UnitedHealth, PepsiCo among $9 billion of corporate deals priced; ConEd notes trade weaker

By Aleesia Forni and Andrea Heisinger

New York, Feb. 25 - The week started with a bang as more than $9 billion of investment-grade bonds came to the market on Monday.

There was $9.25 billion of new paper sold, including large offerings from PepsiCo Inc., United Health Group Inc., BNP Paribas SA and Fifth Third Bancorp.

Other trades came from Consolidated Edison Co. of New York, Inc., Motorola Solutions, Inc., Spectra Energy Capital LLC and Caterpillar Financial Services Corp.

PepsiCo sold $2.5 billion of bonds in three tranches, its first deal since August of 2012. The sale included a three-year floating-rate note, three-year fixed-rate notes and 10-year notes.

Terms of the sale were not available at press time.

UnitedHealth Group priced $2.25 billion of bonds in three tranches, including 18-month floaters, six-year notes, 10-year notes and 30-year bonds.

The sale saw more than $5 billion on the books, a source said. That demand was mostly evenly split among the tranches, with slightly more interest in the 10-year maturity, he added.

Paris-based BNP Paribas sold $1 billion of 10-year notes, while Ohio's Fifth Third Bank priced $1 billion in tranches due 2016 and 2018. Terms of the BNP Paribas offering were not available at press time.

ConEd tapped the market for $700 million of 30-year debentures.

Communications technology company Motorola Solutions priced $600 million of 10-year senior notes after the size was increased from $500 million.

Spectra Energy Capital sold $650 million of 10-year senior notes guaranteed by parent company Spectra Energy Corp.

There was a four tranche sale totaling $1.1 billion from CAT Financial Services. The trade included three-year floaters, five-year notes and 10-year notes.

A $75 million sale of perpetual $25-par preferred shares was sold by Hersha Hospitality Trust. The size was increased from $65 million.

The week has already seen half of the $15 billion to $20 billion of expected supply.

There was uncertainty over Italian Senate elections, which left the stock market and Treasuries "a bit soft" on the day, a source said.

A syndicate source said that issuance could be more muted on Tuesday "thanks to Italy - again."

There are at least a couple of trades on tap for Tuesday, sources added.

Companies continue to add floating-rate notes to the offerings to keep pace with reverse inquiries and investor demand. The 18-month floater from UnitedHealth was added, after being a possibility, when the deal was announced, a source who worked on the sale said, and Fifth Third Bancorp also added a three-year floater on demand.

"The floater demand is still there," a source close to the UnitedHealth sale said.

Trading volume in the secondary market reached $9.2 billion on Monday, as the Markit CDX Series 18 North American Investment Grade index widened 4 basis points to a spread of 90 bps.

ConEd's new notes were trading wider near the end of the session, a trader said, while Motorola's notes were quoted at 175 bps offered.

In other trading, Friday's new deal from Whirlpool Corp. was trading better in the secondary.

Investment-grade bank and brokerage credit default swaps costs rose during the session.

Bank of America's CDS costs widened 1 bp to 120 bps bid, 125 bid. Citi's CDS costs were 3 bps wider at 112 bps bid, 117 bps offered. J.P. Morgan's CDS costs rose 2 bp to 79 bps bid, 83 bps offered. Wells Fargo's CDS costs rose 1 bp to 70 bps bid, 74 bps offered.

Merrill Lynch's CDS costs were 2 bps wider at 107 bps bid, 114 bps offered. Morgan Stanley's CDS costs rose 4 bps to 140 bps

UnitedHealth's $2.25 billion

UnitedHealth Group sold $2.25 billion of senior notes (A3/A/A-) in four tranches, an informed source said.

A $250 million of floaters due 2014 was sold at par to yield Libor plus 12.5 bps.

The sale included $500 million of 1.625% six-year notes priced at a spread of Treasuries plus 93 bps. Whispered talk was in the 95 bps over Treasuries area.

There was also $750 million of 2.875% 10-year notes sold at 93 bps over Treasuries. The 10-year note had guidance in the 105 bps to 110 bps range.

A $750 million tranche of 4.25% 30-year bonds was priced at a spread of Treasuries plus 125 bps. The bonds were talked in the 125 bps to 130 bps range.

Bookrunners were Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBS Securities Inc., U.S. Bancorp Investments Inc. and Wells Fargo Securities Inc.

Proceeds are being added to the company's general funds for general corporate purposes.

UnitedHealth, a diversified health company based in Minnetonka, Minn., was last in the U.S. bond market with a $2.5 billion offering of senior notes in four tranches on Oct. 17, 2012.

Fifth Third adds floater

Fifth Third Bancorp sold $1.3 billion of notes (A3/BBB+/A-) in two maturities, a source close to the trade said.

