AIG returns to debt market; Apache, CRH, Harris, Incitec price; bank paper weakens in trading

By Andrea Heisinger and Cristal Cody

New York, Nov. 30 - American International Group, Inc., Apache Corp., CRH America, Inc., Harris Corp., Incitec Pivot Finance and Washington Gas Light Co. sold bonds on Tuesday to cap a November of erratic issuance.

There was about $60.25 billion of high-grade debt sold in the past month.

The largest deal of the day came from insurance giant AIG, which has been out of the debt market since 2008 and its near-collapse. The company sold $2 billion of notes in two tranches, both of which priced tighter than both whispered and revised guidance. The sale was well oversubscribed.

Incitec Pivot's sale went overnight from Monday. The chemical maker sold $500 million of five-year notes in line with guidance.

A $1 billion sale in two tranches came from Apache. The oil and natural gas company priced bonds due 2021 and 2042 - both at the tight end of guidance.

One of the upsized deals of the day came from CRH America. The building materials company increased its sale to $750 million from $500 million in tranches with maturities of five and 10 years.

Communications and information company Harris also increased the size of its two-tranche sale. The $700 million deal was increased from $600 million.

The day's smallest offering was $75 million of 30-year bonds from Washington Gas Light.

Fears remained about the euro zone, but issuers had Monday to feel the market out and saw a successful sale from Hewlett-Packard Co.

The market "wasn't any worse" on Tuesday than the day before, one source said at day's end. The source said that there was great interest in how the AIG bonds performed and that they ended up "doing really well."

Issuance volume for the remainder of the week is hazy, but there are more sales expected for Wednesday and possibly Thursday, sources said.

Overall investment-grade Trace volume climbed to more than $12 billion on Tuesday from $8.5 billion the previous day, a source said.

The new bonds from Apache and Incitec Pivot firmed in secondary trading, while high-grade bank and financial paper continued to weaken on the short end, according to sources.

Goldman Sachs Group, Inc.'s 6% notes due 2020 eased 3 basis points to 230 bps early Tuesday, one source said.

Citigroup Inc.'s 6.375% notes due 2014 (A3/A/) moved out to 188 bps from 170 bps on Monday.

The Markit CDX Series 14 North American investment-grade index eased 2 bps to a spread of 99 bps, according to Markit Group Ltd.

Short-dated government debt rallied on investors' flight to quality over euro fiscal debt problems.

The yield on the 10-year benchmark note fell 3 bps to 2.79%. The 30-year bond dropped 3 bps to 4.11%.

AIG returns to market

AIG priced $2 billion of notes (A3/A-/BBB) in two tranches late in the day after a long period of sitting out the debt market, an informed source said.

The $500 million of 3.65% three-year notes priced at a spread of 295 bps over Treasuries. Price talk was whispered in the 300 to 350 bps range and then revised to the 312.5 bps area. The notes came in at the tight end of talk.

A $1.5 billion tranche of 6.4% 10-year notes priced at 362.5 bps over Treasuries. The notes were whispered in the 350 to 400 bps range, and talk was later revised to the 375 bps area. They priced at the tight end of revised guidance.

A source said there was "about $7.5 billion in orders" on the books as of early afternoon, which didn't surprise him. Later, another source close to the trade said there was "closer to $8 billion" of demand.

"I think with a name like this, people know it and they're infrequent."

The bond deal took time to price, partly because AIG's last bond sale was in mid-2008. The company's last sale was $3.25 billion of 8.25% 10-year notes traded on Aug. 13, 2008 at 432.8 bps over Treasuries. Those bonds were rated higher at Aa3/AA-/AA-.

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc. and Morgan Stanley & Co. Inc. ran the books.

Proceeds are being used for general corporate purposes, as agreed upon by the Federal Reserve Bank of New York.

The holding company for insurance subsidiaries is based in New York.

Primary energized

After a week of little bond issuance and a slow Monday, the primary side of the investment-grade market snapped back to life.

There was a lot of interest in the AIG deal that was announced at the top of the day once those marketing the deal found suitable interest. It started at a base benchmark size of $500 million and then grew to $2 billion. The company was not expected to go over that amount.

A source close to the deal said that investors were generally not afraid to buy the bonds, partly because of the return they were getting.

Bonds from Incitec, Harris and CRH also saw their sizes increased as accounts grabbed for high-grade paper. All of the names are infrequent issuers but have good credit ratings.

If the market tone holds, there could be more action on Wednesday on momentum and because investors remain hungry for paper.

"I think we'll see one or two more deals - I know we have one that could go tomorrow," a syndicate source said. "I feel like we haven't been busy like this for a while."

Apache's $1 billion sale

Houston-based Apache priced $1 billion of senior notes (A3/A-/A-) in two tranches by mid-afternoon, a source away from the deal said.

