CAT Financial, Expedia, Timken price; market tone strong; Government Properties firms

By Cristal Cody

Tupelo, Miss., Aug. 13 – Investment-grade corporate issuers brought more than $2 billion of paper to market on Wednesday.

Caterpillar Financial Services Corp. led the pricing action with a $1 billion two-part offering of medium-term notes.

Expedia, Inc. tapped the market for $500 million of 10-year senior notes.

The day also saw a deal from Timken Co., which priced an upsized $350 million of 10-year senior notes.

In other new issuance, Government Properties Income Trust brought an upsized $350 million offering of five-year senior notes.

The high-grade bond market overall “was pretty strong” on Wednesday, one source said. “It felt good.”

Investment-grade bond spreads tightened over the session, according to market sources.

The Markit CDX North American Investment Grade series 22 index firmed 2 basis points to a spread of 61 bps.

Government Properties Income Trust’s 3.75% senior notes due 2019 came in more than 50 bps in secondary trading.

Timken’s 3.875% senior notes due 2024 firmed 4 bps in aftermarket trading, while Caterpillar Financial’s tranche of 2.75% notes due 2021 tightened 2 bps.

Expedia’s notes were not active in late afternoon secondary trading.

CAT Financial sells $1 billion

Caterpillar Financial Services brought a $1 billion two-part offering of series H medium-term notes (A2/A/) on Wednesday, according to FWP filings with the Securities and Exchange Commission.

Caterpillar Financial Services priced $750 million of 1.25% notes due Aug. 18, 2017 at 99.95 to yield 1.267%. The notes priced with a spread of Treasuries plus 40 bps.

In the second tranche, Caterpillar Financial Services priced $250 million of 2.75% notes due Aug. 20, 2021 at 99.798 to yield 2.782%, or Treasuries plus 73 bps.

The 1.25% notes due 2017 were not active in late afternoon aftermarket trading, while the tranche of 2.75% notes due 2021 firmed to 71 bps bid, 68 bps offered, a trader said.

Barclays, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC were the bookrunners for the transaction.

Nashville-based Caterpillar Financial Services is the financial arm of Caterpillar Inc.

Expedia prices $500 million

Expedia priced $500 million of 4.5% senior notes due 2024 at 99.444 to yield 4.57%, according to a company statement and an FWP filing with the SEC.

The company sold the notes due Aug. 15, 2024 (Ba1/BBB-/BBB-) with a spread of 215 bps over Treasuries.

Expedia’s notes were not seen in aftermarket trading, a trader said.

JPMorgan, BofA Merrill Lynch, BNP Paribas Securities Corp., RBC Capital Markets LLC and RBS Securities Inc. were the bookrunners on the deal.

The notes will be guaranteed by certain subsidiaries of Expedia.

Expedia, a Bellevue, Wash.-based online travel company, plans to use the proceeds from the deal for general corporate purposes.

Government Properties brings five-year notes

Government Properties Income Trust priced an upsized $350 million offering of 3.75% five-year senior notes at 99.205 to yield 3.927% on Wednesday, according to a market source and an FWP filing with the SEC.

The deal was upsized from $250 million.

The notes due Aug. 15, 2019 (Baa3/BBB-/) priced with a spread of 275 bps plus Treasuries.

In the secondary market, Government Properties Trust’s notes due 2019 came in to 220 bps bid, 205 bps offered, a trader said.

Citigroup Global Markets, Jefferies & Co., RBC Capital Markets, UBS Securities LLC and Wells Fargo Securities LLC were the joint bookrunners. BofAMerrill Lynch and Morgan Stanley & Co. LLC were the lead managers of the deal.

Proceeds will be used to repay the $149.8 million remaining outstanding principal amount of the company’s $500 million term loan and to reduce amounts outstanding under its revolving credit facility.

The Newton, Mass.-based real estate investment trust owns properties leased primarily to U.S. and state governments.

Timken upsizes

Timken priced $350 million of 3.875% 10-year senior notes at 98.901 in a Rule 144A and Regulation S private offering, according to a market source and a company release on Wednesday.

The deal was upsized from $300 million.

The notes (Baa2/BBB-/BBB) priced with a spread of Treasuries plus 160 bps.

Timken’s notes due 2024 tightened to 156 bps bid, 153 bps offered in the secondary market, a trader said.

Morgan Stanley and Deutsche Bank Securities Inc. were the bookrunners for the offering.

The proceeds will be used to repay $250 million of the company’s outstanding 6% senior notes due September 2014 and for general corporate purposes.

Timken is a Canton, Ohio-based mechanical components engineering, manufacturing and marketing company.

Bank/brokerage CDS costs lower

Investment-grade bank and brokerage CDS prices declined, according to a market source.

Bank of America Corp.’s CDS costs firmed 3 bps to 70 bps bid, 73 bps offered. Citigroup Inc.’s CDS costs ended flat at 69 bps bid, 72 bps offered. JPMorgan Chase & Co.’s CDS costs firmed 1 bp to 56 bps bid, 59 bps offered. Wells Fargo & Co.’s CDS costs declined 2 bps to 45 bps bid, 48 bps offered.

Merrill Lynch’s CDS costs tightened 3 bps to 73 bps bid, 77 bps offered. Morgan Stanley’s CDS costs firmed 2 bps to 77 bps bid, 80 bps offered. Goldman Sachs Group, Inc.’s CDS costs fell 2 bps to 80 bps bid, 85 bps offered.

Paul Deckelman contributed to this review.

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