JPMorgan, Bank of America, Total, HSBC, Caterpillar among bond sellers, BP gains, falls back

By Andrea Heisinger and Cristal Cody

New York, June 17 - JPMorgan Chase & Co., Bank of America Corp., Total Capital, Avnet Inc. and Caterpillar Financial Services Corp. priced bond issues on Thursday as financial deals flooded the market.

HSBC Holdings plc priced a large, upsized offering of perpetual capital securities that had been announced on Wednesday.

Bank of America sold $3 billion of 10-year notes by mid-afternoon, just before the $1.25 billion sale of five-year notes was sold by JPMorgan Chase & Co. JPMorgan increased the size of its sale by $250 million and re-launched it at $1.25 billion.

Following in the financial bond trend was HSBC Holdings, with a huge, upsized $3.4 billion sale of perpetual capital securities at $25 each. The amount was increased from $300 million.

Total Capital was one of the last to price its bonds for the day. The oil and gas company sold $2.5 billion of notes in five- and 10-year tranches.

Caterpillar Financial priced $300 million of five-year notes early in the day.

By late afternoon, Phoenix-based Avnet had priced its $300 million sale of 10-year notes.

Eyes were on BP plc after CNBC reported that the oil company could sell up to $10 billion of bonds as soon as the coming week. Some sources said the size of the deal would likely not be a problem if the issuer was prepared to buy the necessary interest rate.

In trading, BP's debt rallied initially on news of the possible new bond sale but ended the day mostly unchanged, according to sources.

The growing focus on the oil industry has taken the financial sector "out of the hot seat" and bank paper is showing a small rally, a trader said.

Trading overall was "better," a source said. "Stronger."

The CDX Series 14 North American investment-grade index firmed 4 bps to a spread of 114 bps.

Overall investment-grade Trace volume jumped 20% to nearly $13 billion, a market source said.

Yields on government debt fell on Thursday on weaker economic data and a rally in the euro after Spain auctioned more than $4 billion in 10- and 30-year bonds.

The number of initial claims for unemployment rose to 472,000 from 460,000 the previous week, according to the Labor Department.

In addition, the Federal Reserve Bank of Philadelphia's index of regional manufacturing activity fell in June.

Yields on the 10-year benchmark Treasury note fell to 3.19% from 3.26%. Yields on 30-year bonds were 5 bps tighter at 4.13%.

Total prices two tranches

Total Capital sold $2.5 billion of unsecured notes (Aa1/AA) in two tranches by late afternoon, an informed source said.

The $1.25 billion of 3% five-year notes priced at a spread of Treasuries plus 110 bps.

A $1.25 billion tranche of 4.45% 10-year notes sold at 130 bps over Treasuries.

The deal is guaranteed by Total SA.

Bank of America Merrill Lynch, Barclays Capital Inc. and HSBC Securities were bookrunners.

Proceeds are being used for general corporate purposes.

The issuer is a financing unit of oil and gas company Total SA, based in Courbevoie, France.

Bank of America sells $3 billion

Bank of America Corp. priced $3 billion of 5.625% 10-year notes (A2/A/A+) to yield 248 bps over Treasuries, a source away from the sale said.

Bank of America Merrill Lynch was the bookrunner.

The financial services company is based in Charlotte, N.C.

HSBC upsizes capital securities

London-based financial services company HSBC Holdings sold an upsized $3.4 billion, or 140 million, of 8% perpetual subordinated capital securities (A3/A-) after 5 p.m. ET at par of $25, a source close to the sale said.

The size was increased from an initially announced $300 million, or 12 million securities.

"It was a little more than your standard corporate upsizing," the source said.

The capital securities can be exchanged for preference shares in whole on quarterly coupon payment dates.

Wells Fargo Securities, HSBC Securities, Citigroup Global Markets, Morgan Stanley & Co. and UBS Investment Bank were bookrunners.

Proceeds are being used to support development and further strengthen the bank's capital base.

New financial bonds take over primary

A tightening in spreads for financial bonds the previous day may have helped coax new bond deals opportunistically out of JPMorgan and Bank of America, a source said.

"They probably figured if they could get them at good levels, then why not?" he said.

