Coca-Cola Enterprises, Rockwell Collins, BP Capital sell notes; overwhelming demand for deals

By Andrea Heisinger

New York, May 1 - It was an unusually busy Friday in the investment-grade bond market with last-minute deals coming into the market from Coca-Cola Enterprises Inc., Rockwell Collins, Inc. and BP Capital Markets.

The BP deal was the most last-minute of them all, launching and pricing in the late afternoon hours.

It was the optimal market conditions that prompted this haste, a syndicate source said. High investor demand left many of the day's and week's issues several times oversubscribed.

Several issues priced throughout the week were seen trading at high volume early in the afternoon, including those from Whirlpool Corp., EnCana Corp. and ITT Corp.

Spreads were tighter to slightly wider by late afternoon as Treasury yields widened, although not by very much in some cases. The five-year note was in 1 basis point from the previous day to yield 2% while the 30-year bond was 4 bps wider at a 4.07% yield.

Coca-Cola unit reopens notes

Coca-Cola Enterprises, the bottler and distributor of Coca-Cola products, reopened its issue of 4.25% notes due 2015 to add $300 million.

The notes priced at 200 bps over Treasuries.

This brings total issuance to $550 million, including $250 million issued Feb. 20.

The Atlanta-based company used Deutsche Bank Securities Inc., RBS Securities Inc. and Wachovia Capital Markets LLC as bookrunners.

There was not too much of interest on the deal, a source close to it said. "It was roughly three-times oversubscribed with quality accounts," he said. "That's about it."

Rockwell Collins sells upsized deal

Commercial and aviation electronics company Rockwell Collins sold $300 million of 5.25% five-year notes to yield Treasuries plus 215 bps. The size was increased from $250 million, a source away from the deal said.

Bookrunners for the sale from the Cedar Rapids, Iowa, company were Banc of America Securities LLC, J.P. Morgan Securities Inc. and UBS Investment Bank.

BP Capital sells $1.4 billion late

A surprise deal was done late Friday by BP Capital, with only a couple of hours between its launch and pricing.

The $1.4 billion sale of 3.625% five-year notes priced at Treasuries plus 165 bps.

The sale was done after 5 p.m. ET via bookrunners Banc of America Securities LLC, HSBC Securities, Morgan Stanley & Co. Inc. and UBS Investment Bank.

The gas and petroleum company is based in London.

Issues make for odd Friday

In recent weeks Friday often meant no issues as the market wound down from previously busy days. This week was different, a source said.

"The market's in good shape," he said. "This week was the week to go if you were ready."

Several companies were entering the market, with most pricing their deals on Tuesday and Wednesday.

"The fact that anyone got a deal done on Friday says something," the source said. He cited both BP and Coca-Cola Enterprises to illustrate this, as both were announced and priced at the last minute. Even bookrunners didn't know that the Coca-Cola deal would go Friday until the morning.

The week also was a good one for investors, as they overran the market leaving several issues well oversubscribed.

The two-tranche sale from Whirlpool was a good example, with interested buyers calling syndicate desks. This left the tranche of five-year notes 10 times oversubscribed and the tranche of three-year notes six times oversubscribed.

"Investor demand is almost more than the market can keep up with at this point," a source said.

The coming week's issuance volume is "too hard to tell," one market source said Friday. On Thursday, another source said it looked like there would be a lot of opportunistic issuance from a lot of BBB-rated names coming off of earnings blackouts.

New Whirlpool tops trading

A tranche of the recently priced bonds from Whirlpool remained popular in the secondary early Friday afternoon, a market source said.

The 8.6% bonds due 2014 were seen topping the list, and at a significantly tighter level than where they priced Wednesday.

The bonds sold at Treasuries plus 662.5 bps, and were at 585 bps over.

The tranche of notes was highly popular with investors the day it priced, with the book more than 10 times oversubscribed, a source close to the sale said. A tranche of three-year notes that was the other half of the sale was about six times oversubscribed.

Recent deals popular

Along with the new Whirlpool bonds, several others priced this week were some of the most highly traded early Friday afternoon.

EnCana's 6.5% bond due 2019, also priced Wednesday, was in the third spot, with ITT's tranche of 4.9% notes due 2014 right behind it.

Tuesday's issue of 6.5% notes due 2019 from Potash Corp. of Saskatchewan Inc. also remained popular.

This two-tranche deal of five- and 10-year notes was one of the best performing in the secondary, continuing to make gains throughout the week.

Older bonds gain in trading

Outstanding bonds that were issued a while ago were seen noticeably tighter Friday than they were earlier in the week, according to a market source.

Two bonds from Goldman Sachs Group Inc. - which priced a $2 billion issue of bonds Wednesday that was not backed by the Federal Deposit Insurance Corp. - came in significantly.

Outstanding 5.625% notes due 2017 were trading at Treasuries plus 470 bps, versus 530 bps on Tuesday. Their 6.25% due 2017 was in slightly less at 395 bps from 425 bps earlier.

Citigroup Inc. didn't get quite the same boost. Two of its issues tightened slightly, but not nearly as much as those from Goldman.

Their 5.125% notes due 2014 were at Treasuries plus 775 bps on Friday, which was less than a 10 bps tightening from the 782 bps level Tuesday.

There were also some examples on the non-financial side.

A 5.95% bond due 2037 from Johnson & Johnson tightened about 10 bps in a few days, going to 145 bps over Treasuries from 155 bps over Treasuries.

Older bonds from DaimlerChrysler AG fared better this week than those with longer maturities.

The car company's 4.875% notes due 2010 were more than 40 bps tighter, while the 5.875% notes due 2011 were about 15 bps better. An issue of 6.5% notes due 2013 was only in about 1 basis point from 528 bps over five-year Treasuries to 527 bps. This happened in the time frame of when car-maker Chrysler filed for bankruptcy.

Top movers

Bonds from HSBC Finance and Black & Decker Corp. were some of the day's biggest movers as of late Friday, a market source said.

A 5.6% note due 2018 from HSBC was more than 40 bps tighter than the previous week when many financial names were announcing first-quarter earnings.

Black & Decker's 8.95% bond due 2014 was nearly 50 bps wider than the previous week. This comes a day after the company cut its quarterly cash dividend, and a week after the company announced troubling first-quarter earnings. The power tool maker had a 93% drop in profit from the previous year.

© 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.