Oracle, ERP Operating price; both deals oversubscribed multiple times; BP rallies in secondary

By Andrea Heisinger and Cristal Cody

New York, July 12 - Oracle Corp. and ERP Operating LP priced bonds on Monday as the flow of issuance continued into the investment-grade bond market.

Oracle had the marquee sale of the day with $3.25 billion of two tranches. This was the first bond issue for the software company since it sold $4.5 billion of June 2009. The new bond tranches priced at significantly lower spreads than the same maturities done by the company a year ago, and they came in tight to guidance.

ERP Operating had a quieter issue, with an upsized $600 million of 10-year notes. The sale was upsized by $100 million from its original size.

The market started off the week with a good tone, sources said. It's likely because of that and the success of the day's deals, there will be more to come on both Tuesday and Wednesday.

There remains an upcoming sale from Alta Wind Holdings II-IV LLC, which is pricing $412.2 million of pass-through trust certificates due 2035.

The new debt from Oracle and ERP Operating traded stronger in the secondary market after pricing earlier on Monday, sources said.

Corporate debt from BP plc continued its rally in the secondary on Monday, a source said.

Also in secondary trading, "bank and finance were 5 to 10 basis points tighter," a trader said. Bank and financial paper has "been doing well" over the past week, the trader added.

Citigroup Inc.'s investment-grade bonds were active on Monday, a source said.

The New York-based financial services company's 5% notes due 2014 firmed 1 basis point to 324 bps in early trading on Monday, the source said.

Overall investment-grade Trace volume on Monday rose 10% to about $9 billion, a market source said.

The CDX Series 14 North American investment-grade index eased 2 bps to a spread of 112 bps, according to a source.

The government sold $35 billion of three-year notes at a record low yield of 1.055%.

The yield on the benchmark 10-year Treasury note eased 2 bps to 3.07%.

The 30-year bond yield was 2 bps weaker at 4.06%.

The government also plans to sell $21 billion of 10-year notes on Tuesday and $13 billion of 30-year bonds on Wednesday.

Oracle prices $3.25 billion

Computer software and technology company Oracle priced a benchmark $3.25 billion of notes (A2/A/A) in two tranches by mid-afternoon, a source away from the sale said.

The $1 billion of 3.875% 10-year notes priced at a spread of Treasuries plus 85 bps. The notes were sold at the tight end of guidance in the 90 bps area.

A second tranche of $2.25 billion of 5.375% 30-year bonds sold at Treasuries plus 140 bps. The tranche was also sold at the tight end of talk in the 145 bps area.

Oracle's deal tightened in secondary trading, according to sources.

"Heard they had well over $11 billion of orders," a trader said. "That's pretty strong. Solid names have pumped up demand."

The 10-year notes were seen trading at 77 bps bid, 75 bps offered.

The 30-year bonds also were tighter in the secondary at 131 bps bid, 129 bps offered.

Both tranches were sold under Rule 144A.

Bank of America Merrill Lynch, BNP Paribas Securities and J.P. Morgan Securities ran the books.

Proceeds are going to repay debt due in January 2011, to replenish cash used to pay down debt and for general corporate purposes.

Oracle last sold bonds in a $4.5 billion deal in three tranches on June 30, 2009. The 10-year notes from that sale priced significantly higher at 155 bps and the 30-year bonds came in at 185 bps.

There was around $12 billion of demand for the sale by early afternoon, a source said, adding it to the list of highly oversubscribed bonds that have been priced in the last couple of weeks.

The issuer is based in Redwood City, Calif.

Bond flow, demand to continue

The demand for high-grade paper from recognizable names continued at the top of the week with the sale from Oracle and books that were nearly four times oversubscribed. A smaller sale from ERP Operating was similarly in demand, with books more than three times oversubscribed.

"It's the same story as last week," a source said, referring to the large $3 billion sale from Time Warner Inc. that had about $10 billion on the books.

"Everyone's wondering when the gravy train of [large] deals will end," he added. Earnings season will be in full swing soon, meaning that some big-name companies and financials will be unable to issue.

The remainder of the week is expected to be steady with smaller deals.

"I think we have a couple of things that could come," a syndicate source at a large desk said at the end of the day. "I'm not sure on timing."

ERP Operating offers 10-year

ERP Operating sold an upsized $600 million of 4.75% 10-year senior unsecured notes (Baa1/BBB+/A-) to yield Treasuries plus 180 bps, an informed source said.

The size was initially announced at $500 million but increased due to demand. There was "just under $2 billion" on the books for the sale, making it slightly more than three times oversubscribed.

The notes firmed in the secondary market, a trader said.

"The bonds were offered at 176," the trader said late afternoon.

Bookrunners were Citigroup Global Markets, Deutsche Bank Securities and Morgan Stanley & Co. Inc.

Proceeds are going for general corporate purposes including repayment of debt and the outstanding balance of an unsecured revolver.

The arm of real estate investment trust Equity Residential is based in Chicago.

BP gaining strength

Corporate debt from BP continued its secondary rally on Monday, a source said.

"Their bonds are tightening - they've been tightening for about a week now," the trader said.

BP's 4.75% notes due 2019 were quoted Friday at 90 bid, 91 offered.

"The last quote I saw today, they were 911/2, 92 3/8."

Also, BP's 3.625% notes due 2014 firmed to 93, 94 on Monday from 903/4, 91¾ on Friday.

"The short notes are definitely doing better. There's a lot more activity in them as well," the trader said.

BP's stock also continued a five-day rally on renewed confidence the London-based company will be able to stop the oil spill in the Gulf of Mexico and plans to sell company assets.

BP shares gained $2.71, or 7.96%, to finish at $36.76 per share on Monday.

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