Dow Chemical, Broadcom sell debt; large volume ahead; Jefferies widens as No. 1 trading name

By Andrea Heisinger and Cristal Cody

New York, Nov. 4 - Broadcom Corp. and Dow Chemical Co. sold debt on Friday following in the footsteps of several successful issues the previous day.

Semiconductor company Broadcom sold $500 million of seven-year notes by mid-afternoon.

It was followed by Dow Chemical with a $2 billion sale of notes due 2021 and 2041. Both notes priced at the tight end of guidance.

The coming week could have several busy days as volume is expected to jump as most companies will be out of earnings blackout and eager to sell bonds to meet financing needs.

One source said the rough estimate is between $25 billion and $30 billion of new paper in the coming week.

"Of course that could change, but it should be busy," the source said.

Since late October, syndicate desks had tagged Nov. 7 as the date that the market could start to see heavy volume again following third-quarter earnings announcements.

In the secondary market, Jefferies Group, Inc. was the "No. 1 trading name of the day for the second consecutive day," a bond source said on Friday. "It's odd because they're not that big on debt in the scheme of things - $5.6 billion of debt outstanding - so seeing 10% of their flow trade in one day is pretty impressive."

The source saw $545 million of the New York-based investment bank's bonds trading about 21 basis points wider on Friday.

In the telecom sector, distressed name Sprint Nextel Corp. was active, with the company's short-dated bonds up and the longer-dated debt down in trading on Friday.

"At least the company will have money to fund the maturity to at least 2012," one trader reasoned.

Sprint has total debt outstanding as of Sept. 30 of about $18.5 billion.

In other investment-grade trading, Broadcom's new notes firmed about 3 bps and Cigna Corp.'s new bonds stayed wrapped around the issue price.

Xstrata Finance (Canada) Ltd.'s new 10-year and 30-year bonds sold the previous day traded 6 bps to 7 bps better on Friday.

Dow Chemical's 10-year and 30-year bonds launched late in the afternoon, but were not immediately seen in trading.

"There's not a lot of 30-year debt out there in the markets now with the Fed sopping up the Treasury issuance. There's definitely a strong demand for long duration assets," a source said.

Overall trading volume dropped more than 10% to less than $9.5 billion on Friday.

"This morning there was a little bit of activity, then things died out through the rest of the day," a trader said.

Corporate bonds ended the day overall weaker. The Markit CDX Series 17 North American high-grade index eased 2 bps to a spread of 123 bps.

Treasuries rose on renewed European debt concerns. The benchmark 10-year note yield fell to 2.03% from 2.07%. The 30-year bond yield dropped 3 bps to 3.09%.

Dow oversubscribed

Dow Chemical sold $2 billion of notes (Baa3/BBB/BBB) in two maturities, an informed source said.

There was roughly $7.5 billion on the books for the deal, they said.

The $1.25 billion of 4.125% 10-year notes were priced at a spread of Treasuries plus 215 bps. The notes priced at the tight end of guidance in the 220 bps area, plus or minus 5 bps.

There was also a $750 million tranche of 5.25% 30-year bonds sold at 220 bps over Treasuries. It was sold at the tight end of guidance in the range of 220 to 225 bps.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc., Mizuho Securities USA Inc. and Morgan Stanley & Co. LLC.

Proceeds are being used to repay or refinance debt or other obligations and for general corporate purposes.

The specialty chemical company is based in Midland, Mich.

Broadcom sells $500 million

Broadcom priced $500 million of 2.7% seven-year senior notes on Friday to yield Treasuries plus 130 basis points, a market source said.

The notes (A2/A-) were sold at 99.609 to yield 2.762%. They are callable at a make-whole amount of Treasuries plus 20 bps and feature a change-of-control put at 101.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were bookrunners.

Proceeds will be used to pay a portion of the $3.7 billion acquisition consideration for NetLogic Microsystems, Inc. and for general corporate purposes.

There is a mandatory redemption if the NetLogic deal is not done on or before Aug. 31, 2012.

Broadcom last priced debt in a $700 million sale of paper with three-and-five-year maturities on Oct. 27, 2010.

In secondary trading, the 2.7% notes due 2018 firmed 3 bps to 127 bps bid, 122 bps offered, a trader said.

The company makes semiconductors for wired and wireless communication and is based in Irvine, Calif.

