American Airlines prices as market quiets; spreads flat; Sysco a bit better; Arch Capital flat

By Cristal Cody and Aleesia Forni

Virginia Beach, Dec. 13 - Activity was mostly muted in the high-grade bond space on Friday, although American Airlines Inc. did come to market with an offering of pass-through certificates during the session.

The company sold $256,018,000 of 6% pass-through certificates, series 2013-2C, due 2017 at par on Friday, according to a syndicate source.

Supply closed the week at roughly $10.2 billion, falling short of estimates of a $20 billion week.

The primary is expected to wind down in the week ahead, with the possibility of "maybe a couple" new issues, a market source said.

"FOMC will definitely be the focus next week," the source added on Friday.

The Federal Open Market Committee will meet Tuesday and Wednesday of next week, and some expect the Federal Reserve to begin tapering its bond-buying program this month.

"We expect the Fed to begin reducing its asset purchases at its next policy meeting in December 2013 and for the Fed to maintain some form of asset purchases well into 2014," according to a report from Standard & Poor's.

Investment-grade bonds traded mostly unchanged on Friday, according to market sources.

The Markit CDX North American Investment Grade series 21 index ended flat at a spread of 70 basis points.

"Volume was almost $14 billion - for a Friday that's pretty good," a market source said. "Spreads are not a lot tighter."

Sysco Corp.'s bonds, which had moved out at the start of the week on the company's announcement it will acquire US Foods, Inc. for about $8.2 billion in cash, stock and debt, improved but saw little activity in Friday's session, a trader said.

Arch Capital Group (U.S.) Inc.'s 5.144% senior notes due Nov. 1, 2043 priced earlier in the week headed out flat on the day and about 4 bps better than issuance, according to a trader.

American Airlines pass-throughs

American Airlines priced a $256,018,000 offering of 6% pass-through certificates, series 2013-2C, (/B+/B+) at par on Friday, according to a syndicate source.

Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. were the physical bookrunners for the Rule 144A deal.

Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC were the passive bookrunners.

The notes, which are secured with aircraft, come with a three-year average life and a final maturity of Jan. 15, 2017.

The Fort Worth-based air carrier plans to use the proceeds for general corporate purposes.

Sysco slightly better

A few small blocks of Sysco's 2.6% notes due 2022 (A1/A/) traded slightly better at 85.5 bps from where the issue was seen 25 bps wider on Monday at 90 bps bid, 80 bps offered, according to traders.

"Looks like some trades going through at 81½ [bps] and 89 [bps]," one trader said.

The Houston-based food service marketing and distribution company sold $450 million of the notes on June 6, 2012 with a spread of Treasuries plus 110 bps.

Arch Capital flat

Arch Capital's 5.144% notes due 2043 traded flat at 126 bps bid on Friday in thin activity, according to a trader.

The bonds went out on Tuesday at 126 bps bid, 124 bps offered in the aftermarket after the company sold $500 million of the notes (A3/A- /A-) with a spread of Treasuries plus 130 bps.

Arch Capital Group is a Hamilton, Bermuda-based reinsurance company.

Bank/brokerage CDS costs lower

Investment-grade bank and brokerage CDS prices were lower on Friday, according to a market source.

Bank of America Corp.'s CDS costs firmed 2 bps to 80 bps bid, 84 bps offered. Citigroup Inc.'s CDS costs declined 2 bps to 74 bps bid, 78 bps offered. JPMorgan Chase & Co.'s CDS costs tightened 2 bps to 70 bps bid, 73 bps offered. Wells Fargo & Co.'s CDS costs were unchanged at 43 bps bid, 47 bps offered.

Merrill Lynch's CDS costs firmed 2 bps to 82 bps bid, 89 bps offered. Morgan Stanley's CDS costs tightened 1 bp to 95 bps bid, 99 bps offered. Goldman Sachs Group, Inc.'s CDS costs were flat at 98 bps bid, 102 bps offered.

Paul Deckelman and Paul A. Harris contributed to this review.

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