Marathon Petroleum deal faces pushback; Marathon Oil, Southwestern Energy bonds widen

By Aleesia Forni and Cristal Cody

New York, Dec. 7 – New deals from Macy’s Retail Holdings Inc. and Ameren Illinois Co. kicked off the high-grade market’s week on Monday.

Financial issuers Toronto-Dominion Bank, Credit Suisse Group Funding (Guernsey) Ltd. and National Bank of Canada also tapped the primary.

Crude oil refiner Marathon Petroleum was unable to bring pricing in from guidance levels on two of three tranches of its new offering and was forced to widen the spread by around 20 basis points on the 30-year tranche.

The company priced $600 million of notes due 2018 at Treasuries plus 150 bps, $650 million of notes due 2020 at Treasuries plus 175 bps and $250 million of notes due 2045 at Treasuries plus 290 bps.

One source attributed at least part of the deal’s struggle to the 6% tumble in oil prices during the session that sent levels to their cheapest in nearly seven years.

Elsewhere in the primary, Credit Suisse garnered a final order book of $3.4 billion for its new $2 billion five-year offering, while Macy’s Retail and Ameren Illinois each sold their respective new deals at the tightest side of guidance.

In total, the primary hosted $7.6 billion of new issuance to open December’s first full week.

Oil and gas and energy bonds remain mostly weak in the secondary bond market and well off their issue spreads.

Marathon Oil Corp.’s senior notes (Baa1/BBB) widened more than 20 bps on the long end on Monday.

Southwestern Energy Co.’s senior notes (Baa3/BBB-) traded 2 bps to 4 bps weaker.

Duke Energy Progress Inc.’s first mortgage bonds (Aa2/A/A+) eased about 1 bp during the session but continue to trade better than issuance.

The Markit CDX North American Investment Grade 25 index ended the day 1 bp wider at a spread of 83 bps.

Marathon three-parter

Marathon Petroleum entered Monday’s primary to sell a $1.5 billion three-part offering of senior notes (Baa2/BBB/BBB) in tranches due 2018, 2020 and 2045 on Monday, according to a market source.

The deal attracted an order book that was around 1.5 times oversubscribed.

A $600 million tranche of 2.7% notes due 2018 sold at 99.92 to yield 2.728%. The issue sold at Treasuries plus 150 bps.

And a $650 million 3.4% tranche of notes due 2020 sold at 99.872 to yield 3.428% with a spread of Treasuries plus 175 bps.

Both the three- and five-year tranches sold in line with guidance, which was unchanged from initial talk.

There was also $250 million 5.85% notes due 2045 sold at Treasuries plus 290 bps. Pricing was at 99.747 to yield 5.868%.

The notes sold in line with guidance, which had widened from initial talk in the 270 bps area over Treasuries.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Goldman Sachs & Co. and Mizuho Securities are the bookrunners.

Proceeds will be used to pay $750 million of 3.5% notes due 2016 and for general corporate purposes.

Marathon Petroleum is a crude oil refiner based in Findlay, Ohio.

TD Bank five-years

Also on Monday, Toronto-Dominion Bank sold $2 billion of five-year fixed- and floating-rate senior medium-term notes (Aa1/AA-/AA-), series A, on Monday, according to an informed source.

There was $250 million of floating-rate notes sold at par to yield Libor plus 93 bps.

A $1.75 billion tranche of 2.5% fixed-rate notes priced with a spread of Treasuries plus 87.5 bps. The notes priced at 99.785 to yield 2.546%.

TD Securities, JPMorgan, Morgan Stanley & Co. LLC and UBS Securities LLC are the bookrunners.

Proceeds will be used for general corporate purposes.

The financial services and banking company is based in Toronto.

Credit Suisse new issue

Credit Suisse Group Funding (Guernsey) priced $2 billion of 3.125% five-year senior notes (Baa2/BBB+/A) at Treasuries plus 150 bps on Monday, according to a market source.

Pricing was at 99.812 to yield 3.166%.

The issue priced on top of guidance and at the tight end of initial talk set in the area of Treasuries plus 155 bps.

Credit Suisse Securities (USA) LLC was the bookrunner for the Rule 144A and Regulation S deal.

The financial services company is based in Zurich.

Macy’s prices tight

Macy's Retail Holdings priced a $500 million offering of 3.45% five-year senior notes at 180 bps over Treasuries on Monday, according to a market source and an FWP filed with the Securities and Exchange Commission.

Pricing came at the tight end of the 185 bps area over Treasuries guidance. Initially, talk was in the 200 bps area over Treasuries.

The issue priced at 99.899 to yield 3.471%.

The notes (Baa2/BBB+/BBB+) are guaranteed by Macy's, Inc.

BofA Merrill Lynch, Credit Suisse, JPMorgan, Goldman Sachs, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, retirement of debt and repurchasing outstanding common stock.

The department store chain is based in Cincinnati.

Ameren secured notes

In other primary happenings on Monday, Ameren Illinois was in the market with a $250 million issue of 4.15% senior secured notes (A1/A/A) due March 15, 2046 that priced at Treasuries plus 125 bps, according to an FWP filed with the SEC.

Pricing was at 99.001 to yield 4.209%.

The notes sold at the tight side of guidance set in the Treasuries plus 130 bps area following initial talk in the 145 bps area over Treasuries.

The company intends to use the proceeds of the offering to repay a portion of its short-term debt, consisting of commercial paper issuances and borrowings under the Ameren utility money pool.

BNP Paribas Securities Corp., Goldman Sachs, MUFG, SunTrust Robinson Humphrey Inc. and TD Securities (USA) LLC are the bookrunners.

Ameren Illinois is a subsidiary of St. Louis-based electric and natural gas company Ameren Corp.

Marathon Oil weak

Marathon Oil’s 3.85% notes due 2025 were unchanged on Monday at 315 bps bid, a market source said.

The company sold $900 million of the notes on June 1 at a spread of Treasuries plus 170 bps.

Marathon Oil’s 5.2% bonds due 2045 widened about 23 bps from Friday to head out at 353 bps bid on Monday, the source said.

Marathon Oil sold $500 million of the bonds in the June 1 offering at a spread of Treasuries plus 225 bps.

The energy company is based in Houston.

Southwestern Energy softens

Southwestern Energy’s 4.05% notes due 2020 eased 4 bps on Monday to a spread of 608 bps bid, according to a market source.

The company sold $850 million of the notes on Jan. 20, 2015 at a spread of 278 bps over Treasuries.

Southwestern Energy’s 4.95% notes due 2025 softened 2 bps in secondary trading to 560 bps bid.

The company sold $1 billion of the notes in the Jan. 20 offering at 318 bps over Treasuries.

The independent natural gas and oil company is based in Houston.

Duke Energy eases

Duke Energy Progress’ 3.25% notes due 2025 traded 1 bp softer over the day at 87 bps bid, according to a market source.

The company sold $500 million of the notes on Aug. 10 at a spread of Treasuries plus 105 bps.

Duke Energy’s 4.2% bonds due 2045 eased 1 bp to 121 bps bid.

Duke Energy placed $700 million of the bonds in the Aug. 10 sale at Treasuries plus 130 bps.

The electricity distributor is based in Raleigh, N.C.

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