VW, Principal, Dr. Pepper, BMC among trades leading short week; Dr. Pepper notes firm

By Aleesia Forni and Andrea Heisinger

New York, Nov. 13 - Several multi-tranche sales from high-grade bond issuers got the short week off to a solid start on Tuesday.

The day's largest offering came from Volkswagen International Finance NV, which tapped the market for $2.6 billion in four tranches under Rule 144A and Regulation S. A tranche of short-dated floaters was added prior to pricing.

There was a $900 million sale from Principal Financial Group Inc. divided evenly among notes due 2017, 2023 and 2043.

Dr. Pepper Snapple Group Inc. priced $500 million of notes due 2020 and 2022.

Houston-based BMC Software, Inc. sold $300 million of 10-year notes after the deal size was decreased from $400 million.

There was a $250 million offering of five-year notes from Mack-Cali Realty LP.

A deal was announced by Germany's FMS Wertmanagement. The benchmark-size sale of five-year global notes is expected to price on Wednesday.

Wells Fargo & Co. priced an upsized $600 million of perpetual preferred stock shares. The size was initially $250 million.

The market's tone started off on the right foot, wavered at midday but then recovered by the close, a market source said.

"People were ready to go," he said. "We had the big ones right out of the gate."

Later in the day, the tone took a hit when Treasury secretary Timothy Geithner made headlines as he said there would need to be tax hikes to offset the United States' deficit. Other news out of the euro zone added to investor discomfort.

"We'll see how things are tomorrow, but I'd say there are still going to be a handful of trades," a syndicate source said.

The Markit CDX Series 18 North American Investment Grade index widened 2 bps to a spread of 105 bps.

Both tranches of Dr. Pepper's notes were seen tighter late Tuesday.

Dr. Pepper's notes due 2020 firmed 3 bps near the end of the day. The notes due 2022 were quoted 6 bps better.

In bank paper, Goldman Sachs' notes due 2018 were quoted 6 bps weaker, while Citigroup's 8.5% notes due 2019 widened 5 bps.

Morgan Stanley's 7.3% notes due 2019 firmed 4 bps.

VW sells $2.6 billion

Volkswagen priced an upsized $2.6 billion of bonds (A3/A-/) in four tranches, an informed source told Prospect News.

A $150 million tranche of 18-month floating-rate notes was added and sold at par to yield Libor plus 50 bps.

The sale also included a $950 million tranche of two-year floaters priced at par to yield Libor plus 60 bps.

There was also $850 million of 1.15% three-year notes sold at a spread of Treasuries plus 85 bps.

The final part was $650 million of 1.6% five-year notes priced at 105 bps over Treasuries.

The offering was done under Rule 144A and Regulation S.

Barclays, J.P. Morgan Securities LLC and RBC Capital Markets LLC were the bookrunners.

VW International was last in the market with a $3.35 billion sale in four tranches on March 19. That offering included a two-year floater priced to yield Libor plus 75 bps, a 1.625% three-year note sold at 113 bps over Treasuries and a 2.375% five-year bond priced at Treasuries plus 133 bps.

The issuer is an Amsterdam-based financing arm of Wolfsburg, Germany-based auto-maker Volkswagen AG.

Principal's three tranches

Principal Financial Group priced an upsized $900 million sale of senior notes (A3/BBB+/A-) in three maturities, market sources said.

The deal size was increased from $800 million

A $300 million tranche of 1.85% five-year notes sold at a spread of Treasuries plus 125 bps. The tranche sold tighter than guidance in the 137.5 basis points area, plus or minus 2.5 bps.

The $300 million of 3.125% 10-year tranche priced at 155 bps over Treasuries. The tranche was talked in the 162.5 bps area, plus or minus 2.5 bps.

Finally, there was a $300 million tranche of 4.35% 30-year bonds priced at a spread of 165 bps over Treasuries. Price talk was in the 175 bps area.

Bookrunners were Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. and UBS Securities LLC.

Proceeds are being used to pay a portion of the $1.5 billion acquisition consideration for Chile's Administradora de Fondos de Pensiones Cuprum SA.

There is a mandatory call if the Cuprum acquisition is done on or before Nov. 19, 2013.

Principal Financial was last in the market with a $600 million sale in 10-year and 30-year tranches on Sept. 6.

