Pipeline open with Westpac, Sumitomo, ING, Penske in market; new issues tighten in secondary

By Aleesia Forni and Andrea Heisinger

New York, July 10 - There were several new bond deals from names both domestic and from abroad in the in investment-grade bond market on Tuesday as the decent tone held overnight.

Among the larger sales were those from Westpac Banking Corp., Sumitomo Mitsui Banking Corp. and a joint deal from Penske Truck Leasing Co. LP and PTL Finance Corp.

Sumitomo had the largest high-grade deal of the day at $3 billion in three maturities. All of the tranches were sold 15 basis points to 20 bps tighter than initial talk, a source said.

Westpac priced $2 billion of notes in tranches of three-year floating-rate and three-year fixed-rate notes.

The offering from the two Penske units totaled $1.1 billion of notes due 2014 and 2022.

There was a $400 million sale of 30-year bonds from Transcontinental Gas Pipe Line Co. LLC.

Principal Life Global Funding II sold an upsized $350 million of two-year floating-rate notes after the deal was increased from $250 million.

A $850 million private deal of 10-year notes was priced by ING U.S., Inc.

South Carolina Electric & Gas Co. reopened an issue of 4.35% mortgage bonds due in 2042 to add $250 million. This will bring the total outstanding amount to $250 million.

Westlake Chemical Corp. priced $250 million of 10-year notes to redeem the same amount of paper due 2016.

There was also a deal of notes announced by the Japan Bank for International Cooperation that are guaranteed by the government of Japan. The sale is said to be pricing on Wednesday morning.

Japanese issuers made themselves known in the U.S. bond market for the second straight day, with Sumitomo and JBIC following deals on Monday from Takeda Pharmaceutical Co. and Mitsubishi Corp.

"Rates are better [in the U.S.] and they need financing," a market source said. Some Japanese issuers, especially in the financial sector, were downgraded by ratings agencies and haven't tapped the U.S.-dollar bond market since before the tsunami that hit that country in early 2011.

A syndicate source who worked on the Sumitomo deal, as well as the Takeda offering on Monday, said that the number of Japanese issuers was "by chance, to be honest." He also said the rates in the U.S. market "definitely helped" nudge those issuers into pricing.

Wednesday's primary should remain active as syndicates report they have a small number of issuers that will look at the market's tone at the open in the morning.

"We had a couple stand down today," one market source at a smaller desk said. "They wanted to see how things performed today."

In the secondary market, the new issues from Sumitomo, Westpac, Westlake and Transco all traded between 1 bps to 5 bps tighter near the end of Tuesday's session.

Meanwhile, the Markit CDX Series 18 North American Investment Grade index declined 2 bps on Tuesday to a spread of 111 bps.

Sumitomo prices tightly

Sumitomo Mitsui Banking sold $3 billion of notes (Aa3/A+/) in three tranches, an informed source said.

There was roughly $13.75 billion on the books for the trade, the source said.

While some Japanese corporates haven't tapped the U.S. dollar-denominated market for a while, that's not the case with Sumitomo.

"They tend to come to the market every six months or so," the source said.

Sumitomo Mitsui Banking last priced bonds in a $1.5 billion sale of 4.85% 10-year notes priced at 285 bps over Treasuries on Feb. 22.

The new deal was two times as large.

The $1 billion of 1.35% three-year bonds sold at a spread of Treasuries plus 100 bps. The tranche was priced tighter than talk in the 115 bps area.

A $1.25 billion tranche of 1.8% five-year notes priced at 120 bps over Treasuries. The notes were sold tighter than guidance in the 140 bps area.

There was also $750 million of 3.2% 10-year notes priced at Treasuries plus 170 bps. The paper was also priced lower than guidance in the 190 bps area.

All three tranches tightened in secondary trading, a market source said late in Tuesday's session.

The notes due 2015 traded at 97 bps bid, 92 bps offered. The $1.25 billion five-year notes traded 2 bps tighter at 118 bps bid, 116 bps offered, while the notes due 2022 traded at 169 bps bid, 166 bps offered.

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc. and Goldman Sachs & Co. were bookrunners.

The subsidiary of Sumitomo Mitsui Financial Group is based in Tokyo.

Westpac prices covered bonds

Westpac Banking sold $2 billion of covered bonds (Aaa/AAA) in two tranches, a market source said.

The $500 million of three-year floating-rate notes priced at par to yield Libor plus 80 bps.

A $1.5 billion tranche of 1.375% three-year notes sold at a spread of mid-swaps plus 80 bps or Treasuries plus 102.6 bps.

The notes were seen 4 bps tighter near the close at 98 bps bid, 96 bps offered, a bond source said.

The tranches were priced under Rule 144A and Regulation S.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Westpac Securities were bookrunners.

Westpac was last in the U.S. bond market with a $1 billion deal of five-year notes Nov. 17, 2011.

