Medtronic, BofA among issuers as tone rebounds; secondary spreads see continued widening

By Aleesia Forni and Andrea Heisinger

New York, March 19 - There was an explosion of new bonds hitting the investment-grade market on Tuesday, including multi-tranche sales from Medtronic, Inc., Bank of America Corp. and Capital One Financial Corp.

Medtronic sold $3 billion of fixed-rate notes with maturities of 2018, 2023 and 2043.

Bank of America tapped the market for $4 billion of bonds in four parts. There was a three-year floating-rate note, five-year notes in two different tranches, one with a fixed rate and one floating, and a 10-year bond.

Terms of the sale were not immediately available at press time.

Capital One priced $850 million of paper in two parts, including a five-year note and a three-year floater that was added on reverse inquiry, a source said.

Elsewhere in the market, Public Service Co. of Colorado priced $500 million split evenly between 10-year notes and 30-year bonds.

DTE Electric Co. sold $350 million of 30-year mortgage bonds, while split-rated CMS Energy Corp. was in the market with a $250 million trade of 30-year bonds.

Arizona Public Service Co. reopened its issue of 4.5% bonds due 2042 to add $100 million. The sale will bring the amount outstanding to $425 million.

Real estate investment trusts were a presence in Tuesday's session.

Weingarten Realty Investors priced an upsized $300 million of 10-year senior notes, and Healthcare Realty Trust Inc. sold $250 million of 10-year notes.

Host Hotels & Resorts, LP bought a $400 million deal of 10-year senior notes due in Oct. of 2023.

A trio of sovereign issuers sold high-grade bonds.

European Bank for Reconstruction and Development priced $1 billion of notes due 2018 early in the day.

There was a reopening of floating-rate notes due 2016 to add $175 million by Germany's Landwirtschaftliche Rentenbank.

A $1 billion sale of three-year notes announced on Monday by the Netherlands' Nederlandse Waterschapsbank NV was priced in the morning.

Two new preferred issues came to market, one from Citigroup Inc. and one from Prudential Financial Inc.

Citigroup sold $500 million of series C noncumulative perpetual preferreds. The size of that sale doubled to $500 million

The offering comes just days after the New York-based financial institution announced a $3.3 billion redemption of trust preferreds.

Prudential sold $500 million of fixed-to-floating rate junior subordinated notes due 2044. The sale was announced less than two weeks after the company priced a $650 million offering of 5.7% $25-par junior subordinated notes due 2053.

The market rebounded after a weak opening on Monday due to the collapse of the banking system in Cyprus and waiting to find out what the outcome would be. High-grade issuers steered clear of pricing bonds as stocks faltered.

By Tuesday morning, the primary was buzzing with deals both large and small. In the end, there was $10 billion of corporate bonds priced, not including those from emerging markets, sovereign sales or the two preferred stock offerings.

"I think we saw a rebound by the open," said one source who worked on a couple of Tuesday's trades.

Though the secondary market's tone was seen "better than yesterday" during Tuesday's session, one market source noted that spreads continued to trade wider overall.

The Markit CDX Series 18 North American Investment Grade index widened 2 basis points to a spread of 82 bps on Tuesday.

One market source commented that financial names were particularly active on the session and saw Capital One's notes firm 3 bps soon after the notes sold.

Issues that priced in last week's primary market were trading mixed on Tuesday, one trader said.

GATX Corp.'s two-part deal was trading tighter on the day, while the recent deal from Ventas Realty LP weakened following tighter levels seen on Monday.

Wednesday should see more inflow into the market from issuers emboldened by the success of Tuesday's sales.

"We have a couple of names from different sectors," said one source. "From what I've heard, we should be pretty busy."

Medtronic's $3 billion trade

Medtronic was in the market with a $3 billion sale of senior notes (A2/A+/) in three maturities, an informed source said.

There was $1 billion of 1.375% five-year notes priced at a spread of Treasuries plus 63 bps. Pricing was at the tight end of talk in the 65 bps area, a source said.

A $1.25 billion tranche of 2.75% 10-year notes sold at a spread of 88 bps over Treasuries. The notes sold at the low end of guidance in the 90 bps area.

Finally, a $750 million tranche of 4% 30-year bonds priced at Treasuries plus 98 bps. Talk was in the 100 bps area.

