Cardinal Health, Wyndham, Mitsubishi price; traders see low volume as new bonds tighten

By Andrea Heisinger

New York, Feb. 19 - There were three bond sales by investment-grade issuers on Tuesday to begin the short week.

Wyndham Worldwide Corp., Cardinal Health, Inc. and Ryder System, Inc. each jumped into the market following the three-day weekend in observance of President's Day.

Cardinal tapped the market for $1.3 billion to help pay for the purchase of AssuraMed, Inc.

Meanwhile, hospitality company Wyndham sold $850 million and is using part of the proceeds for the repurchase of two outstanding notes. The size of the trade was increased from $750 million.

Ryder sold $250 million of notes due 2019.

There was a $750 million sale of one-year floating-rate notes from Toyota Motor Credit Corp.

A sovereign trade came from European Investment Bank. The funding arm of the European Union sold $5 billion of three-year notes.

Two Japanese issuers were in the primary. Nippon Telegraph & Telephone Corp. sold $500 million of seven-year notes tighter than initial guidance.

The Bank of Tokyo-Mitsubishi UFJ Ltd. was also in the market with a $2.25 billion sale in four tranches, including maturities of 2016, 2018 and 2023. Terms of the offering were not available at press time.

Issuance is expected to continue on Wednesday as "more people get back in their chairs," one source said.

"We had good momentum today. I don't think any of us were expecting this many deals after a [long] weekend."

In the secondary side of the market, volume was "as to be expected for a day like today," one trader said at midday. He was referring to the light volume that's typical of a day following a long weekend.

"It's definitely not like a Wednesday in January," the trader said.

Trading volume was about $9.3 billion by the close, a secondary source said. Volume of investment-grade bond trading had been just over $7 billion on Friday, the source said.

"Most things are trading mixed," the trader said at midday, adding that traders focused on bonds from H.J. Heinz Co.

Last week it was announced that the ketchup and food company would be acquired by Warren Buffett's Berkshire Hathaway Inc. Over the weekend, news came out that there may have been insider trading in Heinz bonds.

Cardinal Health's three new bonds were 2 bps to 6 bps better in trading, while Wyndham's two tranches were 4 bps tighter to unchanged.

Two bonds from Heinz were among the day's most actively traded as of mid-afternoon, a source said. The company's 7.25%/6.75% notes due 2032 were seen at a spread of 364 bps over Treasuries. A 3.125%% note due 2021 was trading at 147 bps, which was more than 20 bps wider than the original spread of 125 from when the bonds were priced on Sept. 7, 2011. Heinz's 2% notes due 2016 were also active.

As for the new issues announced on Tuesday, the trader said that initial talk on the bonds would likely change, as would gray market trading quotes.

"They're likely to walk that talk in," he said. The Cardinal spreads on the Cardinal bonds ended up contracting 10 bps to 15 bps from initial pricing.

Elsewhere in trading, the cost of insuring bank and brokerage names declined as investment-grade credit default swaps were seen tightening across the board.

Cardinal funds merger

Cardinal Health priced $1.3 billion of senior notes (Baa2/A-/BBB+) in three maturities to help pay for an acquisition, a market source said.

A $400 million tranche of 1.7% five-year notes was priced at a spread of Treasuries plus 85 bps. Initial price guidance was in the 100 bps area, with the notes selling at the tight end of the 90 bps revised guidance.

There was $550 million of 3.2% 10-year notes sold at Treasuries plus 120 bps. Whispered guidance was in the 130 bps area and later revised to the 125 bps area.

Finally, there was $350 million of 4.6% 30-year bonds sold at a spread of 140 bps over Treasuries. Initial talk was in the 150 bps area and later revised downward to the 145 bps area.

Bookrunners were BofA Merrill Lynch, Deutsche Bank Securities Inc. and UBS Securities LLC.

Proceeds are being used, along with cash on hand, to fund a portion of the $2.07 billion purchase price of AssuraMed, Inc.

There is a mandatory call at 101 if the acquisition's not done by Oct. 31.

Cardinal Health was last in the U.S. bond market with a $500 million sale of notes in two tranches on May 16, 2012. That trade included a 1.9% five-year note sold at 120 basis points over Treasuries and a 3.2% 10-year note priced at 145 bps over Treasuries.

The healthcare services company is based in Dublin, Ohio.

Wyndham's upsized trade

Wyndham Worldwide priced an upsized $850 million of notes (Baa3/BBB-/BBB-) in two tranches, a market source told Prospect News.

