CF Industries, Kimberly-Clark lead week of modest volume; new issues trading flat to tighter

By Aleesia Forni and Andrea Heisinger

New York, May 20 - There were two multi-tranche sales in Monday's high-grade bond market from CF Industries Inc. and Kimberly-Clark Corp.

Consumer paper products company Kimberly-Clark sold $850 million of bonds in three tranches in a trade with a do-not-grow provision on it. The sale included $250 million of three-year floating-rate notes, $350 million of 10-year notes and $250 million of 30-year bonds.

There was roughly $3 billion of demand for the sale, a source said.

CF Industries priced $1.5 billion of bonds in tranches due 2023 and 2043.

Elsewhere in the primary, Swedish Export Credit Corp. announced an offering of three-year notes. Pricing is expected on Tuesday as the sale goes overnight to attract investors in Europe and Asia, a source said.

Deutsche Bank AG announced it would sell fixed-to-floating rate subordinated tier 2 notes due 2028.

Spreads overall were little-changed to start the week at Monday's open, a market source said. Most of the week's sales are expected to come out on Tuesday and Wednesday, with a small number possible Thursday, sources said.

"We've seen a couple of trades pushed back, just because they're not ready to go," a market source said after the close.

Some are planning to go on Wednesday or Thursday, which the source said are "still viable days before the half-day Friday," while others are waiting until the following week after the long Memorial Day holiday weekend.

"It's nothing major; they just didn't have documentation, things like that ready to go," the source said.

The market will also be watching for minutes released Wednesday from the Federal Reserve's Federal Open Market Committee meeting that concluded May 1, along with a testimony that same day before the Joint Economic Committee in Congress by Fed chair Ben Bernanke.

The preferred stock market began the week with an upsized $275 million sale of $25-par preference shares from RenaissanceRe Holdings Ltd.

"It's trading strong," a trader said, seeing the paper moving between less 15 cents and less a nickel.

A sale of $50-par cumulative preferreds was announced by Callon Petroleum Corp.

The high-grade secondary bond market saw Kimberly-Clark's new notes trading unchanged near the end of the session, one trader said.

Meanwhile, the new notes from CF Industries were quoted 7 basis points to 8 bps better.

"[The secondary market] didn't see a ton of movement today," one trader said following the session's close, though he added there had been strong demand for the new bonds from CF Industries.

Investment-grade bank and brokerage credit default swap costs were unchanged on Monday, according to a market source.

Bank of America Corp.'s CDS costs were unchanged at 83 bps bid, 88 bps offered. Citigroup Inc.'s CDS costs were also flat at 81 bps bid, 85 bps offered. JPMorgan Chase & Co.'s CDS costs remained at 74 bps bid, 77 bps offered. Wells Fargo & Co.'s CDS costs were flat at 62 bps bid, 65 bps offered.

Merrill Lynch's CDS costs were unchanged at 76 bps bid, 86 bps offered. Morgan Stanley's CDS costs remained flat at 111 bps bid, 115 bps offered. Goldman Sachs Group, Inc.'s CDS costs were also unchanged at 99 bps bid, 103 bps offered.

Kimberly prices tight

Kimberly-Clark tapped the market for $850 million of notes (A2/A/A) in three parts, an informed source said.

A $250 million tranche of three-year floating-rate notes priced at par to yield Libor plus 12 bps.

There was $350 million of 2.4% 10-year notes sold at a spread of 70 bps over Treasuries. Initial price talk was in the 75 bps area, a source said.

The notes traded flat near the end of the session at 70 bps bid, 67 bps offered.

Finally, there was $250 million of 3.7% 30-year bonds priced at Treasuries plus 80 bps. Initial guidance was in the 90 bps area.

A trader quoted the notes at 80 bps bid, 77 bps offered.

Bookrunners were Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds are being used for general corporate purposes, including to repay $500 million of 5% notes due Aug. 15, 2013.

Kimberly-Clark was last in the U.S. bond market with a $300 million offering of 2.4% 10-year notes priced at 68 bps over Treasuries on Feb. 6, 2012.

The consumer paper products company is based in Irving, Texas.

CF does two tranches

CF Industries priced $1.5 billion of senior notes (Baa2/BBB-/BBB) in two tranches, a market source said.

The sale included $750 million of 3.45% 10-year notes priced at a spread of Treasuries plus 150 bps.

The notes were quoted 7 bps better at 143 bps bid, 140 bps offered.

A $750 million tranche of 4.95% 30-year bonds sold at Treasuries plus 180 bps.

In the secondary market, the notes traded at 172 bps bid, 169 bps offered.

Bookrunners were Goldman Sachs and Morgan Stanley.

Proceeds are being used to fund capacity expansion projects and working capital, along with general corporate purposes such as stock repurchases.

The sale is guaranteed by CF Industries Holdings Inc.

The maker and distributor of nitrogen and phosphate products is based in Deerfield, Ill.

Deutsche's hybrid

Deutsche Bank intends to sell fixed-to-fixed reset rate subordinated tier 2 notes due May 2028, the company said in a prospectus filed with the Securities and Exchange Commission.

Deutsche Bank Securities Inc. is the bookrunner.

The interest rate will stay fixed through May 2023, at which time it will convert to the five-year swap rate plus a spread. Interest will be payable on a semiannual basis.

The Zurich-based bank will apply to list the notes on the New York Stock Exchange.

Proceeds will be used for general corporate purposes and to strengthen the regulatory capital base.

SEK preps three-year

Swedish Export Credit is tapping the market for three-year notes (Aa1/AA+/), a market source said. Bookrunners are BofA Merrill Lynch, Barclays, Mizuho Securities USA Inc. and Nomura Securities International Inc.

The lender to Sweden's export industry is based in Stockholm.

RenRe's $25-par

RenaissanceRe Holdings priced $275 million of 5.375% $25-par series E noncumulative preference shares, a market source said.

Price talk on the deal was around 5.375%, according to a trader. The size was increased from $150 million.

Wells Fargo Securities LLC, BofA Merrill Lynch and Citigroup are the joint bookrunning managers.

The company will apply to list the new series of preference shares on the NYSE under the ticker symbol "RNRPE."

Proceeds will be used to redeem all outstanding 6.6% series D preference shares. Should there be any funds left over, the company will then call all or part of its 6.08% series C preference shares.

RenaissanceRe is a Hamilton, Bermuda-based reinsurance company.

Callon preps preferred

Callon Petroleum has proposed an offering of $50-par series A cumulative preferred stock, according to a prospectus filed with the SEC.

Janney Montgomery Scott LLC, Stern Agee & Leach and MLV & Co. are the joint bookrunning managers.

The Natchez, Miss.-based company intends to apply to list the new series of preferreds on the NYSE under the ticker symbol "CPEPA."

The oil and gas producer will use proceeds to accelerate the timing of capital expenditures to further develop and evaluate its properties in the Permian basin as well as for possible future acquisitions and general corporate purposes. Pending such use, the funds will be used to repay borrowings under a revolving credit facility.

Stephanie N. Rotondo contributed to this review

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