PepsiCo, Kinder Morgan, Baxter, MetLife among deluge of new issues; Leggett, MetLife tighten

By Aleesia Forni and Andrea Heisinger

New York, Aug. 8 - There were no signs of a slowdown in volume on Wednesday. Deals from PepsiCo, Inc., Kinder Morgan Energy Partners LP and Baxter International, Inc. were among those pricing.

The largest deal with the most tranches was priced by PepsiCo. The food and beverage company sold $2.5 billion of three-year notes, five-year notes and 30-year bonds.

Kinder Morgan was in the market with a $1.25 billion sale of notes due 2023 and 2042, with the total divided evenly between the two tranches.

Baxter sold an upsized $1 billion of notes due 2022 and 2042. The deal size was initially $750 million.

Diversified manufacturer Leggett & Platt Inc. sold $300 million of 10-year notes in its first bond deal in several years.

MetLife Inc. tapped the high-grade market for $750 million of 30-year bonds. The sale was upsized from a benchmark $500 million

There was a first-time bond offering from real estate investment trust Essex Portfolio LP, which sold $300 million of 10-year notes. The size was increased from $250 million.

A $150 million issue of 10-year notes came from Susquehanna Bancshares, Inc.

Winthrop Realty Trust gave the terms of its $75 million issue of 7.75% $25-par notes due 2022 priced in the preferred stock market.

There was somewhat poor demand at an auction of 10-year Treasury notes on the day, but that will likely not put a stop to deals coming out of the high-grade bond market, sources said.

"Nah, I don't think anyone was bothered much," said a source who worked on two of the day's trades. "I know we still have people looking at tomorrow."

High demand for bonds including a well oversubscribed book for PepsiCo will mean more companies jumping into the market while they can.

"I wouldn't say it's going to be as crazy as today, but we definitely have a couple who will look," a syndicate source said late in the day.

As of late Wednesday, the week had seen more than $21 billion of deals, already surpassing estimates of $15 billion to $20 billion.

For the second day in a row, the Markit CDX Series 18 North American Investment Grade index stood unchanged at a spread of 103 basis points on Wednesday.

The new issues from Leggett & Platt and MetLife tightened in secondary trading.

Pepsi's $2.5 billion deal

PepsiCo priced $2.5 billion of senior notes (Aa3/A-/A) in three parts, an informed source said.

There was about $4 billion of demand on the books for the deal, the source said.

A $900 million tranche of 0.7% three-year bonds priced at a spread of Treasuries plus 33 bps. The notes were sold at the tight end of guidance in the 35 bps area.

There was $1 billion of 1.25% five-year notes sold at 63 bps over Treasuries. The tranche priced at the low end of talk in the 65 bps area.

Finally, a $600 million tranche of 3.6% 30-year bonds priced at a spread of Treasuries plus 95 bps. The bonds were sold in line with talk in the 95 bps area.

Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and RBS Securities Inc. were the bookrunners.

Proceeds are being used for general corporate purposes including commercial paper repayment.

PepsiCo, the Purchase, N.Y.-based convenience food and beverage company, was last in the market with a $2.75 billion issue of notes in three tranches on Feb. 29.

Kinder Morgan's two tranches

Kinder Morgan Energy Partners sold $1.25 billion of senior notes (Baa2/BBB/BBB) evenly split into two tranches, an informed source said.

There was $625 million of 3.45% notes due 2023 sold at a spread of Treasuries plus 185 bps.

A second part was $625 million of 5% 30-year bonds priced at a spread of 230 bps over Treasuries.

The active bookrunners were Citigroup, RBS and Wells Fargo Securities LLC.

Proceeds are being used to pay a portion of the purchase price for the $6.22 billion acquisition of Tennessee Gas Pipeline Co. LLC and a 50% interest in El Paso Natural Gas Co. from Kinder Morgan, Inc.

Kinder Morgan Energy Partners was last in the market with a $1 billion deal of 3.95% 10-year notes priced at 200 bps over Treasuries on March 8.

The pipeline is based in Houston.

Baxter's upsized $1 billion

Baxter International sold an upsized $1 billion of senior notes (A3/A+/A) in two maturities, a market source said.

The size of the deal was increased from $750 million, the source said.

The $700 million of 2.4%10-year notes priced at Treasuries plus 80 bps.