The size was increased from $750 million.

A $450 million tranche of 2.5% five-year notes sold at a spread of Treasuries plus 165 bps. The notes were quoted slightly tighter in trading at 161 bps bid, 156 bps offered, and later at a bid of 160 bps.

The second part was $400 million of 3.9% 10-year notes priced at a spread of 190 bps over Treasuries. These bonds were seen trading flat at 190 bps bid, 186 bps offered.

Bookrunners were J.P. Morgan Securities LLC, BofA Merrill Lynch and Deutsche Bank Securities Inc. Additionally, the five-year note has RBS Securities Inc. as a bookrunner, and the 10-year note has Credit Suisse Securities (USA) LLC.

Proceeds are being used to repurchase any and all $250 million of 5.75% notes due 2018 and $250 million of outstanding 7.375% notes due 2020 in a tender offer that began on Feb. 6, the planned call of 9.875% senior notes due 2014, and the repayment, redemption, repurchase, defeasance or retirement of other debt including commercial paper and other outstanding debt.

Wyndham was last in the U.S. bond market with a $150 million reopening of 4.25% notes due 2022 on March 12, 2012.

The hospitality and lodging company is based in Bethesda, Md.

Ryder sells $250 million

Ryder System priced $250 million of 2.35% medium-term notes due 2019 (Baa1/BBB/A-) at a spread of Treasuries plus 150 bps, a market source said.

A trader quoted the bonds 1 bp better at a bid of 149 bps and offer of 145 bps. Another source later saw the bonds flat at 150 bps bid, 147 bps offered.

BNP Paribas Securities Corp., BofA Merrill Lynch, Mizuho Securities USA Inc. and RBC Capital Markets LLC were bookrunners.

Ryder was last in the U.S. bond market with a $350 million offering of 2.5% notes due 2018 priced on Aug. 15, 2012 at Treasuries plus 175 basis points.

The transportation and logistics company is based in Miami.

Nippon seven-years

Nippon Telegraph & Telephone sold $500 million of 2.15% seven-year notes (Aa2/AA/) to yield Treasuries plus 80 bps, an informed source said.

The notes priced tighter than initial guidance in the 90 bps area, the source said.

Bookrunners were BofA Merrill Lynch, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

The telecom and IT company is based in Tokyo.

Toyota's floaters

Toyota Motor Credit priced $750 million of one-year floating-rate medium-term notes, series B, (Aa3/AA-/) at par to yield Libor flat, according to an FWP with the Securities and Exchange Commission.

Agents for the sale were BofA Merrill Lynch, RBS Securities Inc., Loop Capital Markets LLC and Toyota Financial Services Securities USA Corp.

The funding arm of Toyota is based in Torrance, Calif.

EIB sells $5 billion

The European Investment Bank sold $5 billion of 0.625% three-year global notes (Aaa/AAA/AAA) to yield Treasuries plus 23.9 bps, an informed source said.

Bookrunners were Barclays, Deutsche Bank Securities Inc. and Goldman Sachs International.

The funding arm of the European Union is based in Kirchberg, Luxembourg.

Cardinal bonds tighten

The three maturities of bonds totaling $1.3 billion priced on Tuesday by Cardinal Health were quoted tighter in trading by secondary sources after the close.

One source said the notes due 2018 were 2 bps improved at 83 bps bid, 80 bps offered. The tranche sold at 85 bps.

A tranche of 10-year notes also declined in trading by about 5 bps, seen at 115 bps bid, 113 bps offered by one trader and then at 114 bps bid, 113 bps offered by another a short time later.

The third tranche of bonds due 2043 was seen 6 bps tighter at 134 bps bid, 132 bps offered and later by a second trader at a bid of 135 bps.

CDS costs tighten

A trader reported on Tuesday that credit default swaps for banks and brokerages were down from Friday.

Bank of America's CDS costs dropped 1 bp to 114 bps bid, 118 bps offered. Citigroup's costs declined 3 bps to 106 bps bid, 110 bps offered. JPMorgan Chase & Co. and Wells Fargo & Co.'s costs each dropped by 2 bps to 78 bps bid, 82 bps offered and 68 bps bid, 72 bps offered respectively.

Merrill Lynch's CDS costs were down 3 bps to 105 bps bid, 115 bps offered while Morgan Stanley's costs also tightened 3 bps to 140 bps bid, 144 bps offered. Goldman Sachs' costs dipped 4 bps to 130 bps bid, 134 bps offered.

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