bps spread over Treasuries. Pricing was at 99.837 to yield 2.585%.

Guidance was in the Treasuries plus 130 bps area, inside talk set in the Treasuries plus 140 bps area.

Bookrunners were Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC.

The banking and financial services company is based in Sydney, Australia.

Sweden prices tight

Sweden priced $2 billion of 1.125% three-year notes on Tuesday at mid-swaps plus 19 bps, according to a news release and a market source.

Pricing was at 99.709 to yield 1.224%.

The Rule 144A and Regulation S notes (Aaa/AAA/AAA) were sold at the tight side of guidance set in the mid-swaps plus 20 bps area.

Bookrunners were Goldman Sachs, Nordea and RBS Securities Inc.

SEB five-year notes

In another new issue from that region, Skandinaviska Enskilda Banken AB priced a $1.25 billion issue of 2.625% five-year senior notes on Tuesday at Treasuries plus 130 bps, an informed source said.

The notes (A+/A+) priced at 99.93 to yield 2.64%.

The bookrunners are BofA Merrill Lynch, Goldman Sachs, JPMorgan and SEB.

Proceeds will be used for general corporate purposes.

The financial services company is based in Stockholm.

Cades floaters

Caisse d'Amortissement de la Dette Sociale priced $1 billion of two-year floating-rate notes (Aa2/AA) at par to yield Libor plus 38 bps, according to a market source and a company news release.

The notes sold in line with talk via Rule 144A and Regulation S.

Barclays and Deutsche Bank Securities Inc. are the bookrunners.

The French debt agency is based in Paris.

Duke Energy mortgage bonds

Duke Energy Carolinas LLC priced $1 billion of first and refunding mortgage bonds (Aa2/A/AA-) in two parts on Tuesday, according to a market source and an FWP filing with the Securities and Exchange Commission.

The offering included $500 million of 2.5% bonds due 2023 sold at 99.961 to yield 2.506%, or Treasuries plus 87 bps.

Also, $500 million of 3.875% bonds due 2046 priced at 99.647 to yield 3.895% with a spread of Treasuries plus 127 bps.

Both tranches sold at the tight side of guidance and tighter than initial price thoughts.

BNP Paribas Securities Corp., Citigroup, RBC Capital Markets LLC, TD Securities and UBS Securities LLC are the bookrunners.

Proceeds will be used to fund capital expenditures for ongoing construction, for capital maintenance and for general corporate purposes.

The Charlotte, N.C.-based company generates, transmits, distributes and sells electricity and is a wholly owned subsidiary of Duke Energy.

Discovery upsizes

Discovery Communications priced an upsized $500 million of 4.9% 10-year senior notes (Baa3/BBB-/BBB-) at Treasuries plus 312.5 bps on Tuesday, according to a market source and an FWP filing with the SEC.

Pricing was at 99.633 to yield 4.947%.

The notes sold at the tight end of guidance and well inside initial talk in the mid-300 bps area over Treasuries.

BofA Merrill Lynch, JPMorgan, BNP Paribas, Citigroup, Credit Suisse Securities (USA) LLC, Mizuho Securities and RBC are the bookrunners.

The notes are guaranteed by Discovery Communications, Inc.

The Silver Spring, Md., media company will use proceeds for general corporate purposes.

Entergy mortgage bonds

The primary also hosted Entergy Texas Inc., which priced $125 million of 2.55% five-year first mortgage bonds (Baa1/A-) tighter than talk at Treasuries plus 125 bps, according to an informed source and an FWP filing with the SEC.

Pricing was at 99.808 to yield 2.59%.

Goldman Sachs, KeyBanc Capital Markets and U.S. Bancorp Investments Inc. are the bookrunners.

Proceeds will be used for general corporate purposes.

Entergy Texas is a Beaumont, Texas-based energy provider.

Canadian market sees issues

Wells Fargo & Co. and Laurentian Bank of Canada tapped the Canadian bond market on Tuesday in what may be an active week for bank and financial issuance.

“The market is expecting more,” a source said. “We have earnings out of the way, and they were generally positive.”

Wells Fargo sold C$1 billion of 2.222% senior notes due March 15, 2021 (A2/A/DBRS: AA) at par to yield a spread of 157 bps over the interpolated Government of Canada bond curve.

Laurentian Bank priced C$100 million of non-viability contingent capital non-cumulative class A preferred shares with a 5.85% dividend for the initial period ending on but excluding June 15, 2021.

Duke Energy improves

In the secondary market, Duke Energy’s 2.5% bonds due 2023 firmed about 1 bp from issuance to 86 bps bid, 83 bps offered, a trader said.

The company’s tranche of 3.875% bonds due 2046 tightened about 1 bp from where the bonds priced to 126 bps bid, 123 bps offered as the session closed.

ConocoPhillips firms

ConocoPhillips’ 4.95% notes due 2026 were seen 5 bps tighter earlier in the day at 310 bps offered, according to a market source.

ConocoPhillips sold $1.25 billion of the bonds (Baa2/ A/A-) on Thursday at a spread of 312.5 bps plus Treasuries.

The energy company is based in Houston.

Exxon Mobil tightens

Exxon Mobil’s 3.043% notes due 2026 traded about 8 bps tighter over the morning at 109 bps offered, a market source said.

The company sold $2.5 billion of the notes (Aaa/AAA) on Feb. 29 at 130 bps over Treasuries.

Exxon Mobil is an energy company based in Irving, Texas.

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