KLA-Tencor, BP Capital notes meet overwhelming demand; bond spreads flat; trading subdued

By Aleesia Forni and Cristal Cody

Virginia Beach, Oct. 30 – KLA-Tencor Corp., BP Capital Markets plc, Whirlpool Corp. and Toronto-Dominion Bank made their way to Thursday’s primary market, pricing more than $6 billion of new investment-grade paper.

The session’s largest new issue came from KLA-Tencor, which priced $2.5 billion of senior notes in five tranches.

Investors flocked to the company’s new deal, which amassed an overwhelming $12 billion order book.

The five tranches of notes sold around 10 basis points to 15 bps tighter than initial guidance.

BP Capital’s new $2 billion two-part issue also received solid demand with an order book that was more than six times oversubscribed.

In other primary happenings, Whirlpool priced a $650 million two-part offering of notes at the tight end of talk.

Toronto-Dominion Bank was also in the market with a two-part sale of senior notes on Thursday.

So far, this week has seen roughly $21 billion of new issuance, falling in line with what sources had predicted to be a $20 billion to $25 billion week.

Looking ahead, sources are not ruling out the chance of primary activity on Friday to close out October.

The typically quiet end of the week for the high-grade market has seen unusual amounts of activity in recent weeks following a volatile start to the month.

“I really would not be surprised,” a source said of the possibility of new issuance on Friday.

Canadian domestic high-grade bond issuance has stayed quiet over the week, despite expectations of primary action ahead of the Oct. 31 fiscal year-end, according to market sources.

“There’s not much going on,” one source said. “Tomorrow’s not a good day to be launching an issue with the bank year-end, and it’s Halloween.”

Investment-grade credit spreads opened the day about 1 bp weaker but ended the session mostly unchanged, according to market sources.

The Markit CDX North American Investment Grade series 23 index was flat at a spread of 66 bps.

In the secondary market, Time Warner Inc.’s 4.65% senior notes due 2044 were seen about 3 bps tighter earlier in the day but still more than 20 bps wider from where the notes priced in May, a market source said.

Goldman Sachs Group Inc.’s 3.85% notes due 2024 were quoted about 6 bps softer than where the notes priced in June, a source said.

KLA brings $2.5 billion

KLA-Tencor priced a $2.5 billion issue of senior notes (Baa2/BBB/) in five tranches, according to sources away from the trade.

A $250 million tranche of 2.375% notes due 2017 priced at 99.94 to yield 2.396%, or Treasuries plus 150 bps.

The notes sold at the tight end of talk, which was set in the Treasuries plus 162.5 bps area after having tightened from guidance set in the Treasuries plus 170 bps area.

There was also $250 million of 3.375% notes due 2019 sold with a spread of Treasuries plus 180 bps. Pricing was at 99.991 to yield 3.377%.

The notes sold at the tight end of talk in the Treasuries plus 190 bps area. Talk had tightened from initial guidance set in the Treasuries plus 200 bps area.

A $500 million 4.125% tranche of seven-year notes sold at 99.983 to yield 4.128%, or Treasuries plus 212.5 bps.

Pricing was at the tight end of talk, which remained flat from initial guidance in the 225 bps over Treasuries area.

The company also priced $1.25 billion of 4.65% 10-year notes with a spread of Treasuries plus 237.5 bps. The notes priced at 99.748 to yield 4.682%.

Pricing was at the tight end of the Treasuries plus 250 bps area talk, which was unchanged from guidance.

There was also $250 million of 5.65% 20-year bonds priced at 99.764 to yield 5.67%, or Treasuries plus 262.5 bps.

The notes sold at the tight end of talk, set in the Treasuries plus 275 bps area. Talk had tightened from guidance, which was set in the Treasuries plus 280 bps area.

J.P. Morgan Securities LLC was the bookrunner.

Proceeds will be used to fund a special dividend to stockholders and for other general corporate purposes.

The Milpitas, Calif.-based company is a supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries.

TD Bank two-parter

TD Bank sold a $1.75 billion offering of senior medium-term notes, series A, (Aa1/AA-/) in fixed- and floating-rate tranches due 2019 on Thursday, an informed source said.

There was $500 million of five-year floating-rate notes priced at Libor plus 56 bps.

The sale also included $1.25 billion of 2.25% five-year notes priced with a spread of Treasuries plus 72 bps.

The fixed-rate notes sold at the tight end of price talk, set in the 75 bps over Treasuries area.

TD Securities, Goldman Sachs & Co., JPMorgan, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will be added to the company’s general funds and be used for general corporate purposes.

The financial services and banking company is based in Toronto.

BP prices tight

Also on Thursday, BP Capital Markets priced $2 billion of senior notes (A2/A/) in two tranches, a market source said.

A $1.25 billion tranche of 2.521% notes due 2020 priced at par with a spread of Treasuries plus 95 bps.

Pricing was tight of guidance, which was set in the 105 bps area over Treasuries.

There was also $750 million of 3.535% notes due 2024 sold at par, or 124 bps over Treasuries.

The 10-year notes sold tighter than the Treasuries plus 135 bps area guidance.

The bookrunners were BNP Paribas Securities Corp., HSBC Securities (USA) Inc., JPMorgan and Morgan Stanley.

The unit of oil company BP plc is based in London.

Whirlpool new issue

The primary also hosted Whirlpool, which sold a $650 million two-tranche offering of senior notes (Baa2/BBB/BBB) on Thursday in three- and 10.5-year tranches, according to a market source and an FWP filed with the Securities and Exchange Commission.

The sale included $300 million of 1.65% three-year notes priced at Treasuries plus 75 bps. The notes priced at 99.994 to yield 1.652%.

A second tranche was $350 million of 3.7% notes due 2024 priced at 99.897 to yield 3.712%, or Treasuries plus 140 bps.

Both tranches sold at the tight end of talk.

The bookrunners were Citigroup Global Markets Inc. and JPMorgan.

Proceeds will be used to repay commercial paper borrowings.

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

Time Warner gains

Time Warner’s 4.65% senior notes due 2044 (Baa2/BBB/BBB+) traded about 3 bps tighter earlier on Thursday at 158 bps offered, a market source said.

Time Warner sold $600 million of the 30-year notes on May 20 at Treasuries plus 135 bps.

The media and entertainment company is based in New York City.

Goldman softer

Goldman Sachs’ 3.85% notes due 2024 (Baa1/A-/A) were quoted at 142 bps offered on Thursday, about 6 bps weaker from where the notes priced in June, according to a market source.

Goldman Sachs sold $2.25 billion of the notes on June 30 at a spread of Treasuries plus 135 bps.

The financial services company is based in New York City.

Bank/brokerage CDS costs

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

Bank of America Corp.’s CDS costs fell 1 bp to 69 bps bid, 72 bps offered. Citigroup Inc.’s CDS costs were 2 bps lower at 67 bps bid, 70 bps offered. JPMorgan Chase & Co.’s CDS costs were 1 bp higher at 59 bps bid, 62 bps offered. Wells Fargo & Co.’s CDS costs were flat at 46 bps bid, 49 bps offered.

Merrill Lynch’s CDS costs were 1 bp lower at 72 bps bid, 75 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 also flat at 83 bps bid, 85 bps offered.

Paul Deckelman contributed to this review

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