Progress Energy, Bacardi, Bank of Montreal sell in slow start to week; Bacardi firms 6 bps

By Andrea Heisinger and Cristal Cody

New York, Jan. 18 - Progress Energy, Inc., Bacardi Ltd., Bank of Montreal and KfW sold bonds as others surveyed the tone of the high-grade bond market Tuesday following the long holiday weekend.

Progress Energy priced its $500 million sale of 10-year notes quickly. The size of the deal was set from the beginning.

Germany's KfW priced its upsized $1.5 billion issue of two-year floating-rate notes by early afternoon. The offering was initially announced at $1 billion.

Spirits maker Bacardi priced a $300 million offering of 10-year notes that also had a do-not-grow provision, a source said.

There was a late sale of $1.5 billion of five-year covered bonds by the Bank of Montreal. The bonds were sold in line with guidance in mid-swaps.

Other than the few bond deals and upcoming sales announced, it was "pretty dull" on the primary side of the market, a source said late in the day.

"I think it was a feeler day," she said. "We'll have more tomorrow, I'm hearing away."

LaSalle Hotel Properties announced a sale of perpetual preferred stock that is expected to price on Wednesday. The preferreds will be sold at $25 each.

There was also a sovereign sale from European Investment Bank announced. The funding arm of the European Union is planning a $4.5 billion sale of three-year notes.

Corporate bonds have been few and far between as sovereigns and Yankee bond names monopolize the U.S. high-grade primary and domestic names take a backseat due to earnings blackouts.

"There are more earnings tomorrow, so I can't see it being really exciting," a syndicate source said. "After this week, we should have more [corporate bonds]."

Citigroup Inc. reported its first yearly profit since 2007 on Tuesday, and Wells Fargo & Co. is reporting numbers on Wednesday.

The Markit CDX Series 14 North American investment-grade index started the new week on Tuesday "a bit tighter" by half a point but ended unchanged at a spread of 83 basis points, sources said.

In the secondary market, the bonds that Progress Energy and Bacardi sold firmed in trading, sources said.

Overall investment-grade Trace volume was mostly flat, up 2% to about $14.3 billion, a market source said.

Treasuries sold off on Tuesday, sending yields up on longer-term debt. The benchmark 10-year note yield rose 4 bps to 3.37%. The 30-year bond yield rose to 4.56% on Tuesday from 4.53% on Friday.

Progress Energy's 10-year

Progress Energy sold $500 million of 4.4% 10-year senior notes (Baa2/BBB/BBB) to yield Treasuries plus 108 bps, an informed source said early in the afternoon.

Price talk was whispered in the low 100 bps area to start and later revised to the 110 bps area, a source said. The deal ended up pricing at the tight end of guidance.

There was about $1.5 billion on the order books, the source said.

Bookrunners were Deutsche Bank Securities Inc., Morgan Stanley & Co., Inc. and Wells Fargo Securities LLC.

Proceeds are going to retire $700 million of 7.1% notes due March 1, 2011 at maturity.

The notes were slightly firmer soon after release in the secondary market at 107 bps bid, 104 bps offered, a trader said. Near the market close, the notes traded at 107 bps bid, 102 bps offered, a trader on another desk said.

The public utility holding company for electric subsidiaries is based in Raleigh, N.C.

BMO prices covered bonds

The Bank of Montreal sold a benchmark $1.5 billion of 2.625% five-year covered bonds late in the day under Rule 144A, a source away from the sale said.

The bonds (Aaa/AAA/AAA) were priced at a spread of mid-swaps plus 47 bps, or Treasuries plus 69.7 bps. This was equal to price talk was in the mid-swaps plus 47 bps area.

Bank of America Merrill Lynch, Barclays Capital Inc., BMO Capital Markets and J.P. Morgan Securities LLC were the bookrunners.

The deal is backed by the Canada Mortgage & Housing Corp.

The financial services company is based in Toronto.

Bacardi sells $300 million

Bacardi sold $300 million of 4.5% 10-year notes at a spread of Treasuries plus 115 bps, a source who worked on the sale said.

The notes (Baa1/BBB) were priced under Rule 144A.

Bookrunners were Bank of America Merrill Lynch, Barclays and Citigroup Global Markets Inc.

Proceeds are going toward general corporate purposes including debt repayment.

Bacardi's notes tightened in secondary trading to 109 bps bid, 107 bps offered, a trader said.

Later in the afternoon, another trader saw the notes 2 bps firmer on the offer side at 109 bps bid, 105 bps offered.

The spirits company is based in Hamilton, Bermuda.

KfW upsizes floater

Germany's KfW priced an upsized $1.5 billion of two-year floating-rate notes at par to yield Libor flat, according to a market source away from the sale.

The size of the notes (Aaa/AAA/AAA) was increased from $1 billion.

Credit Suisse Securities (USA) LLC and Morgan Stanley were the bookrunners.

The development bank is based in Frankfurt.

EIB to tap market

The European Investment Bank is planning a $4.5 billion sale of three-year notes, an informed source said late in the day.

The notes (Aaa/AAA/AAA) are expected to price on Wednesday, he said.

Bank of America Merrill Lynch, Barclays and Morgan Stanley are the bookrunners.

The funding arm of the European Union is based in Kirchberg, Luxembourg.

LaSalle plans preferreds

LaSalle Hotel Properties is pricing perpetual series H cumulative redeemable preferred shares at par of $25, according to a 424B5 filing with the Securities and Exchange Commission.

The sale is expected to be Wednesday's business, a source said.

Wells Fargo Securities is active bookrunner.

Proceeds will be used to redeem outstanding series B preferreds, to reduce amounts outstanding under a senior credit facility, for future acquisitions, working capital and other general corporate purposes including the redemption of other outstanding series of preferreds.

The real estate investment trust of hotel properties is based in Bethesda, Md.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.