Heineken gets low coupons; Toyota, Realty Income, GDF Suez also price; spreads mostly unchanged

By Aleesia Forni and Andrea Heisinger

New York, Oct. 2 - Another large deal made its way to the high-grade bond market on Tuesday with Heineken NV bringing $3.25 billion of bonds.

The sale was in four maturities: 2015, 2017, 2023 and 2042. It set a record-low coupon for a three-year maturity from a BBB rated issuer, a source said.

A previous record was held by Ecolab Inc. (Baa1/BBB+/), which priced a three-year note with a 1% coupon on Aug. 6. The record low for a five-year maturity among BBB names was held by H.J. Heinz Co., which priced a 1.5% five year note on Feb. 28, 2012.

A source close to the Heineken deal said that there was about $22 billion of investor demand.

This sale came on the heels of the $7 billion monstrosity priced in three tranches on Monday by General Electric Co., which garnered more than $25 billion of demand from investors.

Toyota Motor Credit Co. did a quick $1.5 billion sale of five-year notes at a spread tighter than talk.

Several smaller trades were also done on Tuesday.

Realty Income Corp. priced an $800 million deal of senior notes due 2018 and 2022 after the size was increased from $600 million.

Bermuda-based Montpelier Re Holdings Ltd. sold an upsized $300 million of 10-year senior notes. The deal size was increased from $250 million.

French multinational electric utility GDF Suez SA priced $1.5 billion of notes in five-year and 10-year maturities.

There was a $100 million sale of 30-year mortgage bonds from Northern States Power Co.

New issues in the preferred stock market kept coming as General Electric Capital Corp. priced an upsized $825 million of $25-par senior notes due 2052. The size of the offering was massively increased from a minimum $250 million announced earlier in the day.

Market conditions remained stable, and there did not appear to be much loss of investor confidence after split-rated CenturyLink Inc. pulled a two-tranche sale on Monday.

"I don't think anyone cared too much - except maybe them," a syndicate source said late Tuesday.

There is more supply in the pipeline for Wednesday, although no huge deals like the ones from GE or Heineken expected.

"There's an industrial looking and a financial as a possible," the syndicate source said.

So far this week, issuance has been about $16 billion with about $20 billion total expected.

The Markit CDX Series 18 North American Investment Grade index tightened 1 basis point to a spread of 98 bps on Tuesday.

Spreads "largely wrapped unchanged" on the day "with credit specific movement," one trader commented.

Monday's issuances from Weingarten Realty Investors and Darden Restaurants Inc. were seen tighter in secondary trading.

Investment-grade bank and brokerage credit default swaps costs were mostly wider on Tuesday.

Bank of America's CDS costs widened 2 bps to 169 bps bid, 174 bps offered. Citi's CDS costs were widened 1 bps to 165 bps bid, 170 bps offered. J.P. Morgan's CDS costs were 2 bps wider at 118 bps bid, 123 bps offered. Wells Fargo's CDS costs also rose 2 bps to 85 bps bid, 90 bps offered.

Merrill Lynch's CDS costs rose 2 bps to 169 bps bid, 179 bps offered. Morgan Stanley's CDS costs widened 1 bps to 239 bps bid, 244 bps offered. Goldman Sachs' CDS costs declined 1 bps to 179 bps bid, 184 bps offered.

Heineken at record lows

Beer brewer Heineken priced a $3.25 billion deal of notes (Baa1/BBB+/) in four maturities, a source close to the trade said.

A $500 million tranche of 0.8% three-year notes was priced at a spread of 55 bps over Treasuries. This was at the tightest end of initial talk in the Treasuries plus 80 bps area and revised guidance in the 55 bps to 65 bps range.

The $1.25 billion of 1.4% five-year notes sold at Treasuries plus 85 bps. The pricing level was lower than initial guidance in the 110 bps area and revised talk in the 85 bps to 95 bps range.

The $1 billion of 2.75% notes due 2023 priced at Treasuries plus 115 bps. The bonds were priced lower than initial talk in the 140 bps area and at the tight end of revised guidance in the 115 bps to 125 bps range.

The $500 million tranche of 4% 30-year bonds was sold at a spread of 130 bps over Treasuries. The bonds were initially being talked in the 160 bps area and then in the 130 bps to 140 bps range.

Coupons for both the three-year notes and five-year bonds set new record lows among BBB rated issuers, sources said on Tuesday. The three-year coupon had not yet dipped below 1% and the five-year record was previously 1.5%.

