Telstra, Gap, Danske, MassMutual tap into resilient primary; Yankee banks bonds widen

By Andrea Heisinger and Cristal Cody

New York, April 7 - There were only a handful of new bond deals on Thursday, but nearly all came in at or topped $1 billion in size.

Telstra Corp. Ltd. sold $1 billion of notes due 2021 at the tight end of guidance.

There was a $650 million sale in two parts from MassMutual Global Funding LLC. The unit of MassMutual Life Insurance Co. split the offering into a floating-rate tranche due 2014 and a fixed-rate part due 2016.

Clothing retailer Gap, Inc. sold $1.25 billion of 10-year notes at the tight end of guidance by late afternoon. The sale was split-rated, with the focus more from high-grade investors, a source said.

Meanwhile, Copenhagen-based Danske Bank AS priced an upsized $1.75 billion of notes in two parts after a tranche of three-year floaters was added. The sale sold under Rule 144A.

Essex Property Trust, Inc. announced a minimum $50 million sale of at least 2 million shares of perpetual preferred stock. The deal is set to price early on Friday after it goes overnight to let Asian and European investors in.

Although the market tone may have faltered slightly after news of a 7.1 magnitude earthquake hitting Japan, there was no real backlash, a source said.

"I think the market kind of retraced," he said. "It wasn't damaging - there wasn't any damage to nuclear reactors or anything."

Issuance isn't expected to be large for Friday, although with Yankee issuers coming out of the woodwork, there could be a self-led deal or two, a syndicate source said.

"It's always the big banks that throw something at you Friday," he said.

Overall investment-grade Trace volume dropped 15% to about $13.5 billion, a market source said.

"It's been pretty quiet," a trader said.

Bonds in the telecom and media sector were mixed, "anywhere from 2 basis points better to 2 wider," one trader said. "AT&T and Verizon are both a couple basis points better."

Time Warner Inc.'s new notes were seen a "little bit better," a trader said.

Bonds in the oil and gas sector were "unchanged on the day," a trader in the energy sector said.

Another trader said financials "are better by 2 to 5 today."

The exception was "Yankee banks, which are probably 2 to 5 wider on the day," the trader said.

BNP Paribas SA and National Australia Bank Ltd. both are among the recent spate of new Yankee issuers in the past week.

The Markit CDX Series 14 North American investment-grade index also was weaker and eased 1 bp to a spread of 94 bps, according to Markit Group Ltd.

The new deals priced late in the day and were not immediately seen in secondary trading, though the bonds from Telstra and Gap were stronger in the gray markets, according to sources.

Treasuries closed Thursday mixed in trading and weaker on the long end of the curve. The benchmark 10-year Treasury note yield was flat at 3.54%, while the 30-year bond yield rose 1 bp to 4.61%.

Telstra sells $1 billion

Australia's Telstra priced $1 billion of 4.8% notes due 2021 (A2/A/A) to yield Treasuries plus 133 bps, according to an informed source.

The notes priced at the tight end of guidance in the 137.5 bps area.

Demand on the trade was about $2.5 billion, the source said.

The notes were sold via Rule 144A with Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Merrill Lynch on the books.

Proceeds are being used for general corporate purposes, including refinancing of existing debt.

The notes were seen trading in the gray markets at 133 bps bid, 129 bps offered, a trader said.

The telecommunications and media company is based in Melbourne.

Danske sells in two parts

Danske Bank sold an upsized $1.75 billion of notes (A1/A/A+) in two parts under Rule 144A, said a source who worked on the trade.

A $500 million tranche of three-year floating-rate notes was added to the sale at the launch. Those notes sold at par to yield Libor plus 105 bps.

The $1.25 billion of 3.875% five-year notes sold at a spread of Treasuries plus 160 bps.

Bookrunners were Goldman Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Wells Fargo Securities LLC and Danske.

The bank and financial services company is based in Copenhagen.

MassMutual sells two tranches

MassMutual Global Funding priced $650 million of notes (Aa2/AA+/AA+) in two parts under Rule 144A, a market source said.

The $250 million of floating-rate notes due 2014 was priced at par to yield Libor plus 38 bps.

A $500 million tranche of 3.125% five-year notes sold at a spread of Treasuries plus 85 bps.

Merrill Lynch and UBS Securities LLC ran the books.

The subsidiary of MassMutual Life Insurance Co. is based in the Cayman Islands.

Gap's 10-year deal

Gap priced $1.25 billion of 5.95% split-rated 10-year notes (Baa3/BB+/BBB-) by late in the day at a spread of Treasuries plus 245 bps, said a source away from the sale.

This was at the low end of guidance in the 250 bps area.

Goldman Sachs & Co., J.P. Morgan Securities LLC and Merrill Lynch were bookrunners.

Proceeds will be used for general corporate purposes, including common stock repurchase.

Gap's new notes were seen trading at 235 bps bid, 230 bps offered, a trader said. "Still trading in the grays, it hasn't broke yet."

The clothing retailer is based in San Francisco.

Essex plans preferreds

Essex Property Trust announced a minimum $50 million or 2 million share sale of perpetual cumulative preferred stock priced at $25, according to a 424B5 filing with the Securities and Exchange Commission and an informed source.

The shares are being talked in the range of 7.125% to 7.25%, with pricing expected Friday morning, the source said. It's possible there could be 4 million shares sold.

Wells Fargo Securities LLC and Raymond James & Associates are bookrunners.

Proceeds are being contributed to the operating partnership to repurchase series B preferred stock and used for general corporate purposes.

The real estate investment trust for apartment communities is based in Palo Alto, Calif.

Time Warner firms

Time Warner's 4.75% notes due 2021 traded 2 bps tighter at 137 bps bid, 132 bps offered on Thursday. The notes (Baa2/BBB/BBB) priced on March 29 at a spread of 140 bps over Treasuries.

The media and entertainment company is based in New York City.

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