Anglo American sells $2 billion, $1 billion from Energy Transfer; spreads tighten; secondary focuses on new deals

By Sheri Kasprzak and Paul Deckelman

New York, April 2 - Primary activity maintained a brisk pace Thursday although it saw a notable shift away from the financial sector.

While the week has seen a good number of industrial names, financials have been prominent, notably JPMorgan Chase & Co.'s $5.9 billion sale of FDIC-backed notes on Wednesday.

Thursday's biggest deal was $2 billion of notes in two tranches from Anglo American Capital plc. Also among the major transactions was $1 billion for Energy Transfer Partners, LP, again in two tranches.

In the secondary sphere on Thursday, a market source said the CDX Series 12 North American high-grade index tightened on the day to a mid bid-asked spread level of 198 bps, versus 202 bps on Wednesday.

Advancing issues kept their lead over decliners, though by a narrower not-even eight-to-seven ratio.

Overall market activity, reflected in dollar volumes, rose 2% from the levels seen on Wednesday.

Spreads in general were seen tighter, in line with substantially higher Treasury yields; for instance, the yield on the benchmark 10-year issue rose by 12 bps, to 2.77%

The focus in the secondary market returned to recent new deals, with activity seen in the day's issues like TJX Cos., Inc. and Anglo-American Capital, as well as issues priced earlier in the week such as Dell Inc., Natural Fuel Gas Co., Ingersoll-Rand Co. Ltd. and Black & Decker Corp.

Anglo American brings $2 billion

Leading primary news on Thursday was Anglo American Capital.

It sold $1.25 billion of five-year notes (Baa1/BBB/A) and $750 million of 10-year notes (Baa1/BBB/A), both priced with a 9.375% coupon at par to yield 9.375%. As has been the case recently with higher yielding deals, each of the tranches was priced to a coupon rather than a spread.

Goldman Sachs & Co., Morgan Stanley & Co. Inc. and RBS Securities Inc. were joint bookrunners for the Rule 144A transaction. The co-managers were BNP Paribas Securities Corp. and Barclays Capital Inc.

The issuer is the financing unit for a mining group based in London.

Energy Transfer sells $1 billion

Meanwhile Energy Transfer Partners also split its offering into two pieces, selling $350 million of 8.5% senior notes due 2014 and $650 million of 9% senior notes due 2019.

Credit Suisse Group, J.P. Morgan Securities Inc., Morgan Stanley & Co. and RBS Greenwich Capital are the joint bookrunners. The co-managers are BNP Paribas and Deutsche Bank Securities Inc.

Full details were not available at press time.

Proceeds will be used to fully repay debt outstanding on the company's revolving credit facility and for general partnership purposes..

Dallas-based Energy Transfer owns and operates a portfolio of energy assets, including natural gas transportation and storage operations.

TJX deal prices

A smaller deal was brought to market by TJX Cos. (T.J. Maxx).

It sold a $375 million issue of 6.95% 10-year notes (A3/A/) at a 425 basis points spread to Treasuries on Thursday, according to an informed source.

The deal priced tight to the Treasuries plus 437.5 bps price talk.

The reoffer price was 99.812 resulting in a 6.976% yield to maturity.

Banc of America Securities LLC, J.P. Morgan Securities Inc. and RBS Securities Inc. were joint bookrunners for the issue of notes that were priced off a shelf.

Proceeds will be used to redeem TJX's zero coupon convertible subordinated notes due February 2021, or, if the notes are converted, to repurchase shares of common stock under TJX's stock repurchase program.

The repurchase of shares would be in addition to TJX's previously announced expectations for stock repurchases in the fiscal year ending January 30, 2010.

Any remaining portion of the proceeds from the sale of the notes will be used for working capital and other general corporate purposes.

The issuer is a Framingham, Mass.-based off-price retailer of apparel and home fashions.

EIB sells $3.5 billion

Earlier this week, European Investment Bank priced $3.5 billion in 3% notes, said a term sheet released Thursday.

