LabCorp, GATX, Telephone & Data price deals on stronger tone; bank, financial paper weaker

By Andrea Heisinger and Cristal Cody

New York, Nov. 16 - Laboratory Corp. of America Holdings, GATX Corp. and Telephone & Data Systems, Inc. priced bonds on Tuesday as the tone remained softer and issuers were less likely to take a chance on pricing bonds.

"Prices have risen," one source said. "That's why you're seeing lower-rated [names] in the market because they need to be there. A lot of the opportunistic [deals] are over."

North Carolina-based LabCorp priced $925 million in two parts by late afternoon. The size of the deal had been announced early in the day and did not increase. There was more interest in the 10-year maturity, a source close to the deal said.

Telephone & Data Systems was the first to price for the day. The $200 million sale of notes due 2059 went overnight from Monday and was sold early.

Another early sale came from transportation leasing company GATX. Its $250 million sale of notes due 2016 was done by early afternoon.

California Water Service Co. announced a $100 million sale of guaranteed first mortgage bonds in a press release. The notes were not seen pricing Tuesday.

Issuance of high-grade bonds is expected to continue for the next couple of days as "decent rates" keep companies interested in pricing, a source said. He added that there is also the shortened Thanksgiving week coming up that issuers need to price ahead of.

Potential issuers "were cautious on Monday," a syndicate source said at the end of the day. "People wanted to feel things out, I think."

Despite the somewhat slow start to the week, the pace is expected to quicken on Wednesday.

"I heard it's going to be crazy again tomorrow," the syndicate source said.

Overall investment-grade Trace volume rose 14% to about $12 billion, a source said.

In secondary trading, JPMorgan Chase & Co.'s new debt sold the previous week, along with bank and financial paper, continued to widen, sources said. Procter & Gamble Co.'s tranche of notes due 2015 sold on Monday firmed slightly in trading.

The secondary market was "very quiet still," on Tuesday, a trader said. "People just follow the new issue markets."

The Markit CDX Series 14 North American investment-grade index eased 1 basis point to a spread of 94 bps, Markit Group Ltd. said.

Treasuries rallied on Tuesday, sending yields back down, as the market realized the Federal Reserve is unlikely to back off its quantitative easing program to purchase $600 billion of government debt.

The yield on the 10-year Treasury dropped to 2.83% after ending at 2.95% the previous day. The 30-year bond yield fell to 4.26% from 4.41% on Monday.

"The market overdid on the down side," said Mary Ann Hurley, a fixed income trader for D.A. Davidson & Co. "You had 10s almost touching 3%."

Trading is expected to remain volatile.

LabCorp prices two tranches

Laboratory Corp. of America priced $925 million of senior notes (Baa2/BBB+) in two parts just ahead of the market close, an informed source said.

The first tranche was $325 million of 3.125% notes due 2016 priced at a spread of Treasuries plus 168 bps. A $600 million tranche of 4.625% 10-year notes sold at 183 bps over Treasuries.

Citigroup Global Markets Inc. was active bookrunner.

Proceeds are going to fund a portion of the purchase price of the acquisition of assets of Genzyme Genetics and for general corporate purposes.

The clinical lab company is based in Burlington, N.C.

In the secondary market, the tranche of notes due 2016 firmed to 167 bps bid, 160 bps offered and later to 165 bps bid, 160 bps offered, according to traders.

The notes due 2020 also tightened in trading to 173 bps bid, 168 bps offered.

GATX offers $250 million

GATX sold $250 million of 3.5% senior notes due 2016 (Baa1/BBB) early in the afternoon to yield 200 bps over Treasuries, a source who worked on the trade said.

"They knew how much they wanted to get done and got in and out," the source said.

Citigroup was active bookrunner, and Bank of America Merrill Lynch was passive.

Proceeds are going to repay commercial paper maturing within 25 days and bearing an effective interest rate of 0.45%. They will also be used for general corporate purposes including working capital and capital expenditures.

The transportation leasing service is based in Chicago.

TDS sells early

Telephone & Data Systems priced $200 million of 6.875% senior notes due 2059 (Baa2/BBB-/BBB) in the morning at par of $25, a source close to the sale said.

The sale was announced early on Monday and went overnight. There is an over-allotment option of $30 million that can be exercised within 30 days.

The bookrunners were Bank of America Merrill Lynch, Citigroup, UBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are going to redeem some or all of $500 million of outstanding 7.6% notes due 2041.

The telecommunications services company is based in Chicago.

California Water's bonds

California Water Service announced a $100 million sale of first mortgage bonds, series PPP, (/AA-) in a press release and a 424B5 filing with the Securities and Exchange Commission.

Robert W. Baird & Co. and Blaylock Robert Van, LLC are the bookrunners.

Proceeds are going to repay the balance of a syndicated revolving line of credit and for general corporate purposes like increasing working capital, making capital expenditures, acquiring assets and for other business opportunities.

The deal is guaranteed by the California Water Service Group.

The holding company for the water utility is based in San Jose, Calif.

JPMorgan weaker

Financial paper continued trading weaker on Tuesday, according to sources.

"On the back of that JPMorgan deal priced late last week, it priced wider where the outstanding stuff was trading so it put a damper on the whole bank and finance market out there," one trader said.

JPMorgan sold $1.75 billion of 2.6% notes due 2016 (Aa3/A+) to yield Treasuries plus 140 bps on Nov. 10.

JPMorgan's new notes were seen trading wider Tuesday afternoon at 145 bps bid, 142 bps offered.

P&G firms

Procter & Gamble's tranche of five-year notes sold on Monday tightened slightly in the secondary market, according to a trader.

Procter & Gamble sold $1 billion of senior notes (Aa3/AA-) due 2015 at a spread of Treasuries plus 47 bps.

In secondary trading on Tuesday, the notes were quoted at 46 bps bid, 44 bps offered.

The consumer products company is based in Cincinnati.

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