The $500 million of 3.625% notes due 2021 priced at a spread of Treasuries plus 95 bps. This was at the tight end of price talk in the 100 bps area, with a margin of plus or minus 5 bps.

A $500 million tranche of 5.25% notes due 2042 sold at 125 bps over Treasuries. They priced at the tightest end of guidance in the 130 bps area, also with a margin of plus or minus 5 bps.

Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and RBS Securities Inc. were the bookrunners.

Proceeds will be used to repay debt assumed when completing the Mariner Energy acquisition on Nov. 10. The remainder will be used for general corporate purposes.

Apache's new debt firmed in the secondary market, according to sources.

The notes due 2021 traded at 89 bps bid, 86 bps offered.

The tranche of bonds due 2042 firmed in the gray market to 125 bps bid, 123 bps offered. Later in secondary trading, the notes due 2042 firmed on the bid side to 123 bps, a source said.

The issuer is a natural gas and crude oil exploration, development and production company.

Incitec offers five-year notes

Incitec Pivot Finance priced $500 million of 4% five-year notes early in the afternoon to yield Treasuries plus 275 bps, a source close to the deal said.

The sale went overnight after being announced on Monday. The size was expected to be between $350 million and $500 million, depending on interest from investors in Europe and Asia, a source said. The notes were priced in line with guidance in the 275 bps area.

The notes (Baa3/BBB/BBB) were priced under Rule 144A. They are guaranteed by parent company Incitec Pivot Ltd.

The bookrunners were Bank of America Merrill Lynch, Citigroup and RBS Securities.

The company last sold bonds in an $800 million issue of 6% 10-year notes on Dec. 3, 2009. This is Incitec's only outstanding paper.

The notes were quoted trading in the gray market earlier on Tuesday at 262 bps bid, 252 bps offered, a trader said.

The industrial and agricultural chemical manufacturer is based in Melbourne, Australia.

Harris' upsized $700 million

Harris priced a slightly upsized $700 million of notes (Baa1/BBB+) in two tranches late in the afternoon, a source away from the deal said.

The size had been announced at $600 million earlier in the day.

The first part was $400 million of 4.4% 10-year notes priced at a spread of Treasuries plus 165 bps. A second tranche was $300 million of 6.15% 30-year bonds priced at 205 bps over Treasuries. The bookrunners were Bank of America Merrill Lynch, JPMorgan and Morgan Stanley.

Proceeds from the sale are going toward the payment of all or a portion of the purchase price for the pending acquisition of the Schlumberger GCS business, repayment of a portion of outstanding debt under a commercial paper program incurred in connection with the acquisition of CapRock Communications, Inc., and for general corporate purposes.

The communications and information company is based in Melbourne, Fla.

CRH's two tranches

CRH America priced an upsized $750 million of guaranteed senior notes (Baa1/BBB+/BBB) in two tranches by late afternoon, a market source said.

The planned size of the deal was $500 million, and it was upsized at the launch, a second source said.

The $350 million of 4.125% five-year notes sold at a spread of Treasuries plus 270 bps.

The second tranche was $400 million of 5.75% 10-year notes priced at Treasuries plus 295 bps.

The deal is guaranteed by parent company CRH plc.

Active bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc. and JPMorgan.

Proceeds are going to fund the purchase of certain amounts of $1 billion of 6.95% notes due March 15, 2012, $500 million of 5.625% notes due Sept. 30, 2011 or $700 million of 5.3% notes due Oct. 15, 2013. All of the notes were issued by CRH America and are guaranteed by CRH plc.

The notes were not immediately seen trading in the secondary market, a source said.

The manufacturer and supplier of building materials is based in Atlanta.

Washington Gas prices

Washington Gas Light sold $75 million of 5.211% 30-year bonds on Tuesday at par to yield 5.211%, according to an FWP filing with the Securities and Exchange Commission.

The notes (A2/AA-) are callable at a make-whole amount of 20 bps over Treasuries.

BB&T Capital Markets and Mitsubishi UFJ Securities (USA) Inc. ran the books.

Proceeds will be used to retire short-term debt used to refund long-term debt redeemed on April 6, 2010 and for general corporate purposes including property acquisition and working capital.

The natural gas company is based in Washington, D.C.

Bank, brokerage CDS costs rise

A trader said that the cost of credit default swaps contracts protecting holders of big-bank paper against possible events of default rose between 1 bp and 15 bps on the day, a sign of lessened investor confidence in the sector, while CDS costs to protect holders of investment-bank paper rose between 3 bps and 13 bps.

He said that Bank of America and Merrill Lynch were "the two bad boys." Bank of America's CDS costs rose 15 bps, and (Bank of America subsidiary) Merrill Lynch's were 13 bps higher.

Paul Deckelman contributed to this report

© 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.