Watson prices mega deal for M&A; MetLife does remarketing; traders see appetite for corporates

By Andrea Heisinger

New York, Sept. 27 - Two new corporate deals from Watson Pharmaceuticals, Inc. and MetLife, Inc. hit the investment-grade market on Thursday as the tone was somewhat improved at the open.

"Spreads are a little tighter," a trader said in the late morning of the New York session. "It was a little weaker the last couple of days, but we had better tone this morning."

Watson priced a $3.9 billion deal in three parts to help pay for the acquisition of the Actavis Group. The sale included tranches due 2017, 2022 and 2042, all of which priced at the tight end of guidance.

MetLife sold a $1 billion remarketing of series C senior component debentures. The deal was done in two tranches of $500 million each due 2017 and 2022 after the remarketing settles.

There was pricing in late morning of a $1 billion sovereign trade of five-year notes by Agence Française de Développement.

Canada's Golden Credit Card Trust sold $1.2 billion of bonds in a two-part deal done under Rule 144A and Regulation S.

A new deal of preferred stock was announced by CBL & Associates Properties Inc. and is expected to price on Friday.

Issuers continue to "try to squeeze stuff in before the elections," as one source said. "At rates this low, why not?"

There was positive news out of the euro zone as members of Greece's governing coalition are said to have agreed to cost-cutting measures.

Traders see lower volume

The secondary side of the market was seeing "little flow in general," a trader said early in the day, adding that volume had improved "probably because people are back from vacation for Yom Kippur."

By the close, volume had rebounded and was called "pretty good" by a trader.

She quoted about $12.8 billion of trading volume in general, with about $10 billion of that investment-grade bonds.

There remains a big appetite for corporate bonds from investors, the trader added.

The new MetLife remarketed notes due 2017 and 2022 were seen between 5 basis points and 7 bps tighter in trading.

Watson's three new notes were each quoted more than 10 bps better in the gray market.

Financial names were among the day's most-traded bonds.

A Goldman Sachs Group, Inc. 5.75% bond due in 2022 was the most active as of mid-afternoon in the New York session. The bonds were trading at a spread nearly 150 bps tighter than where the bonds were priced at 380 bps over Treasuries on Jan. 19, 2012.

The financial giant was in the news as it settled a civil suit in a so called "pay to play" case for $12 million.

A recent 3.25% bond due 2022 from JPMorgan Chase & Co. was also actively trading at a spread of 154 bps over Treasuries. The $3 billion deal was priced on Sept. 19 at Treasuries plus 155 bps.

Walgreen Co. saw two of the bonds sold in its massive $4 billion offering on Sept. 11 have high trading volume ahead of fiscal fourth-quarter earnings on Friday.

The 3.1% notes due 2022 were quoted as 15 bps tighter than the price of 145 bps, while the 4.4% bond due 2042 were seen 27 bps better than where they were priced.

Watson's $3.9 billion trade

Watson Pharmaceuticals priced $3.9 billion of senior notes (Baa3/BBB/BBB-) in three tranches, an informed source said.

The deal size was increased slightly from a ballpark of $3.75 billion given in a press release.

A $1.2 billion tranche of 1.875% five-year bonds priced at a spread of Treasuries plus 135 bps. The notes were sold at the tight end of guidance in the 145 bps area, plus or minus 10 bps.

There was also $1.7 billion of 3.25% 10-year notes priced at a spread of 170 bps over Treasuries. Price talk was in the 180 bps area, plus or minus 10 bps.

A final part was $1 billion of 4.625% 30-year bonds sold at a spread of Treasuries plus 190 bps. The tranche sold at the low end of guidance in the 200 bps area, plus or minus 10 bps.

The bookrunners were Bank of America Merrill Lynch, Barclays, J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

Proceeds, along with those from a term loan facility, cash on hand and possibly borrowings under a senior revolving credit facility, are being used to fund a portion of the cash consideration for the acquisition of Actavis Group.

There is a mandatory call at 101 if the acquisition is not done by Feb. 28.

The drug company was last in the market with a split-rated $850 million offering in two tranches on Aug. 18, 2009.

That deal included 5% five-year notes and 6.125% 10-year notes, both priced at 262.5 bps over Treasuries.

Watson is a Parsippany, N.J.-based pharmaceutical maker of generics and specialized branded products for women's health.

MetLife's remarketing

MetLife sold $1 billion of series C senior component debentures (A3/A-/) in two tranches in a remarketing, a source away from the trade said.

A $500 million tranche of five-year debentures will have an initial maturity of June 15, 2018, which will adjust to Dec. 15, 2017 following the settlement of the remarketing on Oct. 10.

The notes were priced at a spread of Treasuries plus 105 bps.

The second part was $500 million of 10-year debentures with an initial maturity of June 15, 2018 and a final maturity of Dec. 15, 2022 following the remarketing settlement.

The 10-year notes were priced at a spread of 135 bps over Treasuries.

In the secondary, the new five-year notes were seen tightening 5 bps to a bid of 100 bps and offer of 90 bps, a trader said.

The 10-year notes also improved and were initially quoted 3 bps better with a bid of 132 bps and offer of 127 bps.

Another trader later quoted the 10-year tranche at 7 bps improved with a bid of 128 bps and offer of 126 bps.

The series C debentures were originally issued in November 2010 as $1 billion of series C senior debentures due 2023, which formed part of MetLife's 40 million common equity units, with an aggregate stated amount at issuance of $3 billion.

Effective Sept. 15, each original series C debenture converted into a unit consisting of two tranches, with each $2,000 principal amount of original series C debentures consisting of $1,000 principal amount of series C senior component debentures due 2018 and $1,000 of series C senior component debentures due 2023.

The remarketing agents were Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, JPMorgan and Morgan Stanley & Co. LLC.

The insurance, annuities and employee benefits provider is based in New York.

AFD's $1 billion

Agence Française de Développement priced $1 billion of 1.625% five-year notes (Aaa/AAA/) to yield mid-swaps plus 85 bps, or Treasuries plus 99.6 bps, a market source said.

The notes were sold under Regulation S.

The bookrunners were BNP Paribas Securities Corp., Daiwa Securities America Inc. and Deutsche Bank.

AFD provides development and financing assistance to developing countries.

CBL's preferred deal

CBL & Associates Properties will price on Friday a sale of at least $100 million series E cumulative redeemable preferreds, a market source said.

Price talk is 6.625% to 6.75%, a trader said.

A trader quoted the issue at $24.65 bid, $24.70 offered in the gray market.

Bank of America Merrill Lynch, JPMorgan and Wells Fargo are the bookrunners.

Chattanooga, Tenn.-based real estate investment trust CBL will apply to list the preferred stock on the New York Stock Exchange under the ticker symbol "CBLPE."

Proceeds will be used to redeem the company's 7.75% series C cumulative redeemable preferreds and for general corporate purposes.

Watson trades tighter in gray

All three of the new notes from Watson Pharmaceuticals were seen trading 10 bps better across the board in the gray market, a trader said just ahead of the close.

The five-year notes were initially seen at a bid of Treasuries plus 125 bps. A second trader later quoted the notes at a bid of 123 bps over Treasuries.

The 10-year notes were getting a bid of 160 bps over Treasuries and were later quoted by a trader at 158 bps.

The tranche of 30-year bonds was bid at 180 bps over Treasuries and later seen at 177 bps bid.

Stephanie N. Rotondo contributed to this review

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