Medtronic sells year’s largest deal; Berkshire Hathaway, Cox also price; Medtronic firms

By Aleesia Forni and Cristal Cody

Virginia Beach, Dec. 1 – Medtronic Inc. kicked off the month of December selling a $17 billion issue of senior notes during the session on Monday in the largest investment-grade bond deal priced this year.

All seven tranches of the new issue sold at the tight end of price talk, which had firmed up to 25 basis points compared to initial price thoughts.

The new issue “went very well,” one source noted, attracting an orderbook for that was more than 2.5 times oversubscribed.

The deal now holds the record as the largest investment-grade issue printed in 2014, topping Apple Inc.’s $12 billion seven-part trade priced in April.

The primary also saw new multi-part deals price from Berkshire Hathaway Energy Co., Cox Communications Inc. and Citizens Bank NA, bringing the day’s total supply to $21.35 billion.

Meanwhile, cash continues to flow into investment-grade bond funds.

Lipper reported inflows of $880 million for the week ending Nov. 26, down from $3.236 billion for the week ended Nov. 19.

This pushes the year-to-date total inflows into corporate investment-grade funds to more than $81 billion.

Players are gearing up for what is expected to be a busy month of December for the high-grade primary.

“The next few weeks will be very active,” a market source said, as issuers attempt to access the market before the end of the calendar year.

Investment-grade credit spreads opened the month weaker, while new issues brought on Monday mostly tightened in aftermarket trading, according to market sources.

The Markit CDX North American Investment Grade series 23 index eased 2 bps to a spread of 63 bps.

Medtronic’s tranches of notes tightened 3 bps on the short end of the offering to 7 bps on the longer end of the deal, according to traders.

Berkshire Hathaway Energy’s notes were not seen in the secondary market.

Citizens Bank’s two tranches of notes were mixed in late afternoon trading, a trader said.

Cox Communications’ two-part offering of notes traded 2 bps better to flat in the secondary market, according to a trader.

Medtronic breaks record

Medtronic sold $17 billion of senior notes (A3/A/) in seven tranches on Monday in what is now the largest deal priced this year, according to a market source.

The sale included $1 billion of 1.5% notes due 2018 priced with a spread of Treasuries plus 70 bps.

The notes sold at 99.712 to yield 1.591%.

There was also $500 million of floaters due 2020 priced at par to yield Libor plus 80 bps.

A third tranche was $2.5 billion of 2.5% notes due 2020 sold at 99.899 to yield 2.521%, or 100 bps over Treasuries.

The company also sold $2.5 billion of 3.15% notes due 2022 at Treasuries plus 125 bps.

The notes sold at 99.791 to yield 3.183%.

A $4 billion tranche of 3.5% bonds due 2025 sold at 99.042 to yield 3.613%, or 140 bps over Treasuries.

There was $2.5 billion of 4.375% notes due 2035 sold with a spread of Treasuries plus 150 bps.

Pricing was at 99.117 to yield 4.442%.

Finally, $4 billion of 4.625% bonds due 2045 sold at 170 bps over Treasuries.

The notes priced at 99.732 to yield 4.642%.

All tranches sold at the tight end of price talk, which had firmed 15 bps to 25 bps compared to initial guidance.

The active bookrunners were BofA Merrill Lynch, Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC.

Proceeds will be used to help fund the proposed acquisition of Dublin-based health-care products company Covidien plc.

Medtronic’s notes due 2019 firmed to 97 bps bid, 93 bps offered in the secondary market, according to traders.

The company’s notes due 2021 were quoted in the secondary tighter at 120 bps bid to 122 bps bid.

The offering of notes due 2024 tightened to 136 bps bid, 133 bps offered, a trader said. The 10-year notes were seen early in aftermarket trading at 138 bps bid.

Medtronic’s tranche of notes due 2034 headed out better at 143 bps bid.

The long tranche of notes due 2044 firmed to 165 bps bid, 160 bps offered in the secondary market.

Medtronic is a medical technology company based in Minneapolis.

Berkshire three-parter

Berkshire Hathaway Energy priced $1.5 billion of senior notes (A3/BBB+/BBB+) in tranches due 2020, 2025 and 2045 on Monday, an informed source said.

There was a $350 million tranche of 2.4% notes due 2020 sold at 88 bps over Treasuries, or 99.978 to yield 2.404%.

Pricing was at the tight end of price talk.

A second tranche was $400 million of 3.5% notes due 2025 priced at 99.977 to yield 3.502% with a spread of 128 bps over Treasuries.