Other financials came from Caterpillar Financial Services and HSBC Holdings plc, the latter bringing its capital securities in a sale that went overnight from Wednesday.

Within the investment-grade universe, "we like financials," said Jamie Guenther, head of U.S. investment grade credit for DB Advisors, in a Thursday conference call.

"We like the senior debt of some of the larger financials out there. We feel that once financial regulation is completed in terms of the Congressional process that that will be alone a reasonable catalyst for the market overall."

An upbeat tone at the end of the Thursday will have little impact on what new deal activity is like on Friday, a source said.

There aren't any large deals planned, although in past weeks there have been a couple of deals pricing at the end of the week.

"It never used to be like that," the source said. "I think it's just that people want to issue if they see a window. There could be something small."

JPMorgan upsizes to $1.25 billion

JPMorgan Chase sold an upsized $1.25 billion of 3.4% five-year unsecured notes (Aa3/A+/AA-) late in the day at Treasuries plus 145 bps, a source away from the sale said.

The size was increased and the deal re-launched from its original $1 billion size.

J.P. Morgan Securities was the bookrunner.

The proceeds are being used for general corporate purposes.

The financial services company is based in New York City.

Avnet prices 10-year notes

Industrial distributor Avnet priced $300 million of 5.875% 10-year senior unsecured notes (Baa3/BBB-/BBB-) at Treasuries plus 275 bps, a source away from the deal said.

Bank of America Merrill Lynch and J.P. Morgan Securities ran the books.

Proceeds from the notes are being used for general corporate purposes.

The industrial distributor is based in Phoenix.

BP bond issue talked

A sizable bond issue is being floated by BP plc, possibly in the coming week, a source said in the afternoon.

He referred to a story on CNBC that said the company could price between $5 billion and $10 billion in debt in the next week.

Another source said that it's hard to say how the deal would go since so little is known at this point.

"It's basically all rumors," he said. When asked if it's possible that BP could get such a huge amount of bonds sold he said that "there's a good chance."

"There's a price for everything, right? All I hear is it could get done."

It's a good time to bring such an offering, he said, despite the day-to-day volatility and the fact that BP was downgraded by Standard & Poor's during Thursday's session.

"The market's very constructive right now. Everything's been oversubscribed and things are pricing at good spreads."

Bookrunners are not set, but those being thrown around include Goldman Sachs & Co. and Morgan Stanley.

The beleaguered oil company is also considering a bank credit facility.

There is a list of woes hitting the company since an oil rig it leased in the Gulf of Mexico exploded, and oil continues to gush from the damaged well. Top executives have been testifying before Congress, and the company has agreed to set up a fund to help those who have not been able to work since the spill began.

An estimate also came out that the oil spill could hit $100 billion in cleanup and other costs for BP.

Caterpillar sells $300 million

Caterpillar Financial Services priced $300 million of 2.75% five-year medium-term notes (A2/A/A) by early afternoon at 77 bps over Treasuries, a source away from the deal said.

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

The issuer provides financing for Caterpillar products and is based in Nashville.

BP rally fizzles

The market reacted to news BP may sell corporate debt in five- or 10-year maturities as soon as next week, initially pushing the outstanding debt up sharply..

The London-based company's existing bonds rallied at the start of the day but ended mostly unchanged, sources said.

"Initially, there was a big rally where we saw their bonds rise 4 or 5 points, but that was in the morning for about an hour," one trader said. "It quickly faded as sellers came in and lost 80% of what it had gained in the day. Going out, it was practically unchanged."

BP's 4.75% notes due 2019 were quoted late in the day at 85.5 bid, 86.5 offered.

Several media reports on Thursday indicated BP plans to sell the debt to shore up liquidity and confidence in the face of the widespread damages from the Gulf of Mexico oil spill that began April 20.

On Wednesday, BP agreed to place $20 billion into a fund to compensate victims in the four states hit by the oil leak.

"It's going to be hard to issue a large amount of debt at any reasonable level," a trader said. "They're issuing at high-yield levels."

BP could draw junk buyers

A trader said that "when talk came out about BP [possibly] doing a $10 billion deal, it seems you've got junk guys who are interested in getting in at these levels - it's kind of like the falling knife has hit the cutting board, and people are starting to grab it."

