Philip Morris, Tampa Electric, Parker-Hannifin, United Tech, Fannie Mae, Sovereign Bank price issues

By Andrea Heisinger and Paul Deckelman

Omaha, May 13 - The investment-grade new issue market was dominated by industrial and utility names Tuesday, with issuers like Philip Morris International Inc., The Empire District Electric Co., Tampa Electric Co., Parker-Hannifin Corp., United Technologies Corp., Columbus Southern Power Co., Fannie Mae and Sovereign Bank bringing deals.

A $4 billion issue of hybrid notes from American International Group Inc. also priced late in the day via Citigroup Global Markets Inc. and J.P. Morgan Securities Inc., a source close to the deal said. Terms were not available at press time.

In the investment-grade secondary market Tuesday, advancing issues trailed decliners by a three-to-two ratio, while overall market activity, reflected in dollar volumes, jumped some 48% from Monday's pace.

Spreads in general widened, as Treasury yields declined; the yield on the benchmark 10-year issue, for instance, fell by 1 basis point to 3.77%.

A trader said that apart from new issues, which seemed tighter, including such names as PetroCanada, "everything was otherwise wider on supply concerns" amid the great volume of new paper coming onto the market. "There was a weaker tone in general, even though the [credit-default swaps] market was tighter."

Philip Morris brings $6 billion

Philip Morris priced $6 billion of senior unsecured notes in three tranches.

All of the notes priced at Treasuries plus 177 bps.

The issue consisted of $2 billion of 4.875% five-year notes, $2.5 billion of 5.65% 10-year notes and $1.5 billion of 6.375% 30-year notes.

Credit Suisse Securities, Deutsche Bank Securities Inc. and Lehman Brothers Inc. ran the books.

United Technologies goes long

United Technologies priced $1 billion of 6.125% 30-year notes at 99.707 to yield 6.145% at a spread of Treasuries plus 153 bps.

They came at the tight end of price talk of 155 bps area, with the issue about two times oversubscribed, a source close to the deal said.

Banc of America Securities LLC and Citigroup were bookrunners.

Parker-Hannifin tight to talk

Parker-Hannifin priced $775 million of medium-term notes in two tranches.

The $450 million of 5.5% 10-year notes priced at 99.765 to yield 5.531% with a spread of Treasuries plus 165 bps.

The $325 million of 6.25% 30-year notes priced at 99.946 to yield 6.254% with a spread of Treasuries plus 165 bps.

Both tranches came at the tight end of price talk of 165 to 170 bps, a source said.

Agents were Banc of America, Goldman Sachs & Co. and Morgan Stanley & Co. Inc.

Columbus Southern oversubscribed

Columbus Southern Power priced $350 million 6.05% 10-year senior notes at 99.774 to yield 6.081% with a spread of Treasuries plus 220 bps.

They came at the tight end of talk of 220 to 225 bps, a source said.

Both this issue and Parker-Hannifin were oversubscribed, he said.

Bank of New York Mellon Securities, Goldman Sachs and Lehman Brothers were bookrunners for the Columbus Southern new issue.

This was one of a handful of utilities that priced issues Tuesday.

Empire District Electric priced $90 million in 6.375% 10-year first mortgage bonds at 99.944 to yield 6.382% with a spread of Treasuries plus 248 bps.

UBS Securities was bookrunner.

Tampa Electric priced $150 million 6.1% 10-year notes at par to yield 6.1% with a spread of Treasuries plus 225 bps.

Morgan Stanley & Co. Inc. and BNP Paribas were bookrunners.

There was no particular reason why utilities decided to issue Tuesday, a source said, other than the prime market conditions.

Sovereign, Fannie Mae price deals

Financial names also continue to trickle into the market.

Sovereign Bank priced $500 million 8.75% 10-year subordinated bank notes at 99.664 to yield 8.8% with a spread of Treasuries plus 491.7 bps.

Lehman Brothers was bookrunner.

Fannie Mae priced $2 billion in non-cumulative preferred stock in an effort to enhance the company's capital position, provide additional market liquidity and pursue new business opportunities, according to a press release from the company.

The 80 million shares of 8.25% preferreds priced at par of $25 and are callable on or after May 20, 2013.

Merrill Lynch, Pierce, Fenner & Smith Inc., Citigroup, Morgan Stanley, UBS Investment Bank and Wachovia Capital Securities LLC were bookrunners.

"The preferred securities attracted a wide base of individual as well as institutional investors," said David Benson, senior vice-president and treasurer of Fannie Mae, in a news release. "This issuance completes Fannie Mae's capital raising plan announced last week."

The plan also included selling common stock and convertible preferreds.

An upcoming issue was announced from OJSC Russian Agricultural Bank.

The company plans to sell dollar-denominated bonds via Rule 144A/Regulation S following a roadshow that runs from May 15 to 20.

Bookrunners are ABN Amro, Citigroup and Goldman Sachs.

Steady tone draws issuers

The market remained mostly unchanged in tone from the last couple of weeks, with opportunistic issuers continuing to keep traders busy.

"I think we'll see similar tone throughout the rest of the week in that we'll see many trades," a source said. "It's a good time to issue paper, just good all around."

Issuance last week set a record, and this week could give it a run for its money, a market source said.

PetroCanada stronger

A trader saw the new Columbus Southern Power 6.08% notes due 2018 at a bid spread of 220 bps over comparable Treasuries, 215 bps offered, versus a 220 bps issue price earlier in the session.

He saw no trace of the new United Technologies or Tampa Electric Co. bonds.

PetroCanada's new 6.05% notes due 2018, which priced Monday at 230 bps, tightened to 226 bps bid, 223 bps offered. The company's new 6.80% notes due 2038, which also priced at 230 bps over, were a little tighter at 228 bps bid, 223 bps offered.

Simon wider

However, he saw the new Simon Property Group 5.30% notes due 2013 and 6.125% notes due 2018, each of which priced Monday at 235 bps over, as having widened to 240 bps bid, 235 bps offered.

CenterPoint Energy's 6% notes due 2018, which had priced Monday at 235 bps over, were straddling that mark, at 237 bps bid, 232 bps offered.

Among other recently priced deals, ConocoPhillips' 5.20% notes due 2018 were seen at 112 bps over, versus their spread at pricing of 135 bps.

Sovereign gains

A high yield trader got a reading on the new Sovereign Bank 8¾% notes due 2018 - nominally a six-B rated investment-grade issue, but one which priced at a bloated junk-like spread of 491.7 basis points over comparable Treasuries, several percentage points above where high-grade financials are generally found these days. He saw those bonds firm up to a par bid, where they were left, from their 99.664 issue price earlier in the day.

CDS spreads little changed

A trader saw CDS contracts protecting holders of major bank debt as being 1 bp tighter to unchanged, while brokerage debt-protection costs were likewise steady. Washington Mutual's CDS cost was about 5 bps tighter, he said.

© 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.