Sunoco Logistics prices deal, supply sluggish; secondary tightens in active session; Dow gains

By Andrea Heisinger and Cristal Cody

New York, Feb. 9 - Sunoco Logistics Partners Operations LP and Inter-American Development Bank were the only entrants in the high-grade bond market on Tuesday.

The tone was slightly improved from a dismal Monday when no deals were priced due to lingering worries about the debt loads of some European countries.

With news that Greece could get a bailout, there was a slight bump in tone by the end of Tuesday, a market source said.

"It wasn't great, but better," he said. "It [the news] didn't really do much."

Sunoco Logistics sold $500 million, split evenly between 10-year notes and 30-year bonds. They each priced at the tight end of talk, a source said.

Ten-year bonds totaling $1.5 billion were also sold by IADB (Aaa/AAA/AAA), but full terms were not available at press time. They were priced off London syndicate desks by HSBC Securities, J.P. Morgan Securities and Morgan Stanley & Co. after the deal went overnight from Monday to allow Europe and Asia in on the books.

Secondary investment-grade trading was stronger on Tuesday, with one of the two new tranches that Sunoco Logistics Partners Operations priced on Tuesday seen firmer in the secondary, according to sources.

"Corp volume looks pretty decent," one trader said. But he added: 'I think the focus today was all E.U.,/Greece and weather."

Overall Trace volume rose about 24% from Monday to about $13.5 billion, a source reported.

The CDX Series 13 North American high-grade index tightened 4 bps to a mid bid-asked spread level of 102 bps, according to a market source.

Meanwhile Treasuries eased. The yield on the 10-year Treasury note weakened 8 bps to 3.64%, while the yield on the 30-year Treasury bond also eased 8 bps to 4.58%.

Elsewhere in secondary trading, Bank of America Corp.'s 7.625% notes moved out, while Dow Chemical Co.'s 8.55% notes were tighter, sources said.

Sunoco Logistics sells two tranches

Sunoco Logistics Partners Operations priced $500 million of senior unsecured notes (Baa2/BBB) by late afternoon in two tranches, an informed source said.

The $250 million of 5.5% 10-year notes priced at a spread of 190 bps over Treasuries.

A $250 million tranche of 6.85% 30-year bonds sold at Treasuries plus 230 bps.

Both tranches priced at the tight end of guidance. Price talk was in the 195 bps area for the 10-year notes and in the 235 bps area for the 30-year bonds, a source said.

Barclays Capital and Citigroup Global Markets were active bookrunners.

The debt is guaranteed by Sunoco Logistics Partners LP.

Proceeds are being used to repay $201.2 million remaining in a promissory note issued to Sunoco Partners LLC and $145 million outstanding under a $400 million revolving credit facility. The remainder will be used for general partnership purposes.

The oil pipeline and transportation company is based in Philadelphia.

New deals remain sparse

Issuance continued its sluggish pace on Tuesday as market conditions were stagnant and there was a lingering lack of interest among companies in borrowing money.

"We could see some [deals] tomorrow," a syndicate source at a large desk said.

After a week of strong issuance from good names, there has been a lack of excitement since Feb. 4 when Kraft Foods Inc. and Berkshire Hathaway Inc. came to market with huge deals.

A market source said that he "didn't think we're going to touch those" in size for the remainder of this week or "in the near future."

It's unclear when the market will be at high volume again, but it will not likely be until the tone recovers and "headlines stop being negative," the market source said.

Sunoco firms

Sunoco Logistics' new notes due 2020 were seen by one trader tightening to 185 bps in the secondary markets.

Sunoco priced the notes Tuesday at Treasuries plus 190 bps.

In a second tranche, the company also priced notes due 2040 at Treasuries plus 230 bps. The notes, though, were not seen moving from that level in trading, according to a source.

Bank of America widens

Elsewhere in investment-grade activity on Tuesday, Bank of America's 7.625% notes due 2019 were seen widening to 225 bps from 210 bps over Treasuries on Monday, according to a source.

Early Tuesday, Standard & Poor's said it revised its outlook on the Charlotte, N.C.-based bank to negative from stable based on uncertain government support.

Dow Chemical tighter

Midland, Mich.-based chemical and plastics manufacturer Dow's notes due 2019 firmed on Tuesday, one source said.

The 8.55% notes were seen at 232 bps from 235 bps the day before.

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