Bookrunners were Barclays, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Proceeds are being used for working capital and general corporate purposes, possibly including debt repayment.

The medical technology company is based in Minneapolis.

Capital One's two tranches

Capital One Financial tapped the market for $850 million of notes (A3/BBB+/A-) in two maturities, a market source said.

A three-year floating-rate note was added to the sale before the launch, the source said.

That $250 million tranche of three-year floaters sold at par to yield Libor plus 45 bps.

There was also $600 million of 1.5% five-year notes priced at a spread of Treasuries plus 82 bps. Guidance was in the 85 bps area earlier in the day.

One source saw the notes trading at 79 bps bid on Tuesday.

Bookrunners were Barclays, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC.

The financial services company is based in McLean, Va.

Host Hotels sells 10-years

Host Hotels & Resorts priced $400 million of 3.75%10-year series D senior notes (Baa3/BBB-/) to yield Treasuries plus 185 bps, an informed source said.

The sale was run by J.P. Morgan Securities LLC, Goldman Sachs & Co., BofA Merrill Lynch and Deutsche Bank Securities Inc.

Proceeds, along with cash on hand, are being used to redeem outstanding amounts of $400 million of 9% series T notes due 2017 at a price of $418 million.

The real estate investment trust for lodging properties is based in Bethesda, Md.

PS CO's mortgage bonds

Public Service Co. of Colorado priced $500 million of first mortgage bonds (A2/A/A) in two parts, according to an FWP with the Securities and Exchange Commission.

A $250 million tranche of 2.5% 10-year notes was sold at a spread of Treasuries plus 65 bps.

There was also $250 million of 3.95% 30-year bonds priced at 85 bps over Treasuries.

Goldman Sachs & Co., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used to repay short-term borrowings, to fund the maturity of $250 million of 4.875% first mortgage bonds on March 1 and for operational needs.

The electric and gas utility is based in Denver.

DTE upsizes

DTE Electric, formerly Detroit Edison Co., priced an upsized $375 million of 4%30-year general and refunding mortgage bonds (A1/A/A) to yield Treasuries plus 87.5 bps, a market source said.

The size was increased slightly from $350 million.

Bookrunners were Barclays, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and RBS Securities Inc.

Proceeds are being used for the March redemption of $51 million in tax-exempt bonds bearing 5.3% interest, to repay short-term borrowings and for general corporate purposes.

The electric utility is based in Detroit.

Healthcare's 10-years

Healthcare Realty Trust has priced $250 million of 3.75%10-year bonds (Baa3/BBB-/BBB-) at a spread of Treasuries plus 195 bps, a market source said.

J.P. Morgan Securities LLC and Wells Fargo Securities LLC were active bookrunners, while Credit Agricole Securities (USA) Inc. was passive.

Proceeds are being used to redeem senior notes due 2014, to repay outstanding borrowings under an unsecured credit facility and for general corporate purposes.

The real estate investment trust for outpatient healthcare services properties is based in Nashville, Tenn.

CMS does crossover

CMS Energy was in the day's session with a $250 million split-rated sale of 4.7% 30-year senior notes (Baa3/BBB-/BB+) to yield Treasuries plus 160 bps, a market source said.

BNP Paribas Securities Corp., BofA Merrill Lynch, J.P. Morgan Securities LLC and Mitsubishi UFJ Securities (USA) Inc. were bookrunners.

Proceeds are being used for general corporate purposes, including, along with cash on hand, to pay off at or prior to maturity 2.75% senior notes due 2014 with $250 million outstanding.

The parent company of electric and gas utility subsidiaries is based in Jackson, Mich.

Arizona PS' reopening

Arizona Public Service reopened its issue of 4.5% notes due 2042 to add $100 million, an informed source said.

The notes (Baa1/BBB+/BBB+) sold at a spread of Treasuries plus 105 bps.

Total issuance will be $425 million, including $325 million sold at Treasuries plus 155 bps on Jan. 10, 2012.

Bookrunners were Mitsubishi UFJ Securities (USA) Inc., RBS Securities Inc. and SunTrust Robinson Humphrey Inc.