The notes sold at the tight end of talk.

A $750 million tranche of 4.5% bonds due 2045 sold at 160 bps over Treasuries. The notes priced at 99.141 to yield 4.552%.

Pricing was in line with talk.

The bookrunners were Barclays, RBC Capital Markets LLC, RBS Securities Inc. and Scotia Capital (USA) Inc.

Based in Des Moines, Berkshire Hathaway Energy is a utility holding company.

Citizens Bank prices tight

Meanwhile, Citizens Bank priced $1.5 billion of senior bank notes (A3/A-/) in three- and five-year tranches on Monday, an informed source said.

The bank priced a $750 million tranche of 1.6% notes due 2017 with a spread of Treasuries plus 73 bps.

A $750 million tranche of 2.45% notes due 2019 sold at 95 bps over Treasuries.

Both tranches sold at the tight end of talk.

Morgan Stanley & Co. LLC and RBS Securities were the bookrunners.

Proceeds will be used for general corporate purposes.

Citizens Bank’s tranche of notes due 2017 headed out at 69 bps offered in the secondary market, a trader said.

The bank’s notes due 2019 traded slightly weaker at 97 bps bid, 92 bps offered.

The bank is based in Providence, R.I.

Cox sells $1.35 billion

Also on Monday, Cox Communications priced $1.35 billion of senior notes (Baa2/BBB/) in tranches due 2024 and 2034, according to an informed source.

The company priced $700 million of 3.85% 10-year bonds at 99.827 to yield 3.87%, or Treasuries plus 165 bps.

Pricing was at the tight end of talk.

There was also $650 million of 4.8% notes due 2034 sold with a spread of 185 bps over Treasuries.

Pricing was at 99.964 to yield 4.802%.

The notes sold in line with guidance.

Proceeds will be used for general corporate purposes.

Cox Communications’ notes due 2024 traded better at 163 bps bid, 158 bps offered in aftermarket trading, according to a trader.

The company’s notes due 2034 were quoted flat at 185 bps bid in the secondary market.

The provider of phone, internet and TV service is based in Atlanta.

U.S. Cellular preferreds

United States Cellular Corp. priced $275 million of 7.25% $25-par senior notes due Dec. 1, 2063 (expected ratings: Ba1/BB/BB+) at par on Monday, according to a market source.

BofA Merrill Lynch, Morgan Stanley, RBC Capital Markets, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers.

Interest will be payable on the first day of March, June, September and December, beginning in March 2015. The notes become redeemable at par plus accrued interest on or after Dec. 8, 2019.

Proceeds will be used for general corporate purposes.

The Chicago-based wireless telecommunications services provider intends to list the securities on the New York Stock Exchange under the ticker symbol “UZB.”

Forward calendar builds

In other primary market happenings, new deals from Amazon.com Inc. and BGC Partners Inc. were announced during the session.

Amazon.com set price guidance for a planned offering of senior notes (Baa1/AA-/) in five maturities, an informed source said.

The sale is expected to include five-year notes talked in the 105 bps area, seven-year notes talked in the area of 135 bps over Treasuries, 10-year notes talked at the 155 bps area over Treasuries, 10-year notes talked in the 185 bps area over Treasuries and 30-year bonds talked in the 205 bps area over Treasuries.

Bookrunners are Morgan Stanley, BofA Merrill Lynch, Deutsche Bank Securities and HSBC Securities (USA) Inc.

The Seattle-based online retailer plans to use proceeds for general corporate purposes.

The deal is expected to price on Tuesday.

Meanwhile, New York City-based BGC Partners plans to offer senior notes in a Rule 144A and Regulation S.

Bank/brokerage CDS costs

Investment-grade bank and brokerage CDS prices were mostly higher on Monday, according to a market source.

Bank of America Corp.’s CDS costs rose 1 bp to 62 bps bid, 65 bps offered. Citigroup Inc.’s CDS costs were also 1 bp higher at 62 bps bid, 65 bps offered. JPMorgan Chase & Co.’s CDS costs were 1 bp higher at 55 bps bid, 57 bps offered. Wells Fargo & Co.’s CDS costs were flat at 44 bps bid, 47 bps offered.

Merrill Lynch’s CDS costs were 1 bp higher at 66 bps bid, 70 bps offered. Morgan Stanley’s CDS costs ended 1 bp higher at 74 bps bid, 77 bps offered. Goldman Sachs Group, Inc.’s CDS costs were 1 bp higher at 76 bps bid, 79 bps offered.

Paul Deckelman contributed to this review.

© 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.