Alcoa, Westpac, Kimberly-Clark, ComEd sell bonds; new debt stronger in secondary; volume light

By Andrea Heisinger and Cristal Cody

New York, July 26 - Kimberly-Clark Corp., Westpac Banking Corp., Alcoa Inc. and Commonwealth Edison Co. each priced bonds on an upbeat Monday.

Dallas-based Kimberly-Clark was the first to price its bonds in the early afternoon. The company sold $250 million of 10-year notes.

The $500 million deal of 10-year mortgage bonds from Commonwealth Edison priced by mid-afternoon. It was also priced at the size at which it was announced in a 424B2 filing with the Securities and Exchange Commission.

New York City-based Alcoa priced a benchmark $1 billion deal of 10-year notes.

All three of the non-financial deals came from companies that haven't sold bonds since 2008.

Westpac was the last to price its $3 billion deal in two tranches. The deal was made up of $1 billion of three-year notes and $2 billion of five-year notes.

Bank of America Corp. priced a deal of InterNotes in two tranches that totaled $95.725 million. The notes have six-year and nine-year maturities.

The new investment-grade debt from Alcoa, Commonwealth Edison and Kimberly-Clark was all tighter in secondary trading though the market was quiet, sources said.

"Spreads in general were good overall today in corporates," a source said. "It was just quiet. Volume was a little light."

The CDX Series 14 North American investment-grade index firmed 3 bps to a spread of 103 bps, according to a source.

Overall investment-grade Trace volume rose 23% to about $9.5 billion, according to a source.

Treasury prices fell early in the day but recovered late Monday, keeping yields nearly unchanged from Friday.

"Treasuries ended off their lows today, and I really saw no reason why it ticked up a little bit. Stocks were up," one trader said.

The yield on the 10-year note ended the day unchanged from Friday's yield of 2.99%.

The yield on the 30-year bond also ended unchanged at 4.02%.

The Treasury Department plans to sell $104 billion of two-, five- and seven-year debt, starting with the sale of $38 billion of two-year notes on Tuesday.

Alcoa's $1 billion deal

Aluminum giant Alcoa sold a benchmark $1 billion of 6.15% 10-year senior unsecured notes (Baa3/BBB-/BBB-) at 318 bps over Treasuries, a source who worked on the sale said.

The notes priced at the tight end of guidance in the 325 bps area, a source said, and there was about $5 billion of demand on the books.

The bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets and Deutsche Bank Securities.

Proceeds are being used to fund the purchase of 2011, 2012 and 2013 notes tendered and accepted for purchase in offers, to repay certain debt and for general corporate purposes.

Alcoa last priced senior notes on July 10, 2008, when it did a $1.5 billion deal in two tranches. The 10-year notes from that issue priced at 300 bps over Treasuries, which is comparable to the new notes.

The aluminum production and management company is based in New York City.

Demand, low yields remain

Issuance was anything but light to start the week, with more than $5.7 billion of new bonds priced for the day. Demand for high-grade paper is still there, with deals like the bottom-tier investment-grade bonds from Alcoa still five times oversubscribed.

The market's tone has been stable for a couple of weeks, which has helped clear a backlog.

"It's made it a little busier [during earnings]," a syndicate source said.

Bad headlines had kept some issuers out of the market lately, but others have come back to take advantage of cheaper rates after earnings announcements.

"We've got more in the pipeline coming up," the source said.

Another market source said that there "could be a couple of bigger things" in the next couple of days.

Unlike in previous weeks, none of Monday's deals was upsized, but that wasn't due to lack of demand.

"Most of them just knew how much they wanted to get done," a source who worked on one of the day's deals said.

Westpac sells $3 billion

Westpac Banking priced $3 billion of senior unsecured notes (Aa1/AA/AA) late in the afternoon in two tranches, an informed source said.

A $1 billion tranche of 2.1% three-year notes sold at a spread of Treasuries plus 117 bps.

The second $2 billion tranche of 3% five-year notes priced at Treasuries plus 137 bps.

HSBC Securities, J.P. Morgan Securities and Morgan Stanley & Co. Inc. were bookrunners.

Proceeds are being used for general corporate purposes.

The bank sold $3 billion of notes on Dec. 7, 2009, which was its last sale. It included three-year floating-rate notes and three-year fixed, both of which were backed by the Australian government's guarantee.

The three-year notes priced cheaper at 68.7 bps over Treasuries.

The financial services company is based in Sydney, Australia.

Kimberly-Clark two tranches

Kimberly-Clark priced $250 million of 3.625% 10-year senior unsecured notes (A2/A/A) early in the day at 65 bps over Treasuries, a source away from the deal said.

The notes priced at the tight end of talk in the 70 bps area.

The bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities and UBS Investment Bank.

Proceeds are being used for general corporate purposes.

Kimberly-Clark last priced notes in a $500 million sale of 10-years on Oct. 30, 2008. These priced at a substantially steeper spread of 362.5 bps over Treasuries, which was in line with guidance.

The consumer products company is based in Dallas.

ComEd prices mortgage bonds

Commonwealth Edison Co. priced $500 million of 4% 10-year first mortgage bonds (Baa1/A-/BBB+) series 109 to yield Treasuries plus 100 bps, according to an FWP filing with the Securities and Exchange Commission.

The bookrunners were Bank of America Merrill Lynch, Deutsche Bank Securities, Loop Capital Markets, Scotia Capital and U.S. Bancorp Securities.

Proceeds will be used to refinance $212 million of 4.74% first-mortgage bonds due on Aug. 15, to contribute $193 million to an Exelon-sponsored pension plan and for general corporate purposes. Pending the use for general corporate purposes, the company may use proceeds to pay down a portion of commercial paper.

The electric subsidiary of Exelon Corp. is based in Chicago.

BofA sells InterNotes

Bank of America priced $95.725 million of senior unsecured InterNotes in two tranches, according to a 424B3 filing with the SEC.

The $55.279 million of 4% six-year notes priced at par to yield 4%.

A $40.446 million tranche of 4.85% nine-year notes sold at par to yield 4.85%.

Joint lead managers were Bank of America Merrill Lynch and InCapital LLC.

The financial services company is based in Charlotte, N.C.

Alcoa firms in secondary

Alcoa's $1 billion of 6.15% notes due 2020 that the company priced on Monday firmed in secondary trading.

The notes priced to yield Treasuries plus 318 bps and were seen in the gray market trading at 305 bps bid, 298 bps offered, a trader said.

Later in the day, the notes firmed in the secondary.

"They were last offered at 301. Right before that they were offered at 303," the trader said. "I had heard they were going a little tighter."

Commonwealth Edison tighter

Commonwealth Edison's new offering also tightened in the secondary. The company sold $500 million of 4% mortgage bonds due 2020 to yield Treasuries plus 100 bps.

"They were offered at 90 and I saw a 92 bid earlier," a source said.

Kimberly-Clark stronger

Kimberly-Clark's new investment-grade debt was stronger in secondary trading.

The company priced $250 million of 3.625% due 2020 at Treasuries plus 65 bps.

The notes were quoted trading early afternoon at 64 bps bid, 57 bps offered and were seen tightening further near the market close.

"Looks like a last quote at 60, 58," a trader said late afternoon.

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