Proceeds are being used to replace funds and/or reduce short-term debt used to redeem all of the $90 million of Maricopa County, Arizona, Pollution Control Corp. 5.05% pollution control revenue refunding bonds, 2002 series A due May 1, 2029. They also may be used to refinance short-term debt incurred for other purposes.

The electric utility is based in Phoenix.

NWB's $1 billion trade

Nederlandse Waterschapsbank priced $1 billion of 0.75% three-year senior notes (Aaa/AAA/) at mid-swaps plus 25 bps, or Treasuries plus 41.4 bps, an informed source said.

The size of the bond sale was projected to be at least $500 million the source said. Whispered guidance was in the mid-swaps plus mid 20 bps area as of Monday evening.

The sale was priced under Rule 144A and Regulation S.

Bookrunners were Citigroup Global Markets Inc., HSBC Securities (USA) Inc. and RBC Capital Markets LLC.

NWB Bank was in the U.S. bond market with a $1 billion sale of 1.25% three-year global notes priced at Treasuries plus 78.2 basis points on Oct. 11, 2011.

The financial services company for the public sector is based in The Hague, Netherlands.

EBRD sells 2018 notes

The European Bank for Reconstruction and Development priced $1 billion of 1% notes due 2018 (Aaa/AAA/AAA) at a coupon of mid-swaps minus 1 bp, or Treasuries plus 22.8 bps, a market source said.

Bookrunners were Barclays, Credit Suisse Securities LLC, Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC.

The lender to banks, businesses and industries is based in London.

Rentenbank's reopening

Landwirtschaftliche Rentenbank reopened its issue of floating-rate notes due June 30, 2016 to add $175 million, a market source said.

The notes (Aaa/AAA/AAA) were priced at par to yield Libor flat.

Total amount outstanding will be $675 million.

The sale is guaranteed by the Federal Republic of Germany.

Morgan Stanley & Co. LLC was bookrunner.

The German development agency for agribusiness is based in Frankfurt.

Citi does preferreds

Citigroup priced $500 million of 5.8% series C noncumulative perpetual preferred stock, an informed source said.

The preferreds will be sold as depositary shares representing a 1/1,000th interest.

Price talk was 5.875% to 6%, according to a trader. The size was increased from a minimum of $250 million.

"I imagine they'll push it to the 5.875% level," a trader said.

The trader saw the issue trading at $24.85 bid, $24.90 offered in the midday gray market.

Citigroup Global Markets Inc. was bookrunner.

The new securities will be listed on the New York Stock Exchange.

Proceeds will be used for general corporate purposes, which may include funding operating units and subsidiaries, financing possible acquisitions or expansions and refinancing or extending the maturities of existing debt obligations.

Citigroup is a New York-based financial institution.

Prudential's $25-pars

Prudential Financial sold $500 million of 5.2% fixed-to-floating rate junior subordinated notes due March 15, 2044 at par, an informed source said.

Citigroup Global Markets Inc., Goldman Sachs & Co., HSBC Securities, JPMorgan Securities and RBS Capital Markets are the joint bookrunning managers.

Through March 15, 2024, interest will be paid on the 15th of March and September at a fixed rate. Beginning on June 15, 2024, the interest rate will begin to float at Libor plus 307 bps.

A trader said at midday that he had not seen the new issue trading, opining that it will be a $1,000-par issue.

The notes will not be listed.

Proceeds will be combined with funds raised on March 14 in an offering of 5.7% junior subordinated notes due 2053 to redeem all $920 million of 9% junior subordinated notes due 2068.

Prudential is a Newark, N.J.-based financial services and insurance provider.

Ventas Reatly widens

The secondary market saw Ventas Realty's notes return to levels near new issue spread, as the notes traded 24 basis points wider compared to Monday's levels at 134 bps bid, 128 bps offered.

Ventas sold $500 million of the 2.7% seven-year senior notes at a spread of 132 bps over Treasuries on Thursday.

The real estate investment trust for housing and health-care properties is based in Chicago.

GATX notes firm

In other trading, GATX's notes due 2018 were quoted at 150 bps bid, 147 bps offered.

The notes were sold on Thursday a spread of Treasuries plus 155 bps.

The $250 million tranche of 3.9% 10-year notes, which priced at 200 bps over Treasuries, traded at 198 bps bid.

The transportation leasing service company is based in Chicago.

Stephanie N. Rotondo contributed to this review

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