Primary stuffed with deals from Coke, Kinder Morgan, JPMorgan; high-grade yields hit new lows

By Andrea Heisinger and Cristal Cody

New York, Aug. 3 - A rally in the high-grade bond market continued on Wednesday as JPMorgan Chase & Co., Kinder Morgan Energy Partners LP, Coca-Cola Co. and Southwestern Public Service Co. each priced new deals of varying sizes.

A deal announced on Tuesday from MF Global Holdings Ltd. also priced after going overnight and being upsized to $325 million from $300 million.

The aversion of a default by the U.S. after the debt ceiling was raised on Tuesday provided a boost to issuers trying to gauge whether it was safe to sell bonds, sources said. Some have been eying the market, waiting to see what the outcome of the Congressional debate in past weeks would be.

JPMorgan Chase priced $1.25 billion of 10-year notes - one in a string of recent deals for the big bank.

There was a $2 billion sale of five- and-10-year notes from Coca-Cola done to finance an exchange offer. The sale was done privately under Rule 144A.

There was roughly $7 billion on the books for the offering, split evenly between the two tranches, a source close to the deal said.

Pipeline services company Kinder Morgan Energy Partners sold $750 million in tranches due 2022 and 2041.

The day's smallest offering came from Southwestern Public Service, which sold $200 million of 30-year first mortgage bonds.

Terms were given for a split-rated sale from SL Green Realty Corp. that priced on Tuesday. The real estate investment trust sold $250 million of seven-year notes off the high-grade syndicate desk.

Many of the names in the primary for the day were well-known and highly rated. That encouraged investors who clamored for the debt, sources said.

"We were completely slammed today," said one source who worked on more than one of the day's trades.

Another source said that both Kinder Morgan and Coca-Cola had "some pretty specific [funding] needs" that likely prompted them to jump on the open issuance window.

"I'd like a couple more [days] like today," the source said. "It's nice to have more than one deal out there."

Overall trading volume was flat at about $11 billion on Wednesday, while secondary trading spreads stayed tight, sources said.

"Today's been a really good day for financials, not a huge movement but most of the mainstream banks are tighter by half a basis point to a basis point and a half," a bond source said.

In trading, JPMorgan's new notes traded about 3 basis points tighter.

"Investment-grade bond yields hit all-time lows today on a combination of falling interest rates and spreads being reasonably tight," the source said. "The Barclays corporate investment-grade index priced at 3.42% yield. We expect that to be 3 basis pints lower when it prices today."

The Markit CDX Series 15 North American high-grade index firmed 1 bp to a spread of 98 bps, according to Markit Group Ltd.

Treasuries were mixed after the gains from Tuesday. The 10-year note yield was flat at 2.61%. The 30-year bond yield fell 1 bp to 3.9%.

Coke bonds see demand

Coca-Cola priced $2 billion of notes (Aa3/A+/A+) in two maturities by late afternoon in the Rule 144A, Regulation S market, an informed source said.

The $1 billion tranche of 1.8% five-year notes was priced at a spread of Treasuries plus 57 bps. The notes were sold at the tightest end of guidance in the 60 bps area.

A $1 billion tranche of 3.3% 10-year notes sold at 72 bps over Treasuries. The notes priced at the low end of talk in the 75 bps area.

Bookrunners were BNP Paribas Securities Corp., Citigroup Global Markets Inc. and Goldman Sachs & Co.

Proceeds are being used to fund a note exchange offer.

Coca-Cola was last in the market with a $4.5 billion sale in four tranches on Nov. 4, 2010. The 1.5% five-year notes from that sale were priced at 52 bps over Treasuries, and a tranche of 3.15% 10-year notes priced at Treasuries plus 72 bps.

In secondary trading, the new notes due 2016 traded at 55 bps bid, 50 bps offered. The tranche of notes due 2021 traded at 70 bps bid, 68 bps offered.

The soft drink company is based in Atlanta.

Kinder Morgan tranches

Kinder Morgan Energy Partners sold $750 million of senior notes (Baa2/BBB/BBB) in two tranches, a source close to the offering said.