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

Penske units' $1.1 billion

Penske Truck Leasing and PTL Finance priced $1.1 billion of senior notes (Baa3/BBB-/) in two tranches, a market source close to the deal said.

The books had about $4 billion on them, the source said.

The $300 million of 2.5% two-year notes were priced at a spread of Treasuries plus 225 bps. The tranche was priced tighter than talk in the mid-200 bps area.

An $800 million tranche of 4.875% 10-year notes sold at a spread of 345 bps over Treasuries. The paper priced tighter than guidance in the mid-300 bps area.

The deal was done under Rule 144A and Regulation S.

Bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are being used to repay debt under a bank revolving credit facility and a portion of debt owed to General Electric Capital Corp. under the GE Capital credit facility.

The global transportation services provider is based in Reading, Pa.

ING sells $850 million

ING U.S. sold $850 million of 5.5% 10-year senior notes (Baa3/BBB-/) to yield Treasuries plus 400 bps, an informed source said.

The sale was priced at the low end of guidance in the "low 400 bps," the source said, adding that there was about $2.25 billion on the books.

The deal was done privately under Rule 144A and Regulation S.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC ran the books.

Proceeds are being used for general corporate purposes including debt repayment.

The U.S.-based retirement, investment management and insurance company is a unit of Amsterdam-based ING Groep NV.

Transco's private deal

Transcontinental Gas Pipe Line priced $400 million of 4.45% 30-year senior notes (Baa1/BBB/BBB) at a spread of Treasuries plus 185 bps, a market source said.

The deal was done under Rule 144A and Regulation S.

In the secondary market, the notes traded 5 bps tighter at 180 bps bid, 177 bps offered.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Mizuho Securities USA Inc. and Scotia Capital (USA) Inc. were bookrunners.

Proceeds are being used to repay $325 million of 8.875% notes and for general corporate purposes, including its capital spending program.

Transcontinental was last in the market with a $375 million sale of 5.4% 30-year bonds on Aug. 10, 2011, at 195 bps over Treasuries.

The interstate natural gas transmission company and subsidiary of Williams Partners LP is based in Tulsa, Okla.

Westlake sells $250 million

Westlake Chemical sold $250 million of 3.6%10-year senior notes to yield a spread of Treasuries plus 215 bps, a source away from the deal said.

The notes tightened 1 bps in the secondary market, trading at 214 bps bid, 204 bps offered.

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

Proceeds are being used to redeem $250 million of 6.625% senior notes due 2016.

The notes are guaranteed by existing or future domestic subsidiaries of the Houston-based maker and marketer of chemicals and other building products.

S.C. Electric adds to bonds

South Carolina Electric & Gas reopened its issue of 4.35% first mortgage bonds due on Feb. 1, 2042 to add $250 million, a source who worked on the deal said.

The bonds (A3/A/A) were sold at a spread of Treasuries plus 125 bps.

Total issuance is $500 million including $250 million priced on January 23 at 125 bps over Treasuries.

BB&T Capital Markets, Mizuho Securities USA Inc. and Wells Fargo Securities LLC ran the books.

Proceeds are being used to repay short-term debt incurred as part of a construction program, to finance capital expenditures and for general corporate purposes.

The utility is based in Cayce, S.C.

Principal Life upsized deal

Principal Life Global Funding priced an upsized $350 million of two-year floating-rate notes (Aa3/A+/) at par to yield Libor plus 62.5 bps, a source said.

The deal size was increased from $250 million, the source said.

Jefferies & Co. and U.S. Bancorp Investments Inc. were bookrunners.

The financing unit of Principal Insurance Group is based in Des Moines, Iowa.

JBIC plans guaranteed deal

Japan Bank for International Cooperation announced a deal of guaranteed notes in a 424B5 filing with the Securities and Exchange Commission.

The notes (Aa3/AA-/) will be guaranteed by the government of Japan.

Bank of America Merrill Lynch and HSBC Securities (USA) Inc. are bookrunners.

JBIC was last in the U.S. bond market with a $1.5 billion sale of 4.25% five-year notes at 86.5 bps over Treasuries on June 11, 2008.

The financial aid institution backed by the Japanese government is based in Tokyo.

Bank of Montreal firms

In the secondary market, the 1.3% notes from Bank of Montreal due 2014 widened 1 bps to 55 bps bid, according to a market source.

The $2 billion of notes priced in October at mid-swaps plus 50 bps.

J.P. Morgan tighter

The secondary also saw the $3 billion 6.3% issue from J.P. Morgan due 2019 tighten 20 bps to 170 bps bid.

J.P. Morgan priced the 10-year bonds on April 16, 2009 at 305 bps over Treasuries.

Nova Scotia tightens

Also in the secondary, Bank of Nova Scotia's 1.85% notes due 2015 widened 1 bps on Tuesday to 75 bps bid.

The bank priced the $1 billion issue at 147 bps over Treasuries in January.

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