Boeing, St. Jude Medical, Bank of America sells bonds, tone turns upbeat; spreads tighter

By Andrea Heisinger and Paul Deckelman

New York, July 23 - Large, multi-tranche deals were the trend for Thursday as Boeing Co., St. Jude Medical, Inc. and Bank of America Corp. tapped the bond market.

There were also a handful of sales from emerging-markets names Centrais Eletricas Brasileiras SA, Dolphin Energy Inc. and Korea National Oil Corp.

The tone was solid at the beginning of the day, prompting both Boeing and St. Jude to announce their offerings early. Bank of America's didn't come to light until later in the day.

"It was good out there," a source said. "We had a lot of good names."

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 12 North American high-grade index tightened by 6 basis points to a mid bid-asked spread level of 118 bps.

Advancing issues - which led decliners for a third straight session on Wednesday - fell back on Thursday, trailing by around a six-to-five margin.

Overall market activity, reflected in dollar-volume totals, rose about 11% from Wednesday's pace.

Spreads in general were seen a tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue gapped out about 12 bps on Wednesday to 3.66%.

Traders saw the new St. Jude bonds firm modestly from the spread over comparable Treasuries at which those bonds had priced.

However, the new Boeing bonds failed to take off.

Boeing sells three tranches

Boeing priced an upsized $1.95 billion of senior notes in three tranches.

The size was originally announced at $1.5 billion, and increased soon after, a source said.

The $750 million of 3.5% notes due 2015 priced at a spread of Treasuries plus 110 bps.

The $750 million of 4.875% notes due 2020 priced at a spread of Treasuries plus 130 bps.

A $450 million tranche of 5.875% notes due 2040 priced at a spread of Treasuries plus 145 bps.

All three tranches priced at the tight end of guidance that was 5 bps more than where they priced. A source away from the sale said he heard whispers that were 15 bps wider than where the tranches priced.

The sale went "very well" and was "very oversubscribed," a source close to it said. He could not give any specifics, he added.

"It's a good name."

He also termed it a good day to bring a deal to the market, although it was hard to tell as "I was buried most of the day working on the Boeing deal."

The structure of the sale was similar to a $1.85 billion deal in three tranches from the company that priced March 10.

"We looked at those in the secondary," the source said.

Bookrunners were Banc of America Merrill Lynch, Deutsche Bank Securities and Morgan Stanley & Co. Inc.

Proceeds are going for general corporate purposes including repayment of debt, acquisitions, working capital additions, capital expenditures, pension funding, funding subsidiaries and the repurchase of stock. They may also be used to help fund the purchase of the assets and operations of Vought Aircraft Industries Inc.'s 787 business.

The aerospace firm is based in Chicago.

St. Jude Medical offers $1.2 billion

St. Jude Medical priced $1.2 billion senior notes in two tranches.

A $700 million tranche of 3.75% five-year notes priced at Treasuries plus 120 bps, while a $500 million tranche of 4.875% 10-year notes priced at 132.5 bps over Treasuries.

Bookrunner was Banc of America Securities Merrill Lynch, with Mitsubishi UFJ Securities, Wells Fargo Securities and Goldman Sachs & Co. as passive books.

Proceeds will be used for general corporate purposes including the repayment of debt and a $500 million stock repurchase program.

The cardiovascular medical device maker is based in St. Paul, Minn.

Bank of America taps market for $2.5 billion

Bank of America offered $2.5 billion of 6.5% seven-year notes at Treasuries plus 330 bps.

Banc of America Merrill Lynch ran the books.

They were not sold under the guarantee of the Federal Deposit Insurance Corp.

The financial services company is based in Charlotte, N.C.

Primary tone turns upbeat

Sources had a decidedly upbeat tone when talking about how the high-grade market looked as of late Thursday.

"It was great out there," a source said. "It was ripping tighter all day. There was great investor sentiment."

He referred to a high-yield deal, KB Home, that was done off the high-grade desk, saying it "flew out the door."

The large sale from Boeing was no surprise, a market source said.

"It was kind of expected at the beginning of the week," he said. "We heard rumblings."

Although the market looked good Thursday, it's not likely to lead to any substantial deals for Friday.

The market source said it would be "a typical, quiet Friday. We don't have anything lined up, but I'm not sure about away."

Eletrobras offers 10-year

From emerging markets, Brazil's Eletrobras priced $1 billion 6.875% 10-year senior unsecured notes to yield 7%, a market source said.

The notes priced at a spread of Treasuries plus 336.2 bps.

Pricing followed a road show in the United States on July 21 and 22.

Credit Suisse was bookrunner for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes.

The government-owned power firm is based in Rio de Janeiro, Brazil.

Dolphin Energy sells bonds

Dolphin Energy priced a $1.25 billion 5.888% 10-year bond at Treasuries plus 337.5 bps, a market source said.

BNP Paribas and RBS acted as bookrunners for the deal.

The energy firm is 51% owned by Mubadala Development Co. of the Emirate of Abu Dhabi.

Korea National Oil prices $1 billion

Korea National Oil priced $1 billion 5.375% five-year bonds at 99.344, a market source said.

Asian Development Bank, Bank of America Merrill Lynch, Barclays Capital, BNP Paribas, Deutsche Bank and Korea Development Bank acted as bookrunners.

The energy firm is based in Anyang, South Korea.

Healthy gain for St. Jude five-years

When the new St. Jude Medical bonds were freed for secondary dealings, a trader saw the company's 3.75% notes due 2014 having firmed to 108 bps bid, 104 bps offered. That was in from the 120 bps over level at which the $700 million of bonds had priced earlier in the session, as part of the St. Paul, Minn. Medical device maker's two-part mega-deal.

The second section of that deal, St. Jude's $500 million of 4.875% notes due 2019, improved just marginally to 130 bps bid, 125 bps offered, versus a spread at pricing of 132.5 bps

New Boeing bonds grounded

The three tranches of new bonds issued by Chicago-based aerospace company Boeing never got off the ground when they hit the aftermarket, a trader said.

He saw its $750 million of 3.50% notes due 2015 at 107 bps bid, 96 bps offered, in slightly from the 110 bps over level at which the bonds had priced.

Boeing's $750 million of 4.875% notes due 2020 were trading at 129 bps bid, 125 bps offered, almost unchanged from their 130 bps over pricing level

And its $450 million of 5.875% bonds due 2040, which priced at a spread of 145 bps, narrowed just a little to 142 bps bid, 140 bps offered.

Dow bonds actively traded

Apart from the brand-new issues, Dow Chemical Co.'s 8.55% notes due 2019 were seen by a source as one of the busiest high-grade bonds on the day. The Midland, Mich.-based chemical maker's bonds were seen to have come in about 6 or 7 bps to the 405 bps level.

However, no fresh news was seen on the company that might explain the strong volume - a market source said that over $60 million of the bonds had traded by mid-afternoon, topping the Most Actives list at that time.

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