The $375 million of 4.15% notes due 2022 priced at a spread of Treasuries plus 157 bps. The tranche sold at the tight end of guidance in the 160 bps area, a source said.

A $375 million tranche of 5.625% 30-year bonds priced at a 180 bps over Treasuries spread. The bonds were priced in line with talk in the 180 bps area.

Bookrunners were Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co., Inc. and SunTrust Robinson Humphrey Inc.

Proceeds will be used to repay commercial paper and for general partnership purposes.

Kinder Morgan last priced bonds in a $1.1 billion sale in two tranches on Feb. 23. The 6.375% 30-year bonds from that offering were priced at 180 bps over Treasuries.

In trading, the notes due 2022 traded at 156 bps bid, 154 bps offered, according to a trader.

The bonds due 2041 firmed to 177 bps bid, 176 bps offered.

The pipeline services company is based in Houston.

JPMorgan offers 10-years

JPMorgan Chase sold $1.25 billion of 4.35% 10-year notes (Aa3/A+/AA-) to yield Treasuries plus 175 bps, a market source away from the deal said.

J.P. Morgan Securities LLC was bookrunner.

In the secondary market, the notes firmed to 172 bps bid, 169 bps offered, a trader said.

The financial services company is based in New York City.

MF's odd coupon provision

MF Global Holdings sold an upsized $325 million deal of 6.25% five-year senior notes on Tuesday at par to yield 6.25%, according to a press release and market sources.

The size of the sale was increased slightly from $300 million.

The notes (Baa2/BBB-) were priced at a spread of Treasuries plus 501.6 basis points. They have a make-whole call at Treasuries plus 50 bps and feature a change-of-control put at 101.

There is a covenant that the coupon will increase by 1% if chief executive officer Jon Corzine is appointed to a federal position by the U.S. President and a Senate confirmation is done prior to July 1, 2013. The interest rate can also be adjusted if the company's debt rating is downgraded.

Jefferies & Co. was the bookrunner.

Co-managers were Bank of America Merrill Lynch, BMO Capital Markets Corp., Commerz Markets LLC, Natixis Securities N.A. Inc., Lebenthal & Co. LLC, Sandler O'Neill & Partners LP and U.S. Bancorp Investments Inc.

Proceeds are being used to repay at least $100 million of outstanding debt under a liquidity facility and for general corporate purposes, including working capital for broker-deal subsidiaries.

Late afternoon, the notes due 2016 traded tighter at 500 bps bid, 490 bps offered, a trader said.

The commodity and derivative broker is based in New York City.

Southwestern's $200 million

Southwestern Public Service sold $200 million of 4.5% 30-year series No. 1 first mortgage bonds (A2/A-/A-) by early afternoon to yield 78 bps over Treasuries, according to an FWP with the Securities and Exchange Commission.

Citigroup Global Markets Inc., Scotia Capital (USA) Inc. and U.S. Bancorp Investments Inc. were bookrunners.

Proceeds are being used to repay short-term debt and redeem $57.3 million of 5.75% Pollution Control Revenue Refunding bonds due on Sept. 1, 2016 with any balance used for general corporate purposes.

The bonds due 2041 traded wrapped around the issue price at 78 bps bid, 76 bps offered, a trader said.

The electric utility is based in Amarillo, Texas.

SL Green gives terms

SL Green Realty priced a split-rated $250 million issue of 5% seven-year senior notes (expected Ba1/BBB-/expected BB) at a 310 bps spread to Treasuries on Tuesday, according to a prospectus filed on Wednesday with the SEC.

The deal, which was priced on the investment-grade desk, launched earlier in the day at 310 bps, according to an informed source.

Wells Fargo Securities, LLC, Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and J.P. Morgan Securities LLC were the joint bookrunners.

Proceeds will be used to repay bank debt, as well as for general purposes and for working capital.

SL Green Realty is a New York-based real estate investment trust focused on Manhattan commercial properties.

Paul Harris contributed to this review

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