The retirement savings, investment and insurance products company is based in Des Moines.

Dr. Pepper prices tight

Dr. Pepper Snapple priced $500 million of senior notes (Baa1/BBB/) due 2020 and 2022, a market source said.

A $250 million tranche of 2% notes due 2020 sold at a spread of Treasuries plus 110 bps. The level was tighter than talk in the Treasuries plus 130 bps area

The notes were seen trading at 107 bps bid, 105 bps offered.

The $250 million of 2.7% 10-year notes priced at 115 bps over Treasuries. Guidance was in the 135 bps area.

A trader quoted the notes at 109 bps bid, 108 bps offered.

Bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities LLC.

Proceeds are being used to retire 2.35% senior notes at maturity on Dec. 21, and for general corporate purposes.

The notes are guaranteed by current or future subsidiaries that guarantee other debt.

Dr. Pepper Snapple was last in the market with a $500 million sale of notes with eight-year and 10-year maturities on Nov. 7, 2011. The 2.6% eight-year notes were priced at a spread of 120 basis points over Treasuries and the 3.2% 10-year notes sold at Treasuries plus 125 bps.

The maker of non-alcoholic beverages is based in Plano, Texas.

Mack-Cali five-years

Mack-Cali Realty priced $250 million of 2.5% five-year senior notes (Baa2/BBB/BBB) to yield Treasuries plus 200 bps, a market source said.

A trader had seen "nothing yet" on the notes near the end of the day.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes and working capital including repayment of outstanding borrowings under a $600 million revolving credit facility and may include the purchase or retirement of some outstanding debt.

Mack-Cali last sold bonds in a $300 million sale of 10-year notes on April 10.

The real estate company is based in Edison, N.J.

BMC downsizes deal

BMC Software priced $300 million of 4.5% 10-year senior notes (Baa2/BBB+/) with a spread of Treasuries plus 300 bps, a market source close to the trade said.

The size of the offering was initially $400 million.

Bookrunners were Bank of America Merrill Lynch, Barclays and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes.

BMC was last in the market with a $500 million offering of 10-year notes on Feb. 8.

The software company is based in Houston.

FMS preps five-years

Germany's FMS Wertmanagement is planning to price up to $2 billion of five-year global notes, an informed source said.

Pricing is expected on Wednesday with guidance in the 25 basis points to 29 bps over mid-swaps range.

The notes (Aaa/AAA/AAA) are backed by the Federal Republic of Germany.

Bookrunners are Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and HSBC Securities (USA) Inc.

Proceeds will be primarily used to refinance existing liabilities in order to replace short-term with longer-term funding. In particular, FMS-WM intends to refinance existing floating-rate liabilities issued under FMS-WM's debt issuance program. Any remainder will be used for general business purposes.

The financial services company is based in Munich.

Wells Fargo's preferreds

Wells Fargo priced $600 million of 5.125% series O noncumulative perpetual class A preferred stock, according to an FWP filed with the Securities and Exchange Commission.

This confirmed rumors heard of such a deal heard last week.

"It seems to be going fine," a trader said of the new issue's dealings in the gray market. He saw trades around $24.60 as of midday, ahead of pricing.

The preferreds will be issued at depositary shares representing a 1/1,000th interest.

The San Francisco-based bank will apply to list the new preferred shares on the new York Stock Exchange under the ticker symbol "WFCPO."

Wells Fargo Securities LLC was bookrunner.

Proceeds will be used for general corporate purposes.

Goldman Sachs widens

Meanwhile, Goldman Sachs' bond due 2018 widened 6 bps to 222 bps bid from levels seen during the previous week.

Goldman Sachs priced the $1.5 billion 6.15% 10-year bonds in April 2008 at Treasuries plus 237.5 bps.

Citi weaker

In other trading, Citigroup's 8.5% notes due 2019 were 5 bps wider at 134 bps bid.

The bank priced $1 billion of the notes at Treasuries plus 437.5 bps on June 11, 2009.

Morgan Stanley firms

Morgan Stanley's 7.3% notes due 2019 traded 4 bps tighter at 221 bps bid at Tuesday's close.

The $1 billion notes sold at a spread of 360 bps over Treasuries in May 2009.

Stephanie N. Rotondo contributed to this review

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