Svensk brings $1 billion; McDonald's sells $900 million; bank, broker CDS costs mostly higher

By Sheri Kasprzak and Aleesia Forni

New York, May 23 - Light primary action in the investment-grade market was led by two fairly large offerings from AB Svensk Exportkredit and McDonald's Corp.

In the broader market Wednesday, Ford Motor Co. was in the spotlight thanks to a ratings upgrade from Moody's Investors Service.

The automobile manufacturer saw its senior unsecured debt lifted to investment grade, said Jody Lurie, corporate credit analyst with Janney Montgomery Scott LLC. The rating was upgraded to Baa3 from Ba2.

"The company has not seen a Baa3 rating since mid-2005, and the ratings upgrade is yet another milestone in the Ford story, affirming the story of improving auto industry trends in general," Lurie wrote in a report released Wednesday.

"While not unexpected, the Moody's upgrade is significant in that Ford's crossover from high yield now opens doors to institutional investors that otherwise could not hold Ford debt. Considering the $100 billion in debt at a total company level, this change translates to new opportunities in the investor community, depending on the timing of a potential S&P upgrade.

"Ford's auto business continues to show fundamental improvements, as evidenced by a reduced debt load and improved cash reserves. Although profitability at the North American segment remains robust, we see the lagging European economy and softer performance at the finance sublevel as two main risks."

Ford's senior unsecured debt is rated BBB- by Fitch Ratings and BB+ by Standard & Poor's.

Investment-grade bank and broker credit default swaps were mostly higher on the day, reflecting less investor confidence in the financial sector, according to a market source.

Banks were unchanged to higher. Bank of America's CDS costs widened 7 basis points to 292 bps bid, 297 bps offered. Citi's CDS costs were unchanged at 255 bps bid, 260 bps offered. JPMorgan CDS costs were 8 bps higher at 139 bps bid, 144 bps offered.

Additionally, Merrill Lynch CDS costs traded 10 bps higher at 320 bps bid, 335 bps offered. Morgan Stanley CDS costs traded 3 bps tighter at 428 bps bid, 438 bps offered. Goldman Sachs' CDS costs also tightened 3 bps to 328 bps bid, 333 bps offered.

Treasuries ended Wednesday stronger. The benchmark 10-year note yield fell 4 bps to 1.73%. The yield on the 30-year bond ended 5 bps lower at 2.81%.

Svensk brings $1 billion

Leading Wednesday's primary action, AB Svensk Exportkredit came to market with $1 billion of notes, said a term sheet.

The 1.75% notes (Aa1/AA+/) are due May 30, 2017 and were priced at a spread of Treasuries plus 108.9 bps. The notes priced at 99.653 to yield 1.823%.

The Securities and Exchange Commission-registered notes were sold through joint lead managers HSBC Securities (USA) Inc., J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Nomura International Inc.

The notes feature an optional redemption after the occurrence of certain tax events at par plus accrued interest.

Proceeds will be used for working capital.

Based in Stockholm, Svensk is the lender to Sweden's export industry.

McDonald's sells $900 million

Elsewhere during the session, McDonald's Corp. priced $900 million of medium-term notes in two tranches, according to term sheets.

The offering included $500 million of three-year notes and $400 million of seven-year notes.

The three-year notes are due May 29, 2015, bear interest at 0.75% and priced at a spread of Treasuries plus 45 bps. The notes were priced at 99.725 to yield 0.843%.

The seven-year notes are due May 29, 2019, bear interest at 1.875% and priced at a spread of Treasuries plus 88 bps. The notes priced at 99.045 to yield 2.022%.

The SEC-registered notes (A2/A/A) were sold through joint bookrunners Goldman Sachs & Co., JPMorgan, Bank of America Merrill Lynch, Morgan Stanley & Co. LLC and Wells Fargo Securities LLC.

Proceeds will be used for working capital purposes.

The fast-food chain is based in Oak Brook, Ill.

Manitoba prices

The Province of Manitoba (Aa1/AA/DBRS: A) sold $600 million of 1.75% seven-year global debentures at a spread of mid-swaps plus 31 bps, or Treasuries plus 62.95 bps, on Wednesday, according to an FWP filing with the SEC.

The debentures (Aa1/AA) are due May 30, 2019 and priced at 99.889 to yield 1.767%.

The offering was upsized from $500 million.

CIBC World Markets Inc., HSBC, National Bank Financial Inc. and RBC Capital Markets Corp. were the lead managers. The co-managers were BMO Capital Markets Corp., Casgrain & Co. Ltd., Scotia Capital (USA) Inc. and TD Securities (USA) LLC.

Proceeds will be used for general government purposes.

The issuer's capital is Winnipeg.

Caterpillar widens

In the secondary market, Caterpillar Financial Services Corp.'s new notes due 2017 traded 3 bps wider on the day and were seen at 91 bps bid, 87 bps on Wednesday.

Additionally, the notes due 2022 traded 5 bps wider at 115 bps bid, 112 bps offered.

The Nashville-based funding arm of heavy equipment maker Caterpillar Inc. sold a $500 million tranche of 1.625% five-year notes at a spread of 90 bps over Treasuries.

There was also a $500 million tranche of 2.85% 10-year paper sold with a spread of 110 bps over Treasuries.

Covidien notes

Also in the recent issuances, the notes due 2015 from Covidien International Finance SA traded flat on the day, closing the session at 96 bid, 94 offered.

The notes due 2022 traded 5 bps wider at 153 bid, 150 bps offered midday Wednesday before tightening to 150 bps bid, 145 bps offered at close.

Covidien sold $1.25 billion of senior notes (Baa1/A/A) in two parts on Tuesday.

The $600 million of 1.35% three-year notes were priced with a spread of Treasuries plus 95 bps.

A second part was $650 million of 3.2% 10-year notes sold with a spread of Treasuries plus 145 bps.

The health-care products company is based in Luxembourg.

Scotiabank notes widen

In other trading, Bank of Nova Scotia's 2.55% notes due 2017 (Aa1/AA-) saw 110 bps at Wednesday's close, up 10 bps from Tuesday's session.

Scotiabank sold $1.25 billion of the notes (Aa1/AA-/) on Jan. 5 at a spread of 172 bps plus Treasuries.

The bank is based in Halifax, N.S.

RBC trades up

Royal Bank of Canada's notes due 2014 traded 1 bps wider on Wednesday at 76 bps bid.

The bank sold $1.25 billion of 1.45% senior notes in October at a spread of Treasuries plus 105 bps.

The financial services company is based in Toronto.

Bank of Montreal widens

Bank of Montreal saw its 2½% notes due 2017 up 8 bps from Tuesday's close at 110 bps on Wednesday.

The bank priced $1.5 billion of the notes at a spread of 170 bps on Jan. 6.

Cristal Cody contributed to this report

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