A $300 million tranche of three-year floating-rate notes was added prior to the launch, and priced at par to yield Libor plus 41 bps.

There was $400 million of 0.9% three-year notes priced at a spread of Treasuries plus 55 bps.

A $600 million tranche of 1.45% five-year notes sold at 73 bps over Treasuries.

Barclays, Deutsche Bank Securities Inc. and Goldman Sachs & Co. were bookrunners.

Fifth Third, a regional bank based in Cincinnati, Ohio, was last in the U.S. bond market with a $500 million sale of 10-year notes on March 2, 2012.

Motorola prices tight

Motorola Solutions priced an upsized $600 million of 3.5%10-year senior notes (Baa2/BBB/BBB) at a spread of Treasuries plus 175 bps, according to an FWP filing with the Securities and Exchange Commission.

An informed source said the notes had initial guidance in the 200 bps over Treasuries area. The size was increased from $500 million.

A trader saw the notes at 175 bps offered.

Citigroup Global Markets Inc., HSBC Securities (USA) Inc. and Morgan Stanley & Co. LLC were on the books.

Proceeds are being used for general corporate purposes, including working capital, fixed asset expenditures, pension contributions, acquisitions, repurchase of common stock or other capital transactions.

Motorola was last in the U.S. bond market with a $750 million trade of 3.75% 10-year notes priced at 195 basis points over Treasuries on May 8, 2012.

The communications technology company is based in Schaumburg, Ill.

CAT sells $1.1 billion

Caterpillar Financial Services has priced $1.1 billion of notes (A2/A/A) in four tranches, a market source told Prospect News.

A $300 million tranche of three-year floating-rate notes sold at par to yield Libor plus 24 bps.

The sale included $300 million of 0.7% three-year notes priced at a spread of Treasuries plus 38 bps.

A $250 million tranche of 1.3% five-year notes sold at Treasuries plus 58 bps.

Finally, there was $250 million of 2.625% 10-year notes priced at a spread of Treasuries plus 83 bps.

BofA Merrill Lynch, Citigroup Global Markets Inc. and Goldman Sachs & Co. were bookrunners.

The funding arm of heavy equipment maker Caterpillar is based in Nashville, Tenn.

ConEd's long bond

Consolidated Edison Co. of New York sold $700 million of 3.95% 30-year debentures (A3/A-/A-) at a spread of Treasuries plus 88 bps, according to an FWP filing with the Securities and Exchange Commission.

The notes widened 2 bps to 90 bps bid, 85 bps offered late during the session.

Active bookrunners were J.P. Morgan Securities LLC, Mizuho Securities USA Inc. and UBS Securities LLC.

Proceeds are being used for general corporate purposes, including repayment of short-term debt at variable rates.

ConEd was last in the U.S. bond market with a $400 million sale of 4.2% 30-year bonds priced at 105 basis points over Treasuries on March 8, 2012.

The electric and gas utility is based in New York City.

Spectra's guaranteed trade

Spectra Energy Capital was in the market with a $650 million sale of 3.3% 10-year senior notes (Baa2/BBB/BBB) priced to yield 144 bps over Treasuries, a market source said.

Active bookrunner was Morgan Stanley & Co. LLC.

Proceeds are being used to repay commercial paper that was used to repay $495 million of 6.25% senior notes that matured on Feb. 15 and for general corporate purposes, including acquisitions and repayment of commercial paper.

The offering is guaranteed by Spectra Energy Corp.

The natural gas transmission and production company is based in Houston.

Hersha sells preferreds

Hersha Hospitality Trust priced an upsized $75 million of 6.875% perpetual series C cumulative redeemable preferred stock late in the day, an informed source said.

The shares sold at par of $25 and were talked in the 7% area, the source said. The size was increased from $65 million.

Wells Fargo Securities LLC was active bookrunner.

Proceeds are being contributed to the operating partnership in exchange for preferred partnership interest and to redeem series A preferred shares.

The company plans to list the shares on the New York Stock Exchange under "HT PRC."

The real estate investment trust for hotels and office properties is based in Harrisburg, Pa.

Whirlpool firms

Whirlpool's $250 million of 3.7% 10-year notes was quoted 6 basis points tighter at 169 bps bid, 166 bps offered, a trader said during the session.

The notes were sold with a spread of Treasuries plus 175 bps on Friday.

Meanwhile, the $250 million tranche of 5.15% 30-year bonds was quoted 1 bp better at 199 bps bid, 197 bps offered following Friday's pricing with a spread of Treasuries plus 200 bps.

Whirlpool is a Benton Harbor, Mich.-based appliance maker.

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