RBC, Ontario, Lorillard, Credit Agricole among high-grade deals; financials seen trading weaker

By Andrea Heisinger and Cristal Cody

New York, April 7 - Royal Bank of Canada, the Province of Ontario, Lorillard Tobacco Co., Credit Agricole SA, London branch, Entergy Mississippi, Inc. and Barclays Bank plc each priced notes in the investment-grade market on Wednesday, making it the busiest day of the week yet.

A split-rated deal was priced by Valmont Industries, Inc., but a source said most of the interest appeared to be on the high-yield side.

RBC was one of the first to price its $1.5 billion of five-year covered bonds after the sale went overnight. It was followed by a similar $2 billion deal of 10-year notes by Canadian province Ontario.

Lorillard Tobacco was originally in the market with 10-year notes but then added an additional tranche of 30-year bonds. The sale totaled $1 billion, with more in the 10-year tranche.

French bank Credit Agricole priced a $1.25 billion issue of five-year notes late in the afternoon through its London branch. They were offered under Rule 144A.

There was also a small deal from Barclays Bank, which priced $75 million of one-year floating-rate notes.

Utility company Entergy Mississippi priced $80 million, or 3.2 million, of 30-year first mortgage bonds.

Valmont Industries upsized its split-rated sale to $300 million in 10-year senior notes. The size was talked at $250 million.

Despite the larger number of deals hitting the high-grade market, there was no big change in the market.

Wednesday's secondary market found Lorillard Tobacco's new notes tightening immediately in trading, according to a source.

But the financial sector was seen trading weaker. Short paper from banks including Bank of America Corp. and Citigroup Inc. moved out, while General Electric Capital Corp.'s outstanding notes closed unchanged after tightening as much as 10 basis points on Monday, sources told Prospect News.

Meanwhile, the CDX Series 14 North American high-grade index moved out 3 bps to a mid bid-asked spread level of 87 bps, according to a source.

Also, overall Trace volume slipped 1% to just over $12 billion, according to a source.

Elsewhere on Wednesday, U.S. Treasuries strengthened for a second day, sources said.

For example, the yield on the 10-year benchmark Treasury note firmed to 3.86% from 3.95%. Also, the yield on the 30-year Treasury bond ended at 4.74%, down from 4.83%.

Lorillard Tobacco offers reallocated deal

Cigarette maker Lorillard Tobacco sold a benchmark $1 billion of senior unsecured notes (Baa2/BBB-) by mid-afternoon in two tranches that were reallocated from a single one, a market source said.

The $750 million of 6.875% 10-year notes priced at a spread of 300 bps over Treasuries.

An added tranche of $250 million in 8.125% 30-year notes sold at Treasuries plus 340 bps.

They are guaranteed by parent company Lorillard, Inc.

Active bookrunners were Barclays Capital and RBS Securities.

Proceeds are being added to a general fund by the Greensboro, N.C.-based company to be used for general corporate purposes.

Primary revived by new deals

It was the busiest day of the week for deals so far, with six pricing in the straight high-grade market after a couple of sleepy days. There was also a split-rated deal.

Three of the sales were from other countries, perhaps taking advantage of the lack of domestic names pricing bonds.

"It was a solid day," a syndicate source who worked on two of the day's deals said.

The Lorillard Tobacco sale was one touchstone, he said, with the lower-rated name adding a tranche of notes and pricing $1 billion. There may have been continued wariness attached to the continuing Treasury auctions, leading some potential issuers to hold back.

"I don't think there's much keeping people out, market-wise," a source said. He pointed to continued vacations from Easter and Passover, which have left desks thinly staffed.

Some of the day's deals were "random," as one market source said. Those included the one-year floater from Barclays and a sale of $25-face-value first mortgage bonds from Entergy Mississippi.

"They had a market, I guess," he said, adding that they were small deals that were likely sold to one or two investors.

There are no set deals on tap for Thursday, although sources said there are likely to be a couple of smaller ones in the works.

RBC prices two-day deal

Royal Bank of Canada priced $1.5 billion in 3.125% five-year covered bonds early in the day at 45.85 bps over Treasuries, a market source said.

The sale went overnight after being announced on Tuesday.