Cigna gives terms

Cigna gave terms for its $2.1 billion of senior notes (Baa2/BBB/BBB) sold in three parts, according to an FWP with the Securities and Exchange Commission.

The $600 million tranche of 2.75% five-year notes was priced at a spread of Treasuries plus 185 bps

. There was also a $750 million tranche of 4% 10-year notes sold at 205 bps over Treasuries.

Finally, a $750 million tranche of 5.375% 30-year bonds priced at Treasuries plus 230 bps.

Bank of America Merrill Lynch, HSBC Securities (USA) Inc., Morgan Stanley & Co. LLC and UBS Securities LLC were bookrunners.

Proceeds will be used to pay a portion of the $3.8 billion purchase price for the HealthSpring Inc. acquisition, or in the case of the 30-year bonds, if the acquisition is not completed, for general corporate purposes.

There is a mandatory redemption at 101 on the five-and-10-year notes if the acquisition is not done by Aug. 24, 2012.

The notes also feature a change-of-control put at 101 if the company's ratings drop below investment grade.

Cigna's notes traded flat on Friday. A trader saw the notes due 2021 at 205 bps bid, 203 bps offered.

The long bonds also were wrapped around issue price at 230 bps bid, 227 bps offered.

The health services company is based in Bloomfield, Conn.

Becton, Dickinson terms

Becton, Dickinson & Co. gave terms for its $1.5 billion of notes (A2/A+) sold in two maturities, a syndicate source said.

The $500 million of 1.75% five-year paper priced a spread of 85 bps over Treasuries.

A second tranche was $1 billion of 3.125% 10-year notes sold at Treasuries plus 110 bps.

Active bookrunners were Goldman Sachs & Co. and Morgan Stanley & Co. LLC. Passive was J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes including funding for working capital, capital expenditures, repurchase of capital stock and acquisitions.

Becton, Dickinson last priced $1 billion of notes in two tranches on Nov. 8, 2010. The 3.25% 10-year notes from that deal were sold at 70 bps over Treasuries.

The medical technology and supply company is based in Franklin Lakes, N.J.

Jefferies widens

Jefferies' bonds stayed at the top of trading activity on Friday. The 6.875% senior notes due 2021 widened about 21 basis points on the day.

"The bigger move was Wednesday into Thursday when there was a 120-basis point widening, so trade is slowing slightly," the source said.

The market is speculating Jefferies' exposure to European debt that bankrupted MF Holdings and Jefferies issued a statement denying major exposure and released details of its European debt holdings on Friday.

Jefferies was the lead manager on now bankrupt MF Global Holdings Ltd.'s $325 million bond sale of 6.25% five-year senior notes on Aug. 3.

Jefferies Group's stock recovered some on Friday edging up .5% to $12.07 on the New York Stock Exchange.

Jefferies in a New York City-based securities and investment bank.

Sprint mixed in trading

Sprint Nextel's distressed bonds were mixed in trading on Friday after the company announced a deal and Standard & Poor's downgraded it to B+ from BB-.

"The front end's up about half a point," a trader said.

Sprint's 8.375% notes due 2012 rose to 101.25 bid, 101.75 offered Friday afternoon.

The issuer's 6.875% notes due 2013 also were up half a point to 99.50 bid, 100.00 offered, the trader said.

Sprint's longer-dated paper traded down about half a point on the day.

The 6.9% notes due 2019 fell ¾ of a point to 82.75 bid, 83.75 offered.

Another bond source saw the 6.9% notes due 2019 down 2 points to 82.00 in a trade.

"The quiet day is sort of tampering it down a bit, the new issue market seems to be where everyone's focused," the source said.

Sprint is based in Overland Park, Kansas.

Xstrata Finance firms

Xstrata Finance (Canada) saw strong demand for the sale of $3 billion of guaranteed senior notes (Baa2/BBB/DBRS: A) in four tranches in the U.S. market on Thursday, and the 10-year and 30-year bonds traded tighter on Friday.

"Little better out there," a trader said.

The 4.95% notes due 2021 firmed to 284 bps bid, 278 bps offered in the secondary market, the trader said.

The company sold $1 billion of the 10-year notes at Treasuries plus 290 bps.

The 6% bonds due 2041 also came in over the day to 293 bps bid, 288 bps offered. The company sold the bonds in a $500 million tranche priced at Treasuries plus 300 bps.

The finance unit of mining company Xstrata plc is based in Toronto, Ontario.

© 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.