He saw "a ton of paper trading," although he added that "the perception that we're getting from accounts is that it's off the high-grade desks. We do have some junk guys playing around in it and it seems like everyone is a better buyer of the paper."

He saw about $200 million of BP's 1.55% notes due 2011 trading "anywhere between" 94¼ and 95 throughout the day, calling it pretty much unchanged from Wednesday's levels.

Among the longer BP paper, he saw the 4¾% notes due 2019 pretty much unchanged right around the 85 3/8 bid level, on volume of about $100 million.

BP's 5¼% notes due 2013 gained around ½ point at the 93¾ bid level, as more than $200 million traded.

"At one point during the day, you may have had [BP bond] down ¼ to ½ point, then you had them up, and they pretty much hung where they were for most of the day."

He said there was no great move to dump the paper, even with BP CEO Tony Hayward getting grilled on Capitol Hill about the decision-making went into drilling the well and BP's actions in the aftermath of the accident.

"Even with his stellar performance," the trader said ironically, and the ratings downgrade by Standard & Poor's, "they basically didn't change. Anything that traded large size pretty much stayed intact to where it went out [Wednesday] night."

He also said that "the impression I'm getting from the high yield guys is that there seemed to be more buyers out there at these levels than sellers, at least in the high yield space. I don't see high yield guys coming in and hitting bids to short the paper - I see them coming in and wanting to buy the paper."

"When the news broke on CNBC that BP is in talks for a debt offering, that sparked a lot of talk and conversation [among junk accounts] - some guys won't touch it, but at the right price, other guys will."

A second trader said that BP's 3 7/8% notes due 2015 and the 4¾% notes were both right around the 85 mark, "up a few points from [Wednesday], 2 to 3 points, I'd say."

Transocean better

Meanwhile Transocean Inc., BP's partner in the Gulf of Mexico catastrophe, saw gains.

A trader said that "we saw some quotes in RIG, but not really a lot of activity." He said "that paper was up, depending on what issue, by between three and 5 ½ points."

The most active Transocean issue, he said, was its 5¼% notes due 2013, with "north of $30 million" traded. He quoted those bonds up at least 2½ points, ending around the 96 level.

The company's other bonds, he said, "just had a couple of million of each trading, so on a trade of $1 million or $2 million, it might be up by 5 points. The real volume was in the 51/4s today."

Another trader said that Transocean's bonds "are still in the 90s," seeing the 6% notes due 2018 and the 6.80% bonds due 2038 in a 91-92 context.

Anadarko gains

A trader saw Anadarko Petroleum Corp.'s 5.95% notes due 2016 up 3 points on the day around the 90 bid area, on volume of over $120 million.

He meantime saw the longer paper of the 25% owner of the Deepwater Horizon drilling rig, such as the 6.20% bonds due 2040, racking up about $50 million in trades, with the bonds up two points to the 85 level.

"Most of its paper was up 2 to 3 points, depending on what issue, and how much volume there was, but there was good volume in all the names there."

Donnelley gains

A junk trader saw some activity in the new R.R. Donnelley & Sons Co. issue, adding that he was 'kind of shocked because I saw a junk guy quoting this."

He saw the new 7 5/8% notes due 2020 "immediately" offered at 100 1/8, after having priced at par.

R.R. Donnelley priced an upsized $400 million of 7.625% 10-year senior unsecured notes (Baa3/BBB/BBB-) at par on Wednesday.

The integrated communications company is based in Chicago.

Oil woes help financials

The financial sector may be getting some help from the concerns over high-grade oil investments, a source said.

"Bank of America and the financial stuff is a little bit better," the source said. "One of the biggest reasons is the government focus on the oil industry right now. It has taken financials out of the hot seat so we're seeing a bit of a rally in the financials."

Bank of America and JP Morgan also brought new offerings on Thursday.

Bank of America sold $3 billion of 5.625% notes due 2020 at Treasuries plus 248 bps, while JPMorgan Chase priced $1.25 billion of 3.4% notes due 2015 at Treasuries plus 145 bps.

JPMorgan's existing 7.9% notes due 2018 "traded up a point today and went out at 1031/2," the source said.

Bank of America's existing 8% perpetual notes traded Thursday unchanged at 95.5, 96.5.

Christine Van Dusen contributed to this report

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