The notes (Aaa/AAA/AAA) were sold under Rule 144A.

Barclays Capital, Goldman, Sachs & Co. and RBC Capital Markets were the bookrunners.

The financial services provider is based in Montreal and Toronto.

Credit Agricole sells bank notes

Credit Agricole priced $1.25 billion of 3.5% five-year bank notes (Aa1/AA-/AA-) through its London branch at Treasuries plus 100 bps, an informed source said.

They were priced in line with talk in the 100 bps area, a source said, and sold under Rule 144A.

Credit Agricole Securities, Citigroup Global Markets and J.P. Morgan Securities were the bookrunners.

The retail bank is based in Paris.

Ontario sells $2 billion

Canada's province of Ontario priced $2 billion of 4.4% 10-year global notes (Aa1/AA-) to yield Treasuries plus 49.95 bps, a source said.

The deal was announced on Tuesday with a minimum size of $1 billion. Price talk was in the low 50 bps area over mid-swaps with the deal pricing in line with that at 52 bps over mid-swaps.

Bank of America Merrill Lynch, Deutsche Bank Securities, JPMorgan and UBS Investment Bank were tapped as bookrunners.

The issuer is based in Toronto.

Valmont upsizes split-rated deal

Nebraska-based Valmont Industries priced an upsized, split-rated $300 million issue of 10-year senior unsecured notes (Ba1/BBB-) to yield 6.625%, an informed source said.

The yield printed at the tight end of the 6.75% area price talk.

Credit Suisse and Bank of America Merrill Lynch were the joint bookrunners for the quick-to-market deal, which was upsized from $250 million.

Proceeds will be used to fund the proposed acquisition of Delta plc. If the acquisition is not completed, proceeds will be used for general corporate purposes, including debt repayment.

The issuer is an Omaha-based producer of fabricated metal products, pole and tower structures and mechanized irrigation systems.

Entergy Mississippi sells mortgage bonds

Entergy Mississippi quietly sold $80 million of 6.2% 30-year first mortgage bonds (Baa3/BBB) to yield 6.25%, an informed source said.

Citigroup Global Markets ran the books.

Proceeds are being used to redeem 7.25% debt due Dec. 1, 2032 at par. Pending that, they will be used to repay borrowings from the Entergy System money pool and invested in short-term securities.

The utility is based in New Orleans.

Barclays Bank prices floaters

Barclays Bank sold $75 million of one-year floating-rate notes (Aa3/AA-) at par to yield one-month Libor plus 32 bps, according to a 424B2 filing with the Securities and Exchange Commission.

Barclays Capital ran the books.

The financial services company is based in London.

Lorillard Tobacco tighter

Lorillard Tobacco's $1 billion of notes firmed in the secondary, a trader said.

The $750 million 6.875% notes due 2020, which priced at Treasuries plus 300 bps, were seen late in the day at 290 bps bid, 288 bps offered.

In addition, the $250 million 8.125% notes due 2040 that priced at Treasuries plus 340 bps were gaining strength at 332 bps bid, 329 bps offered, the trader said.

Financials move out

Meanwhile, banks saw a hot streak on their short paper at the start of the week, but things began to slow down on Tuesday and turned for the worse or came to a halt on Wednesday, according to sources.

For example, on Wednesday, Bank of America's 7.625% notes due 2019 widened 11 bps to 179 bps over Treasuries. The notes had traded 6 bps firmer at 171 bps on Monday.

Also on Wednesday, Charlotte, N.C.-based Bank of America's 6.5% notes due 2016 widened 3 bps to 112 bps over Treasuries after firming 6 bps to 109 bps on Monday, a source said.

Elsewhere in the financial sector, New York-based Citigroup's 8.5% notes due 2019 moved out 4 bps to 220 bps.

In Monday's trading, the nine-year notes had firmed 8 bps to 218 bps, according to a source.

Meanwhile, GE Capital's outstanding notes such as the 5.625% notes due 2018 were unchanged on the day after firming 10 bps on Monday to 105 bps over Treasuries. The eight-year notes were last seen trading unchanged at 105 bps, according to a source.

The Fairfield, Conn.-based company is the financing division of General Electric Corp.

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