Kroger, AvalonBay, Air Lease, Southwest Gas price; Hercules markets; credit spreads widen

By Cristal Cody

Eureka Springs, Ark., Sept. 26 – Several high-grade issuers including Kroger Co. tapped the primary market on Monday despite a rough market tone that kept some companies on the sidelines, according to market sources.

Kroger sold $1.75 billion of senior notes in three tranches.

AvalonBay Communities, Inc. priced $650 million of medium-term notes in two parts.

Air Lease Corp. raised $500 million in an offering of senior notes due Jan. 15, 2020.

Southwestern Electric Power Co. priced $400 million of 10-year notes.

Southwest Gas Corp. sold $300 million of 30-year senior notes on Monday.

In other activity, Hercules Capital, Inc. announced plans to kick off a three-day roadshow on Tuesday.

The Markit CDX North American Investment Grade index closed the session 2 basis points weaker at a spread of 79 bps.

Shire Acquisitions Investments Ireland DAC’s 3.2% senior notes due 2026 priced last week firmed about 1 bp in secondary trading earlier in the day.

Kroger prices $1.75 billion

Kroger sold $1.75 billion of senior notes (Baa1/BBB/BBB) in three tranches on Monday, according to an FWP filing with the Securities and Exchange Commission.

The grocer sold $500 million of 1.5% three-year notes at 99.951 to yield 1.517% and a spread of 65 bps plus Treasuries.

Kroger priced $750 million of 2.65% 10-year notes at 99.676 to yield 2.687%. The notes were sold with a spread of 110 bps over Treasuries.

The $500 million tranche of 3.875% 30-year notes priced at 99.963 to yield 3.877%, or Treasuries plus 155 bps.

Citigroup Global Markets Inc., Goldman Sachs & Co., Wells Fargo Securities LLC, BNY Mellon Capital Markets LLC, Fifth Third Securities Inc. and Santander Investment Securities Inc. were the bookrunners for the three-year notes sale.

The bookrunners on the 10- and 30-year notes offerings were Citigroup, Goldman Sachs, Wells Fargo, BB&T Capital Markets, Fifth Third Securities Inc. and PNC Capital Markets LLC.

Proceeds from the deal will be used to refinance long-term debt maturing in October and January and for general corporate purposes.

Kroger is a Cincinnati-based grocery retailer.

AvalonBay prices $650 million

AvalonBay Communities sold $650 million of medium-term notes (Baa1/A-/) in two parts on Monday, according to a market source and an FWP filing with the SEC.

The company priced $300 million of 2.9% notes due Oct. 15, 2026 at 99.689 and a spread of 135 bps over Treasuries.

The $350 million tranche of 3.9% notes due Oct. 15, 2046 priced at 99.595 and a spread of Treasuries plus 160 bps.

The notes priced on the tight side of guidance.

Barclays and BofA Merrill Lynch were the bookrunners.

Proceeds will be used to reduce debt under AvalonBay’s $1.5 billion unsecured revolving credit facility and for general corporate purposes.

The manager and developer of apartment communities is based in Arlington, Va.

Air Lease sells notes

Air Lease priced $500 million of 2.125% senior notes due Jan. 15, 2020 on Monday with a spread of 137.5 bps over Treasuries, according to a market source.

The notes (/BBB-/) priced on the tight side of guidance.

BofA Merrill Lynch, Goldman Sachs, Santander Investment Securities Inc., Wells Fargo, BMO Capital Markets Corp., BNP Paribas Securities Corp., Citigroup, Fifth Third Securities Inc., ICBC, J.P. Morgan Securities LLC, Lloyds Securities, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, MUFG, RBC Capital Markets Corp. and SunTrust Robinson Humphrey Inc. were the bookrunners.

The Los Angeles aircraft leasing company will use the proceeds for general corporate purposes.

Southwestern Electric prices

Southwestern Electric Power priced $400 million of 2.75% 10-year series K senior notes with a spread of 118 bps over Treasuries on Monday, according to an FWP filing with the SEC.

The notes priced at 99.896 to yield 2.762%.

The bookrunners were Morgan Stanley, UBS Securities LLC, Wells Fargo, BNY Mellon Capital Markets, LLC and KeyBanc Capital Markets Inc.

Proceeds will be used for general corporate purposes relating to the company’s utility business, which may include funding a construction program, repaying advances from affiliates, replenishing working capital and paying at maturity $250 million outstanding of 5.55% series E senior notes due Jan. 15, 2017.

Southwestern Electric Power is a Columbus, Ohio-based electric power company.

Southwest Gas prices

Southwest Gas sold $300 million of 3.8% 30-year senior notes on Monday on the tight side of guidance at a spread of 150 bps over Treasuries, according to a market source and an FWP filing with the SEC.

The notes (A3/BBB+/A) priced at 99.698 to yield 3.817%.

BNY Mellon, JP Morgan, BofA Merrill Lynch and Wells Fargo were the bookrunners.

Proceeds will be used to pay in full $230 million outstanding under the company’s credit facility and for general corporate purposes.

Southwest Gas is a Las Vegas-based natural gas and construction company.

Hercules Capital to price

Hercules Capital (/BBB-/Kroll: BBB+) plans to hold a three-day roadshow that starts on Tuesday, and a benchmark size SEC-registered senior transaction is expected to follow, according to a 497AD filing with the SEC.

Morgan Stanley and Wells Fargo are arranging the fixed-income investor calls.

Hercules Capital is a Palo Alto, Calif.-based venture capital financing firm.

Shire firms

Shire’s 3.2% notes due 2026 traded about 1 bp tighter early Monday at 149 bps offered, according to a market source.

The notes traded on Friday at 152 bps bid, 150 bps offered.

The company sold $3 billion of the notes (Baa3/BBB-/) on Sept. 19 at a spread of 150 bps over Treasuries.

The notes are fully and unconditionally guaranteed by parent company Shire plc.

Shire is a biotechnology company based in Dublin.

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