There was also $300 million of 3.65% 30-year bonds sold at 95 bps over Treasuries.

Deutsche Bank Securities Inc., Goldman Sachs & Co., RBS and UBS Securities LLC were the bookrunners.

Proceeds are being used for general corporate purposes including capital expenditures associated with plans to expand capacity to support the longer-term growth of plasma-based treatments.

Baxter was last in the market with a $500 million issue of five-year notes on Dec. 14, 2011.

The medical products and health-care company is based in Deerfield, Ill.

MetLife's bonds

MetLife sold $750 million of 4.125% 30-year senior bonds (A3/A-/A-) to yield Treasuries plus 142 bps, a source close to the deal said.

One trader saw the deal tighten 9 bps in secondary trading near the end of the session to 133 bps bid, 132 bps offered.

The deal size was increased from $500 million, and the notes priced at the low end of talk in the 145 bps area.

The bookrunners were Barclays, Citigroup Global and UBS.

Proceeds are being used for general corporate purposes including the repayment of $250 million of floating-rate notes due Aug. 6, 2013 and $500 million of 5% senior notes due Nov. 24, 2013.

MetLife was last in the market with a $3 billion deal of senior notes in four parts on Aug. 3, 2010. A 5.875% 30-year bond from that offering sold at 195 bps over Treasuries.

The insurance and financial planning company is based in New York.

Essex sells $300 million

Essex Portfolio sold an upsized $300 million of 3.625%% 10-year senior notes (Baa2/BBB/) at a spread of 210 bps over Treasuries, a market source said.

The deal size was increased from $250 million.

The bookrunners were Citigroup, J.P. Morgan Securities LLC and Wells Fargo.

Proceeds are being used to refinance existing senior debt and for general corporate purposes including repayment of borrowings under an unsecured credit agreement.

The real estate investment trust for multi-family apartment complexes is based in Palo Alto, Calif.

Leggett & Platt's 10-year

Leggett & Platt sold $300 million of 3.4% 10-year senior notes (Baa1/BBB+/) to yield Treasuries plus 180 bps, a source close to the deal said.

The notes were seen trading at 175 bps bid, 173 bps offered near the day's close.

JPMorgan and Wells Fargo were the active bookrunners. The passive was U.S. Bancorp Investments Inc.

Proceeds are being used for general corporate purposes including to repay or refinance debt, fund possible future acquisitions and/or repurchase stock.

The diversified manufacturer is based in Carthage, Mo.

Susquehanna sells, will redeem

Susquehanna Bancshares sold $150 million of 5.375% 10-year senior notes at par to yield 5.375%, a market source said.

The notes (Baa3/BBB-/) were priced at a spread of Treasuries plus 372 bps.

JPMorgan was the bookrunner.

Proceeds and available cash will be used to redeem $125.01 million of 9.375% capital efficient notes due December 2057 from Susquehanna Capital I, which will use the redemption proceeds to redeem the same amount of its 9.375% capital securities, series I; to redeem $50.01 million of 11% junior subordinated deferrable interest debentures, series II, due March 2040 from Susquehanna Capital II, which will use the redemption proceeds to redeem the same amount of its 11% cumulative trust preferred securities, series II; to redeem $12 million of 9% subordinated notes due July 1, 2015 originally issued by Tower Bancorp, Inc., which Susquehanna acquired on Feb. 17; to redeem $9 million of 9% subordinated notes due July 1, 2014 originally issued by Tower Bancorp; and for general corporate purposes.

The financial holding company for retail and commercial banking and financial services is based in Lititz, Pa.

Winthrop's preferreds

Winthrop Realty Trust priced $75 million of 7.75% senior notes due 2022, according to an FWP filed with the Securities and Exchange Commission.

The deal came in line with talk and was upsized from $35 million. There is an $11.25 million over-allotment option.

The notes will be secured by a first-priority security interest in a promissory note issued by Winthrop's operating partnership, WRT Realty LP.

The bookrunners were Barclays, Stifel Nicolaus & Co. Inc. and Jefferies & Co. Inc.

Winthrop will loan the proceeds to its operating partnership in exchange for the promissory note. The operating partnership will then use the funds for future acquisitions and/or for general working capital purposes, including funding capital expenditures, tenant improvements and leasing commissions.

Winthrop is a Boston-based REIT.

Stephanie N. Rotondo contributed to this review

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