UBS brings $4.5 billion deal; CBS, Burlington price; Consumers Energy mixed; Burlington firms

By Aleesia Forni and Cristal Cody

Virginia Beach, Aug. 11 – UBS AG, Stamford Branch, CBS Corp., Burlington Northern Santa Fe LLC and American Water Capital Corp. were among the issuers kicking off the investment-grade bond market’s week.

In the day’s largest new issue, UBS priced $4.5 billion of notes in four parts, with both fixed-rate tranches coming tight of guidance.

CBS was also in Monday’s market, selling $1.75 billion of senior notes in five-, 10- and 30-year tranches.

Meanwhile, Burlington Northern priced a $1.5 billion two-part issue of senior debentures.

American Water sold a $500 million two-part issue of senior notes on Monday around 10 basis points to 20 bps tight of initial guidance, a source said.

Consumers Energy Co. also came to market with a two-part $500 million offering, selling first mortgage bonds in 10- and 50-year tranches.

Sources are expecting around $15 billion to $20 billion of new issuance this week as companies attempt to access the market prior to the late-August slowdown.

Investment-grade bond spreads opened tighter on Monday and continued to firm over the day, informed sources said.

The Markit CDX North American Investment Grade series 22 index narrowed 2 bps to a spread of 63 bps.

Burlington Northern’s two-part offering of debentures tightened in aftermarket trading, a trader said.

Consumers Energy’s 3.125% bonds due 2024 traded about 1 bp tighter, while the company’s tranche of 4.35% bonds due 2064 eased 2 bps in the secondary market, according to a trader.

American Water Capital’s 3.4% notes due 2025 tightened 4 bps on the offered side going out, a trader said.

The new offering from CBS priced late in the day and was not seen in aftermarket trading.

“Too early,” a trader said.

UBS brings $4.5 billion

UBS AG, Stamford Branch priced a $4.5 billion offering of notes (A2/A/A) on Monday in four parts, a market source said.

The bank sold $250 million of three-year floaters at Libor plus 38 bps and $1.25 billion of 1.375% notes due 2017 at Treasuries plus 60 bps.

There was also $500 million of five-year floaters priced at Libor plus 64 bps.

Finally, $2.5 billion of five-year notes sold with a spread of Treasuries plus 80 bps.

Both fixed-rate tranches sold at the tight end of talk.

UBS Securities LLC was the bookrunner.

The financial services company is based in Basel and Zurich, Switzerland.

CBS new issue

Also on Monday, CBS priced a $1.75 billion three-part offering of senior notes (Baa2/BBB/BBB) in five-, 10- and 30-year tranches, according to an informed source and a company release.

The company sold $600 million of 2.3% five-year notes at 99.696 to yield 2.365%, or Treasuries plus 75 bps.

A $600 million tranche of 3.7% notes due 2024 sold with a spread of Treasuries plus 130 bps.

Pricing was at 99.76 to yield 3.729%.

There was also $550 million of 4.9% senior notes due 2044 priced at 98.639 to yield 4.988%, or Treasuries plus 175 bps.

BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and RBS Securities Inc. were the joint bookrunners.

Proceeds will be used to purchase the company’s outstanding 8.875% senior notes due 2019, 7.875% debentures due 2023 and 7.875% senior debentures due 2030.

Any remaining proceeds will be used to repurchase, redeem or repay other outstanding debt, including commercial paper and some or all of the company’s remaining notes due 2019 and for general corporate purposes.

The deal is guaranteed by CBS Operations Inc.

CBS is a broadcasting company based in New York.

Burlington’s $1.5 billion

Burlington Northern Santa Fe was in the market with a $1.5 billion issue of senior debentures (A3/BBB+/) in 10- and 30-year tranches, according to a market source and an FWP filed with the Securities and Exchange Commission.

A $700 million tranche of 3.4% 10-year debentures was sold at 99.771 to yield 3.427%, or Treasuries plus 100 bps.

An $800 million tranche of 4.55% debentures due 2044 sold with a spread of Treasuries plus 135 bps.

Pricing was at 99.446 to yield 4.584%.

The notes sold tight of guidance.

Burlington Northern’s 3.4% debentures due 2024 were offered at 97 bps in the secondary market, a trader said.

The tranche of 4.55% debentures due 2034 were quoted tighter in late afternoon trading at 132 bps bid, 129 bps offered.

BofA Merrill Lynch, Citigroup Global Markets Inc. and Goldman Sachs & Co. were the joint bookrunners.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, repayment of outstanding debt and distributions.

The holding company for railroad transportation subsidiaries is based in Fort Worth.

American Water two-parter

American Water Capital sold a $500 million two-part issue of senior notes (Baa1/A-/) on Monday, according to an FWP filed with the SEC.

Both tranches priced tight of initial guidance.

The company sold $300 million of 3.4% notes due 2025 at 99.867 to yield 3.415%.

The notes priced with a spread of Treasuries plus 100 bps.

There was also a $200 million add-on to the company’s existing 4.3% notes due Dec. 1, 2042 priced at 99.589 to yield 4.325%, or Treasuries plus 110 bps.

The original $300 million issue priced at 142 bps over Treasuries on Dec. 12, 2012.

American Water Capital’s 3.4% notes due 2025 traded mostly unchanged at 100 bps bid, 96 bps offered, a trader said.

The tranche of 4.3% notes due 2042 was not seen in the secondary market.

The bookrunners were BofA Merrill Lynch, RBC Capital Markets LLC, RBS Securities and TD Securities.

The investor-owned water and wastewater utility company is based in Voorhees, N.J.

Consumers prices tight

Consumers Energy sold $500 million of first mortgage bonds on Monday in two tranches, according to a market source and an FWP filing with the SEC.

The company priced $250 million of 3.125% first mortgage bonds due 2024 at 99.898 to yield 3.137%, or Treasuries plus 72 bps.

There was also $250 million of 4.35% first mortgage bonds due 2064 priced at 99.137 to yield 4.393%. The notes sold with a spread of Treasuries plus 117 bps.

Both tranches sold at the tight end of talk.

Consumers Energy’s 3.125% bonds due 2024 tightened to 71 bps bid, 66 bps offered in secondary trading, a trader said.

The company’s 4.35% bonds due 2064 eased to 119 bps bid, 110 bps offered in the secondary market.

Barclays, Citigroup Global Markets, Scotiabank, RBC Capital Markets, Wells Fargo Securities LLC and SunTrust Robinson Humphrey Inc. were the joint bookrunners.

The company plans to use the proceeds from the offering for general corporate purposes.

Consumers Energy is an electric and gas utility based in Jackson, Miss.

Bank/brokerage CDS costs lower

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

Bank of America Corp.’s CDS costs ended 3 bps tighter at 72 bps bid, 75 bps offered. Citigroup Inc.’s CDS costs also decreased 2 bps to 69 bps bid, 72 bps offered. JPMorgan Chase & Co.’s CDS costs fell 3 bps to 56 bps bid, 61 bps offered. Wells Fargo & Co.’s CDS costs decreased 2 bps to 47 bps bid, 50 bps offered.

Merrill Lynch’s CDS costs closed 2 bps tighter at 75 bps bid, 79 bps offered. Morgan Stanley’s CDS costs ended 2 bps tighter at 79 bps bid, 82 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 85 bps bid, 90 bps offered.

Paul Deckelman contributed to this review.

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