The notes (Aaa/AAA/AAA) are due April 8, 2014, and priced at 99.889 to yield 3.024%. The reoffer spread was set at Treasuries plus 138.5 basis points.

The bookrunners were Citigroup Global Markets Inc., Deutsche Bank and J.P. Morgan Securities Inc.

Headquartered in Luxembourg, EIB provides capital to businesses within the European Union.

TJX tightens triumphantly

When the new TJX 6.95% notes due 2019 were freed for secondary dealings, a trader saw the bonds having tightened to 392 bps bid, 390 bps offered. That was well in from the 425 bps spread over comparable Treasuries at which the retailer priced the $375 million issue earlier in the session.

Anglo American stays around issue

On the other hand, the trader said that Anglo-American's new two-part issue was little changed from where it priced.

He saw its 9.375% notes due 2014 trading at 100.25 bid, 101 offered. The mining group's $1.25 billion of bonds had priced at par for a spread of 763.2 bps. And he saw the other part of that deal, the $750 million 9.375 notes due 2019 offered at 100.75 with no bid seen, also versus a par issue price, or a spread of 661.6 bps.

Dell firms from issue price

Dell Inc.'s 5 5/8% notes due 2014 were being quoted at 367 bps bid, 362 bps offered. That was well in from the 400 bps over level at which the Round Rock, Tex.-based computer maker had priced its $500 million of bonds on Wednesday.

National Fuel Gas not moving much

A trader saw Williamsville, N.Y.-based energy company National Fuel Gas' 8.75% notes due 2019 at a wide quote of 610 bps bid, 680 bps offered. That compares with the 612 bps level at which the company priced its $250 million of bonds on Wednesday.

Black & Decker, Ingersoll-Rand bonds remain firm

Black & Decker's 8.95% notes due 2014 were seen trading at 100.5 bps bid, a trader said. That was up from the 98.807 level, or 754.9 bps over, at which the Towson, Md.-based power tool manufacturer priced that $350 million of bonds - upsized from $250 million originally - on Tuesday.

Another market source meantime pegged the bonds at a spread of 700 bps on Wednesday, some 50 bps tighter than their issue price.

In another Tuesday deal, Ingersoll-Rand's 9½% notes due 2014 were seen trading at 102.5 bps bid, 103.5 bps offered, versus the 99.992 level, or 783.8 bps over, at which the Hamilton, Bermuda-based industrial machinery maker priced its $655 million of bonds.

Another market source meantime saw the bonds get as good as 103.25 on the day.

Financials seen better

A trader in financials issues said that his sector was "better throughout the course of the day, anywhere from 10 bps to 15 bps better. It didn't run up - it didn't fly right out of hand - but it did trade better during the course of the day.

He said that it was "all of the big names" that were firming, but none in particular seemed to stand out.

He did see General Electric Co.'s bond better by "5 bps to 10 bps to 15 bps from [Wednesday's] wides, depending on their maturity," helped by news that the Fairfield, Conn.-based industrial conglomerate plans a potentially lucrative health-care joint venture with Intel Corp.

Financial CDS levels seen tighter

In the credit-default swaps market, a market source saw the cost of protecting holders of bonds issued by major banks and brokerage firms against a possible event of default tighten solidly early on, in contrast to Wednesday's early erosion, with the CDS cost for Citigroup Inc. seen 30 bps tighter, for Bank of America Corp. 20 bps tighter, for Wells Fargo & Co. Inc. 15 bps tighter, and for JP Morgan Chase & Co. 10 bps tighter.

Among the brokerage firms-turned-commercial banks, Goldman Sachs Group Inc.'s CDS cost was 3 bps tighter, while Morgan Stanley's was 5 bps tighter.

By the end of the session, a trader who watches the CDS market said that big-bank paper was anywhere from 10 bps to 30 bps tighter, while he saw CDS costs for the investment-bank bonds 10 bps to 25 bps tighter.

Paul A. Harris contributed to this report.

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