TC PipeLines brings $350 million; new deals off to slow start; CenturyLink, Best Buy tighter

By Sheri Kasprzak and Cristal Cody

New York, June 14 - Although the week got off to a slow start, new issue activity picked up on Tuesday, led by a $350 million offering of senior notes from TC PipeLines LP. A few other large offerings priced as well, but the market remains sluggish, according to Jody Lurie, corporate credit analyst with Janney Montgomery Scott LLC.

"Economic uncertainty and the summer season is causing a delay in market issuance, as many worry about the near-term outlook," wrote Lurie in a report released Tuesday.

"Since the announcement of weakening employment, which follow disappointing auto sales, investors seem more risk averse, as high yield spreads jumped 34 bps from two Fridays ago. Last week's $16 billion in new issuance followed a week with less than $10 billion of new deals."

Lurie noted that low issuance two weeks ago could be rationalized through the shortened Memorial Day week, but last week demonstrates a pause that may continue until investors become comfortable with the near-term economic outlook.

"Still, it is possible that the flurry of activity seen through May caused an oversupply that investors need to digest before showing appetite for more," Lurie added.

Overall trading volume jumped to about $15 billion, according to a market source.

"Seemed like there was decent flow and just a firmer tone," a trader said. "More action today."

The series 15 Markit CDX North American Investment Grade index firmed 3 bps to a spread of 97 bps on Monday, according to Markit Group Ltd.

In trading, CenturyLink, Inc.'s 10-year notes stopped the widening and narrowed 5 bps in the secondary market, a trader said.

Best Buy Co.'s notes firmed in trading after the company reported first-quarter earnings that beat Street forecasts, a source said.

Discovery Communications LLC's just-priced 10-year notes firmed in secondary trading.

Treasuries fell, pushing the 10-year note yield up 12 basis points to 3.1% and the 30-year bond yield up 10 bps to 4.3%.

"Treasuries got hammered," a trader said. "It seemed like there wasn't any big catalyst. Stocks rallied, and now they're allocating back into stocks and out of Treasuries."

TC brings $350 million

Heading up Tuesday's flurry of sales, TC PipeLines brought $350 million of senior notes, said an FWP filing with the Securities and Exchange Commission.

The notes (Baa2/BBB/) are due June 15, 2021 and have a spread of Treasuries plus 157 bps. The notes were priced at 99.834 to yield 4.671%.

The joint bookrunners were J.P. Morgan Securities LLC and SunTrust Robinson Humphrey Inc.

Proceeds will be used to repay a $61 million bridge loan and $110 million borrowed under the revolver portion of the company's credit facility associated with the acquisition of a 25% interest in each of Gas Transmission Northwest LLC and Bison Pipeline LLC. The remainder will be used to repay other term loans.

TC PipeLines, based in Omaha, was formed by TransCanada PipeLines Ltd. to own and manage natural gas pipelines and assets.

Hanover sells 6.375% notes

Elsewhere, Hanover Insurance Group Inc. priced $300 million of 6.375% senior notes, said an FWP filing with the SEC. The offering was upsized from $250 million.

The notes (Baa3/BBB-/BBB-) are due June 15, 2021 and have a spread of Treasuries plus 337.5 bps. The notes were priced at 99.331 to yield 6.467%.

The notes feature a make-whole call at the greater of par or the discounted present value at Treasuries plus 50 bps.

The joint bookrunners were Goldman Sachs & Co., Morgan Stanley & Co. Inc. and Wells Fargo Securities LLC.

Additionally, if the closing of the company's acquisition of Chaucer Holdings plc is not completed by Oct. 31 and the escrow agent has released to the issuer the cash and securities held in escrow, the issuer will redeem all the notes 15 days after the later of Oct. 31 or the release to the issuer of the cash and securities held in escrow.

The proceeds will be used to repay debt and to finance general corporate and working capital needs, which may include the repurchase of common stock, capital expenditures, possible acquisitions and the repurchase or redemption of notes.

Located in Worcester, Mass., Hanover is a property and casualty insurance company.

Realty Income prices add-on

Also during the session, the Realty Income Corp. added another $150 million of its 5.875% senior debentures, bringing the total to $250 million, said a statement released by the company.

The bonds (Baa1/BBB/BBB+) are due March 15, 2035 and have a spread of Treasuries plus 205 bps. The bonds were priced at 94.578 to yield 6.318%.

The bonds feature a make-whole call at Treasuries plus 25 bps.

The joint bookrunning managers for the deal were Citigroup Global Markets Inc.; Bank of America Merrill Lynch and JPMorgan. The co-lead managers were BNY Mellon Capital Markets LLC and Wells Fargo Securities. The senior co-managers were Credit Suisse Securities (USA) LLC and UBS Securities LLC.

Proceeds from the sale will be used for general corporate purposes.

Best Buy firmer

Best Buy's 3.75% notes due 2016 traded Tuesday at 190 bps bid, 183 bps offered, tighter than the 210 bps bid, 200 bps offered quote from the previous day after the company reported lower first-quarter earnings, according to traders.

The company's 5.5% notes due 2021 traded late afternoon at 250 bps offered, tighter than an early morning quote of 260 bps bid, 250 bps offered, a trader said. The notes also firmed from a wider quote on Monday at 273 bps bid, 268 bps offered.

The electronics and entertainment retailer is based in Richfield, Minn.

Discovery tighter

Discovery Communications' new 4.375% 10-year guaranteed senior notes (Baa2/BBB/BBB) priced to yield 150 bps over Treasuries on Monday traded Tuesday at 142 bps bid, 140 bps offered, a trader said.

"It's tightening going out on the day."

The notes narrowed from initial trading late Monday at 146 bps bid, 144 bps offered.

The media and entertainment company is based in Silver Spring, Maryland.

CenturyLink narrows

CenturyLink's 6.45% 10-year senior notes (Baa3/BB/BBB-) firmed in trading to 355 bps bid, 345 bps offered after widening since the company sold the notes, a trader said.

The bonds were quoted Monday at 360 bps bid, 355 bps offered. CenturyLink sold the bonds on Thursday at 150 bps over Treasuries.

The integrated communications company is based in Monroe, La.

CDS lower

A trader who watches the credit default swaps market said that the cost of protecting holders of bonds issued by major banking or investment banking companies was solidly lower, signaling increased investor confidence in the sector.

He saw the prices come down by anywhere from 4 bps to 11 bps from where they had been on Monday. He saw the CDS costs for Bank of America Corp. and its Merrill Lynch subsidiary come in by as much as 11 bps on the day.

He also saw the cost of protecting paper from Goldman Sachs Group, Inc. or Morgan Stanley down by 4 bps.

Paul Deckelman contributed to this review

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