AES, Lockheed, CMS price; Banco Santander plans deal; holiday supply slowdown eyed

By Cristal Cody

Tupelo, Miss., May 15 – High-grade deal volume continued on Friday with issuers including Lockheed Martin Corp. and CMS Energy Corp. in the primary market.

AES Corp. priced a $1.6 billion Rule 144A and Regulation S two-part offering of senior secured first-lien notes following fixed income investor calls held Wednesday.

Lockheed Martin sold $1.15 billion of registered fixed-rate notes in two tranches.

CMS Energy priced a $500 million registered offering of 30-year split-rated fixed-to-fixed rate junior subordinated notes.

Investment-grade issuers sold more than $63 billion of corporate bonds over the week.

About $75 billion of investment-grade supply was forecast.

Looking ahead to next week, Banco Santander, SA plans to hold fixed income investor calls for a dollar-denominated offering of senior notes.

The heavy deal pace since March is expected to subside in the week ahead with the early market close on May 22 and full close on May 25 for the Memorial Day holiday, sources report.

About $30 billion to $40 billion of front-loaded issuance is anticipated in the upcoming week.

Broader market

Meanwhile, high-grade bond fund and exchange-traded fund inflows declined to $7.8 billion for the past week ended Wednesday from $8.74 billon in the previous week, according to a BofA Securities, Inc. research note released Friday.

High-grade ETF inflows rose to $3.04 billion from $2.84 billion last week, while fund inflows declined to $4.76 billion from $5.9 billion a week earlier.

Inflows to short-term high-grade edged up to $3.58 billion from $3.51 billion a week earlier, according to the report that includes corporate bonds, agencies, Treasuries and mortgages.

Excluding short-term flows fell to $4.22 billion this past week from $5.22 billion in the prior week.

The Markit CDX North American Investment Grade 33 index closed the day about 1 basis point tighter at a spread of 95.42 bps.

Secondary market

Investment-grade bonds headed out mostly flat to about 10 bps better on the day, a source said.

Energy issues were seen steady to about 3 bps tighter during the session.

Bank and financial paper was mostly stronger with notes from issuers including Goldman Sachs Group Inc. trading flat to about 10 bps improved.

Lockheed’s existing notes traded more than 5 bps better.

New issues priced this week were mixed, a source said.

Honeywell International Inc.’s $3 billion of senior notes (A2/A/A) priced in three tranches on Thursday tightened more than 10 bps in secondary trading.

The company’s 1.95% notes due June 1, 2030 were last seen at 123 bps bid.

Honeywell sold $1 billion of the 10-year notes at 99.891 to yield 1.962% and a 135 bps spread over Treasuries.

Initial price talk was in the 165 bps spread area.

AES raises $1.6 billion

AES priced $1.6 billion of senior secured first-lien notes (Baa3/BBB-) in two parts in an offering on Friday, according to a market source.

The company sold $900 million of 3.3% five-year notes at a spread of 300 bps over Treasuries.

Initial price talk was in the 337.5 bps spread area.

A $700 million offering of 3.95% 10-year notes priced with a Treasuries plus 337.5 bps spread.

The notes were talked to print at the 375 bps over Treasuries area.

BofA Securities, Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC were the active bookrunners.

Passive bookrunners were Barclays, BNP Paribas Securities Corp., Goldman Sachs & Co. LLC, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, MUFG, Santander Investment Securities Inc. and SMBC Nikko Securities America, Inc.

The issuer is an Arlington, Va.-based power company.

Lockheed Martin prices

Lockheed Martin priced $1.15 billion of notes (A3/A-/A-) in two tranches on Friday, according to an FWP filed with the Securities and Exchange Commission.

A $400 million offering of 1.85% 10-year notes priced at 99.78 to yield 1.874%, or a spread of Treasuries plus 125 bps.

Lockheed Martin sold $750 million of 2.8% 30-year notes at 99.133 to yield 2.843%, or Treasuries plus 155 bps.

Mizuho, Morgan Stanley, BofA Securities, Citigroup, Credit Agricole Securities (USA) Inc. and J.P. Morgan were the bookrunners.

The security and aerospace company is based in Bethesda, Md.

CMS Energy comes split-rated

CMS Energy sold $500 million of 30-year fixed-to-fixed rate junior subordinated notes (Baa2/BBB-/BB+) at par to yield 4.75%, according to an FWP filing.

The notes will reset June 1, 2030 to a rate of five-year Treasuries plus 411.6 bps.

Citigroup, Deutsche Bank Securities Inc., Goldman Sachs, Morgan Stanley and RBC Capital Markets, LLC were the bookrunners.

The utilities company is based in Jackson, Mich.

Banco Santander eyes primary

Banco Santander (Baa1/A-/A-) plans to price a dollar-denominated offering of senior notes, according to a market source.

Fixed income investor calls will be held on Monday and Tuesday.

BofA Securities, Citigroup, Deutsche, Morgan Stanley, Santander and Wells Fargo Securities LLC are the arrangers.

The banking services company is based in Madrid.

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