West Fraser, American Honda price amid volatility; Wal-Mart firms; Hewlett-Packard eases

By Cristal Cody and Aleesia Forni

Virginia Beach, Oct. 7 – West Fraser Timber Co. Ltd., American Honda Finance Corp., KfW and Wal-Mart Stores Inc. issued bonds during a weaker session for the high-grade market amid broader market volatility.

KfW sold the day’s largest offering, upsizing and pricing its $1.5 billion new issue at the tight end of price talk.

Also on Tuesday, American Honda priced $875 million of 18-month floating-rate notes.

Meanwhile, West Fraser sold $300 million of 10-year notes, and Wal-Mart stores sold a $500 million add-on.

The session also saw new deal announcements from the European Investment Bank and the Province of Quebec.

Activity in the investment-grade primary market has slowed significantly following a busy September that saw nearly $130 billion of bonds price.

“The wide swings in bond issuance activity in recent months are indicative of the increased volatility in the credit markets, the ebb and flow of investor sentiment related to geopolitical crises, and the elevated uncertainty over monetary policy in Europe and the U.S.,” according to a report published by Standard & Poor’s.

This week so far has seen $6.85 billion of investment-grade bonds price, nearly halfway to what sources had predicted to be a $15 billion to $20 billion week.

Bonds traded mostly softer over Tuesday’s session with investment-grade credit spreads easing nearly 2 bps, according to market sources.

“Definitely going out wider today just from stocks being down,” a trader said.

The Markit CDX North American Investment Grade series 23 index eased 2 bps to a spread of 70 bps.

Wal-Mart’s 3.3% notes due 2024 tightened 4 bps late afternoon following the reopening, a trader said.

West Fraser Timber’s offering was not seen in aftermarket trading, a trader said.

Hewlett-Packard Co.’s bonds remained wider on Tuesday after moving out 10 bps to 15 bps in trading on Monday, according to a trader.

The company announced on Monday that it plans to split into two publicly traded companies.

KfW prices tight

KfW (Aaa/AAA/AAA) priced an upsized $1.5 billion offering of five-year green bonds on Tuesday at 99.743, or mid-swaps minus 4 bps, according to a market source and an FWP filed with the Securities and Exchange Commission.

Price talk was set in the area of mid-swaps minus 2 bps.

The bookrunners were BofA Merrill Lynch, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

The notes are guaranteed by the Federal Republic of Germany.

Proceeds will be used in KfW’s general business.

The German government-owned development bank is based in Frankfurt.

American Honda floaters

Also on Tuesday, American Honda Finance priced $875 million of floating-rate notes (A1/A+/), series A, due Oct. 7, 2015 at par to yield Libor flat, according to a FWP filed with the SEC.

The bookrunners were BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Mizuho Securities USA Inc.

The U.S. arm of Honda Financial Services is based in Torrance, Calif.

Wal-Mart adds on

Wal-Mart Stores priced a $500 million add-on to its existing 3.3% notes due April 22, 2024 at the tight end of price talk with a spread of Treasuries plus 68 bps, according to an informed source and an FWP filed with the SEC.

Pricing was at 102.069 to yield 3.042%.

The bookrunners were Citigroup, Goldman Sachs & Co., JPMorgan, Credit Suisse, BofA Merrill Lynch and RBS Securities Inc.

The original $1 billion of 3.3% notes (Aa2/AA/AA) due 2024 sold at 73 bps over Treasuries on April 15.

Wal-Mart’s 3.3% notes due 2024 tightened to 64 bps bid, 60 bps offered in the secondary market, a trader said.

The discount retailer is based in Bentonville, Ark.

Hewlett-Packard widens

Hewlett-Packard’s 2.75% notes due 2019 were offered late afternoon at 78 bps, wider from where the notes traded on Friday at 57 bps offered, a trader said.

The company sold $1.25 billion of the notes on Jan. 9 at Treasuries plus 102 bps.

Hewlett-Packard’s 4.65% notes due 2021 traded in the 116 bps area in Tuesday’s session, the trader said. The notes headed out on Monday at 97 bps offered.

Hewlett-Packard sold $1.5 billion of the notes on Dec. 6, 2011 at Treasuries plus 260 bps.

The computer technology and software company is based in Palo Alto, Calif.

West Fraser new issue

West Fraser Timber priced $300 million of 4.35% senior notes due 2024 at par to yield Treasuries plus 200 bps, according to a market source and a company press release.

West Fraser intends to use the proceeds from the offering to repay its outstanding 5.2% senior notes due Oct. 15, 2014.

Full details were unavailable at press time.

The notes were sold via Rule 144A and Regulation S.

West Fraser is a Vancouver, B.C.-based diversified wood products company.

Quebec eyes deal

The primary also saw the Province of Quebec emerge with plans to price a benchmark offering of 10-year notes, according to a market source.

The notes are talked at the high-40 bps area over mid-swaps.

BofA Merrill Lynch, National Bank and TD Securities are the bookrunners.

EIB on deck

In other forward calendar news, the European Investment Bank announced plans to price a $1 billion offering of 10-year notes, according to a market source.

Credit Agricole, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are running the books.

The lender for the European Union is based in Kirchberg, Luxembourg.

Bank/brokerage CDS costs rise

Investment-grade bank and brokerage CDS prices were higher on Tuesday, according to a market source.

Bank of America Corp.’s CDS costs rose 2 bps to 71 bps bid, 74 bps offered. Citigroup Inc.’s CDS costs were 2 bps higher at 71 bps bid, 74 bps offered. JPMorgan Chase & Co.’s CDS costs were 3 bps higher at 57 bps bid, 60 bps offered. Wells Fargo & Co.’s CDS costs were flat at 43 bps bid, 48 bps offered.

Merrill Lynch’s CDS costs were 2 bps higher at 75 bps bid, 78 bps offered. Morgan Stanley’s CDS costs ended 2 bps higher at 81 bps bid, 84 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 1 bp higher at 82 bps bid, 85 bps offered.

Paul Deckelman contributed to this review

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