Tone improvement lures Rio Tinto, BB&T, Eaton Vance to primary market; Rio Tinto notes tighten

By Aleesia Forni and Andrea Heisinger

New York, June 14 - A drop in the 10-year Treasury yield overnight led three issuers to price the week's largest offerings on Friday.

A $3 billion trade in four parts from Rio Tinto Finance (USA) plc was by far the biggest sale of the week. The size was increased from an initial $2 billion, and a fifth tranche of five-year floating-rate notes was dropped, with more reallocated to the fixed-rate tranche with the same maturity.

The sale saw a new issue concession of 25 basis points to 30 bps, an informed source said. All of the tranches priced at the tight end of revised guidance.

"We didn't see this one coming - total surprise," the source added.

Elsewhere in the primary, BB&T Corp. sold $1 billion of five-year notes in two parts - one with a fixed rate, the other floating.

Investment management company Eaton Vance Corp. priced $325 million of 10-year notes. The size of the sale was increased from $300 million.

There was an 11 bps drop in the yield overnight, which sources said led some issuers that had been eyeing the market to get a "go" call.

As of Thursday, the week had only seen about $3.7 billion as of Thursday. That was bumped to just above $8 billion with Friday's sales.

The week was expected to see between $10 billion and $15 billion of supply, which is the same amount expected for the coming week, sources said.

"Probably heavy on industrials again," one syndicate source remarked.

In secondary action, Rio Tinto's fixed-rate tranches were met with strong demand, as both tranches traded tighter near the end of the session, one market source said.

The Markit CDX North American Investment Grade index tightened 4 bps to 83 bps on Friday.

Rio Tinto's tranches

Rio Tinto Finance (USA) priced an upsized $3 billion of senior notes (A3/A-/) in four parts, a market source said.

The size was increased from $2 billion. A tranche of five-year floating-rate notes was dropped, and the size of the fixed-rate notes due 2018 increased. This was due to demand from investors, a source said.

The books saw "just over $7 billion. We'll say $7.25 [billion]" of demand, the source said.

A $250 million tranche of two-year floating-rate notes sold at par to yield Libor plus 55 bps.

There was also $500 million of three-year floaters priced at par to yield Libor plus 84 bps.

The third part was $1 billion of 1.375% three-year bonds sold at a spread of Treasuries plus 100 bps.

Finally, there was $1.25 billion of 2.25% notes due 2018 sold at a spread of Treasuries plus 140 bps.

In the secondary market, a trader quoted the three-year fixed-rate notes 4 bps tighter at 96 bps bid, 93 bps bid.

The fixed-rate five-year notes were quoted 1 bp tighter at 139 bps bid.

The bookrunners were Morgan Stanley & Co. LLC, BNP Paribas Securities Corp. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes.

There is a guarantee on the notes by Rio Tinto plc and Rio Tinto Ltd.

Rio Tinto last tapped the U.S. bond market in a $3 billion trade in three tranches on Aug. 16, 2012. That offering included a 1.625% five-year note priced at 93 bps over Treasuries.

The metals and mining company is based in Melbourne, Australia, and London.

BB&T sells $1 billion

BB&T tapped the market for $1 billion of five-year notes (A2/A-/A+) in two tranches, according to FWP filings with the Securities and Exchange Commission.

A $400 million tranche of five-year floating-rate notes sold at par to yield Libor plus 86 bps.

There was $600 million of 2.05% five-year notes priced at a spread of Treasuries plus 105 bps.

The bookrunners were BB&T Capital Markets LLC, Deutsche Bank Securities Inc. and Goldman Sachs & Co.

Proceeds are being used for general corporate purposes, including the acquisition of companies, repurchase of outstanding common stock shares, repayment of maturing obligations and refinancing outstanding debt and extending credit to, or funding investments in, subsidiaries.

BB&T was last in the U.S. bond market with a $500 million offering of 1.45% five-year notes priced at 85 bps over Treasuries on Nov. 14, 2012.

The bank and financial services company is based in Winston-Salem, N.C.

Eaton Vance's 10-year issue

Eaton Vance priced a slightly upsized $325 million of 3.625% 10-year notes (A3/A-/) during the day's session to yield Treasuries plus 155 bps, a market source said.

The size was increased from $300 million.

BofA Merrill Lynch and Morgan Stanley were the active bookrunners. Passive was Citigroup Global Markets Inc.

Proceeds are being used to fund the purchase price of notes tendered for in a tender offer, including payment of accrued interest and any early tender premiums.

Boston-based investment management firm Eaton Vance was last in the U.S. bond market with a $500 million trade of 6.5% 10-year notes sold at 195 bps over Treasuries on Sept. 27, 2007.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.