Simon Property, Bank of Nova Scotia, Trans-Allegheny, Italy sell bonds; secondary 'soft'

By Andrea Heisinger and Cristal Cody

New York, Jan. 19 - Simon Property Group, LP, Bank of Nova Scotia, Trans-Allegheny Interstate Line Co. and the Republic of Italy, all got bond deals on a Tuesday mostly overshadowed by earnings announcements.

Other sales from KfW, Nissan Motor Acceptance Corp., Nordic Investment Bank were announced but not priced.

Simon Property Group was the most-watched sale of the day, and also the last to price. The mall giant sold $2.25 billion of bonds in three tranches, with the deal well oversubscribed.

Italy priced $2.5 billion of five-year global notes early in the day.

Canada's Bank of Nova Scotia also sold $2.5 billion, but its deal was in tranches of both three- and five-year notes.

Utility subsidiary Trans-Allegheny Interstate Line priced $450 million of five-year senior unsecured notes in a sale done under Rule 144A.

In upcoming deals, KfW and Nissan Motor Acceptance are expected to sell their notes on Wednesday.

The offering from Nordic Investment Bank is more likely to come later in the week, a source said.

A sale was also announced by Williams Partners LP. The natural gas company said it will sell bonds to pay for a company restructuring.

Tuesday's investment-grade market tone was not swayed much by the headlines out about items including Citigroup Inc.'s loss, a market source said. And the banks own bonds were unchanged to tighter.

"I don't think it did too much," he said. "People had too much else to do. There was more focus on Simon [Property Group]."

The secondary market remained mostly "soft" on the day back from a three-day holiday, a trader said Tuesday.

"It's digesting new issues and people are far from ecstatic on the levels," the trader said.

Bond markets were closed Monday for observance of Martin Luther King Jr. Day.

"Everything is trading cheap to tight in a manner of weeks," the trader said. "Last week we started seeing an uptick - a good mix of buying and selling - but sellers want last week's levels and buyers' are being more selective."

On Tuesday, declining issues outpaced advancing issues, according to a source.

In addition, according to a market source, the CDX Series 13 North American high-grade index was unchanged at a mid bid-asked spread level of 84 bps.

Meanwhile, one trader said Tuesday there is "massive buying in Treasury coupons" and "some selling in corporates."

Yields on the benchmark 10-year Treasury note eased 1 basis point to 3.69%. The yield on the 30-year Treasury bond also eased 1 bp to 4.59%.

Also, a market source reported that overall dollar volume in investment-grade trading rose 16% to about $11 billion on Tuesday.

Simon offers three tranches

Simon Property Group priced $2.25 billion of unsecured notes late in the day in three tranches, an informed source said.

The source said there was almost $10 billion on the books, with "orders weighted toward the 30-year [tranche]."

A $400 million tranche of five-year notes priced at a spread of 180 basis points over Treasuries.

The $1.25 billion tranche of 10-year notes priced at Treasuries plus 200 bps.

A third tranche of $600 million in 30-year bonds sold at Treasuries plus 220 bps.

Citigroup Global Markets, Morgan Stanley & Co. and RBS Securities were active bookrunners. Proceeds are being used to fund the cash purchase of senior notes issued and tendered by the company or its subsidiary, and for general corporate purposes.

The owner and developer of retail real estate properties is based in Indianapolis, Indiana.

Scotia sells $2.5 billion

The Bank of Nova Scotia priced $2.5 billion of notes in two tranches late in the day, a source close to the deal said.

The $1 billion tranche of 2.25% three-year notes priced at a spread of 83 bps over Treasuries.

A $1.5 billion tranche of 3.4% five-year notes priced at Treasuries plus 98 bps.

Bank of America Merrill Lynch, Citigroup Global Markets and Morgan Stanley were on the books.

The financial services company is based in Toronto.

Earnings to dominate week

Companies and banks began announcing fourth-quarter and 2009 earnings in earnest on Tuesday following the long weekend.

The day brought bad news from Citigroup, which announced a loss of $1.6 billion for 2009, and a $7.6 billion loss for the fourth quarter due to an accounting charge for its repayment of Troubled Asset Relief Program money to the government.

The news did not seem to have much impact on the high-grade market.

"The market's still OK," a syndicate source said. "I would say there were other factors out there more than that."

Another closely watched investment-grade name, International Business Machines, was set to announce its numbers after the close.

The Citi news was "not unexpected," a syndicate source said. He added that "there will probably be others losing."

The investment-grade market's tone was perhaps balanced out by the news that Kraft Foods Inc.'s bid for Cadbury plc was finally accepted.

It will create the world's biggest confectioner and the acquisition is valued at about $19 billion. This is larger than the $16.7 billion hostile bid that has been on offer for the past months, which Cadbury rebuffed.

Potential issuers were "still feeling the market" after the long weekend, a second syndicate source said.

When asked about the reason why so many deals were announced but not priced on Tuesday, the first syndicate source had a ready answer.

"It's logistics more than anything," he said. "I think everyone just wanted to go overnight to get Asia [investors]."

Trans-Allegheny prices five-year

Trans-Allegheny Interstate Line priced $450 million of 4% five-year senior unsecured notes at162.5 bps over Treasuries in a deal done under Rule 144A.