Investor demand for the bonds was skewed toward the longer maturities, a source said. There was about $3.6 billion on the books for the three-year notes, $6.7 billion for the five-year notes, $5.7 billion for the 10-year tranche and $6.5 billion for the 30-year bonds.

Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC were bookrunners.

Proceeds are being used to help fund the acquisition of Asia Pacific Breweries.

Heineken was last in the U.S. bond market with a $750 million sale of 3.4% 10-year notes priced at 127 bps over Treasuries on March 29.

The brewery is based in Amsterdam.

Toyota sells $1.5 billion

Toyota Motor Credit priced a $1.5 billion deal of 1.25% five-year senior notes at a spread of Treasuries plus 65 basis points, a syndicate source said.

The notes (Aa3/AA-/) were sold tighter than talk in the 75 bps area.

Bookrunners were Barclays, Morgan Stanley & Co. LLC, RBS Securities Inc. and UBS Securities LLC.

The funding arm of Toyota is based in Torrance, Calif.

GDF Suez prices tight

GDF Suez priced a $1.5 billion of senior notes (A1/A/) due 2017 and 2022, a market source said.

The $750 million tranche of 1.625% five-year notes sold at a spread of Treasuries plus 115 bps. The spread is tighter than talk in the 150 bps area over Treasuries.

A $750 million tranche of 2.875% 10-year bonds priced at a spread of 140 bps over Treasuries. This level is also tighter than guidance in the 175 bps area.

Active bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Mitsubishi UFJ Securities (USA) Inc. and RBS Securities Inc.

The multinational electric utility is based in Paris.

Realty Income tranches

Realty Income was in the market with an upsized $800 million sale of senior notes (Baa1/BBB/BBB+) in two tranches, an informed source told Prospect News.

The deal size was increased from $600 million, the source said.

The sale included $350 million of notes due 2018 priced at a spread of Treasuries plus 140 bps

A $450 million tranche of 3.25% 10-year notes sold at a spread of 170 bps over Treasuries.

Bank of America Merrill Lynch, BNY Mellon Capital Markets LLC and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, RBC Capital Markets LLC, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used to repay a portion of borrowings under an acquisition credit facility.

Realty Income was last in the market with a $150 million reopening of 5.875% bonds due 2035 on June 14, 2011.

The real estate investment trust for retail and commercial properties is based in Escondido, Calif.

Montpelier upsizes

Montpelier Re Holdings priced an upsized $300 million trade of 4.7% 10-year senior notes (/BBB/BBB+) at 312.5 bps over Treasuries, a market source said.

The size of the offering was increased from $250 million, the source said.

Bookrunners were Barclays and Credit Suisse Securities (USA) LLC.

Proceeds are being used to redeem 6.125% notes due 2013 and for general corporate purposes.

The insurance and reinsurance company is based in Bermuda.

Northern States' long bonds

Northern States Power was in the market with a $100 million sale of 3.7% 30-year first mortgage bonds (A1/A/A+) priced at Treasuries plus 95 bps, according to an FWP with the Securities and Exchange Commission.

Bookrunners were Citigroup Global Markets Inc. and Mitsubishi UFJ Securities (USA) Inc.

Proceeds are being used to repay short-term borrowings incurred for daily operational needs and for general corporate purposes.

The electric and national gas subsidiary of Xcel Energy is based in Eau Claire, Wisc.

GE upsizes preferreds

General Electric Capital priced $825 million of 4.875% $25-par senior notes due Oct. 15, 2052, a market source told Prospect News.

The deal was originally slated to be around $250 million. Pricing was initially around 5% but was revised to lower levels.

The notes will be listed on the New York Stock Exchange.

Morgan Stanley & Co. Inc., Bank of America Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds will be used for general corporate purposes, which may include a partial or full redemption of the 6.625% senior notes due June 28, 2032.

GE Capital is a Norwalk, Conn.-based finance company.

Weingarten performs better

The 3.375% 10-year notes from Weingarten Realty Investors tightened 4 bps to 176 bps bid, 176 bps offered on Tuesday.

The company priced the $300 million issue to yield Treasuries plus 180 bps on Monday.

The real estate investment trust for shopping centers and commercial real estate is based in Houston.

Darden notes firm

In other trading, Darden Restaurants' $450 million of 3.35% 10-year senior notes were quoted 5 bps tighter at 170 bps bid, 167 bps offered.

The notes priced with a spread of 175 bps over Treasuries.

The full service restaurant owner and operator is based in Orlando.

Stephanie N. Rotondo contributed to this review

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