The notes were sold in line with guidance in the 162.5 bps area, the source said.

Barclays Capital, Credit Suisse Securities and J.P. Morgan Securities ran the books.

Proceeds will go to repay $550 million in bank financing and provide additional funding for the remaining construction of a transmission line.

The subsidiary of utility holding company Allegheny Energy, Inc. is based in Greensburg, Pa.

Italy sells global notes

The Republic of Italy sold $2.5 billion of 3.125% five-year global notes early in the day at 74.75 bps over Treasuries.

Barclays Capital, Citigroup Global Markets and Credit Suisse Securities ran the books.

Williams plans debt sale, restructuring

Williams Partners LP is planning a bond offering to fund the cash portion of a restructuring of Williams Cos. Inc. regarding Williams Pipeline Partners LP, according to a press release from the company on Tuesday.

Timing for the deal has not been decided, a market source said.

Williams Cos. plans to contribute its gas pipeline and domestic midstream businesses, plus its interests in Williams Pipeline Partners. The company will be known as Williams Partners following the restructuring that is valued at about $12 billion.

The partnership expects to achieve investment-grade ratings following completion of an asset contribution and the bond offering.

Williams Companies and its natural gas subsidiaries are based in Tulsa, Okla.

Nordic plans sale of short bonds

Nordic Investment Bank is expected to price three-year notes later in the week, a source close to the deal said.

The notes will be sold under Rule 144A. Specific timing is unknown, but the notes are not expected to be sold until Thursday or Friday, the source said.

Citigroup Global Markets, Deutsche Bank Securities, HSBC Securities and J.P. Morgan Securities are running the books.

The lender to Nordic countries is based in Helsinki, Finland.

Nissan financing arm plans offering

Auto financing and leasing company Nissan Motor Acceptance is expected to price notes in two tranches on Wednesday, an informed source said.

They will be priced under Rule 144A, with the deal set to have both three-year notes and five-year notes.

Bank of America Merrill Lynch, Citigroup Global Markets and Deutsche Bank Securities are on the books.

The issuer is based in Irving, Texas.

KfW plans 10-year sale

KfW is planning to sell 10-year global notes on Wednesday, a market source said.

Bookrunners are Goldman Sachs & Co., J.P. Morgan Securities and UBS Investment Bank.

The government-owned development bank is based in Frankfurt, Germany.

Simon tightens

Simon Property Group's five-, 10- and 30-year bonds tightened across the board by 2 bps in secondary trading, a source told Prospect News.

Simon priced $2.25 billion of notes earlier in the day.

The five-year notes were seen tightening 2 bps to 178 bps bid, a trader said near the market's close.

The 10-year notes also tightened to a 198 bid. The notes priced earlier Tuesday at Treasuries plus 200 bps.

In addition, Simon's 30-year bonds tightened to 218 bps bid, the trader said. The bonds priced at Treasuries plus 220 bps.

Kraft unchanged on Cadbury deal

According to one source, Kraft Foods Inc.'s outstanding bonds remained unchanged late Tuesday after the announcement that a takeover agreement had been reached to acquire British confectioner Cadbury plc.

Kraft's 6.125% notes due 2018 were unchanged from Friday's trading at 137 bps over on Tuesday, a source reported. Kraft's 7% bonds due 2037 also were unchanged at 174 bps over.

Kraft said Tuesday that Cadbury had agreed to a sweetened takeover offer of $19.5 billion.

Northfield, Ill.-based Kraft is the world's second largest food company with brands such as Toblerone chocolates and Oreo cookies.

Cadbury's products that include Green & Black's chocolate and Trident, Dentyne and Bubbaloo gums.

Moody's Investors Service said that Kraft likely will retain an investment-grade rating, but that Kraft's Baa2/Prime-2 long-term and short-term ratings remain under review for possible downgrade.

Trans-Allegheny hits secondary late

Trans-Allegheny Interstate Line priced $450 million senior notes in two, five-year tranches on Tuesday, but the notes had not reached secondary by late Tuesday, one trader said.

"I'm not seeing anything on those yet."

Citigroup tightens

Also on Tuesday, outstanding high-grade debt from Citigroup Inc. mostly tightened after the bank reported a $7.6 billion fourth-quarter loss that was attributed in part to the payoff of $20 billion in government loans.

For example, according to a market source, Citigroup's 5.5% notes due 2014 tightened 4 bps to 238 bps over.

The New York-based bank's 8.125% notes due 2039 also tightened to 233 bps over on Tuesday from 239 bps over on Friday.

Citigroup's other outstanding bonds were unchanged, according to a source.

Financials wider

Meanwhile on Tuesday, according to a source, the financial sector was mostly wider.

Charlotte, N.C.-based Bank of America Corp.'s 6.5% notes due 2016 were quoted as widening to 125 bps over Treasuries on Tuesday from 122 bps over on Friday.

Goldman Sachs Group Inc.'s 6.15% notes due 2018 widened 5 bps to 140 bps over.

Also, one sourced reported that the 5.3% notes due 2011 from San Francisco-based bank Wells Fargo & Co. widened 40 basis points to 60 bps over on Tuesday.

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