British American Tobacco, Boston Properties, Tampa Electric grab low yields; Kraft tightens

By Aleesia Forni and Andrea Heisinger

New York, May 31 - It was the busiest day in the high-grade bond market yet this week on Thursday as British American Tobacco International Finance plc, Boston Properties LP and Tampa Electric Co. took advantage of record-low Treasury yields.

British American Tobacco had the largest offering of the day at $2 billion in three tranches priced under Rule 144A and Regulation S.

Boston Properties priced $1 billion of 10-year senior notes, and Tampa Electric brought a $300 million issue of 30-year bonds.

Tampa Electric's new bonds traded "about 5 basis points tighter," a New York-based trader said at the end of the session.

Kommunalbanken Norway was also in the market with a $1.5 billion sale of five-year notes sold under Rule 144A.

Terms were given for European Investment Bank's $3 billion offering of notes due 2015 that priced Wednesday.

The market tone wasn't improved much from Wednesday, but companies couldn't resist the low yields.

"[New issue] concessions are higher, but that's not stopping people if they need financing," a syndicate source who worked on one of the day's deals said.

"People are distracted by the market. There's all this uncertainty about Greece and Europe."

Wednesday's massive $6 billion offering from Kraft Foods Group Inc. was seen tightening 25 bps across the board when it was freed for trading early in the day and was about 35 bps tighter overall later, a source said.

Investment-grade bank and brokerage credit default swap costs rose on the day.

Banks were wider. Bank of America's CDS costs rose 4 bps to 299 bps bid, 304 bps offered. Citi's CDS costs also increased 4 bps to 265 bps bid, 270 bps offered.

Brokers also widened. Merrill Lynch's CDS costs traded 5 bps wider at 320 bps bid, 330 bps offered. Morgan Stanley's CDS costs traded 2 bps wider at 432 bps bid, 437 bps offered. Goldman Sachs' CDS costs widened 4 bps to 329 bps bid, 334 bps offered.

BAT's three tranches

British American Tobacco International Finance sold $2 billion of bonds (Baa1/BBB+/BBB+) in three maturities, a market source said.

The $500 million of 1.4% three-year notes sold at a spread of Treasuries plus 115 bps. The notes priced at the low end of guidance in the 120 bps area.

A $600 million tranche of 2.125% five-year paper priced at 150 bps over Treasuries. The tranche sold at the tight end of guidance in the 155 bps area.

The third part was $900 million of 3.25% 10-year notes priced at a spread of Treasuries plus 180 bps. The notes were priced at the tight end of talk in the 185 bps area.

All of the tranches had a range of plus or minus 5 bps on price talk.

Barclays Capital Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC were the bookrunners.

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

The issuer was last in the market with a $1 billion offering in two parts on Nov. 14, 2008. That sale included 8.125% five-year notes and 9.5% 10-year paper, each priced at 600 bps over Treasuries.

The financing subsidiary of multinational tobacco company British American Tobacco plc is based in London.

Boston Properties' $1 billion

Boston Properties sold $1 billion of 3.85% senior notes due 2023 (Baa2/A-/BBB) to yield 230 bps over Treasuries, an informed source said.

The paper was priced lower than guidance in the 240 bps area, the source said.

There was about $3.2 billion on the books. The deal wasn't officially upsized, the source said, but the initial size was talked between $500 million and $750 million.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., JPMorgan and Morgan Stanley & Co. LLC were the active bookrunners.

Proceeds are being used for general corporate purposes including investment opportunities and debt reduction.

The real estate investment trust for office properties is based in Boston.

Tampa Electric prices

Tampa Electric sold $300 million of 4.1% 30-year bonds (A3/BBB+/A-) at a spread of Treasuries plus 145 bps, a source close to the trade said.

The bonds priced at the tight end of guidance in the 150 bps area, plus or minus 5 bps.

There was roughly $2 billion of demand on the books, the source said. About $500 million was lost through investor drops when the spread was tightened, the source added.

BNY Mellon Capital Markets LLC, Mitsubishi UFJ Securities (USA), Inc., SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were the bookrunners.

Proceeds are being used to repay maturing long-term debt, to repay short-term debt and for general corporate purposes.

In the secondary market, the new bonds traded at 140 bps bid, 137 bps offered, a trader said.

The Tampa, Fla.-based subsidiary of TECO Energy, Inc. was last in the market with a $100 million reopening of 6.1% notes due 2018 on July 1, 2009.

Kommunalbanken's private deal

Kommunalbanken Norway priced $1.5 billion of 1.375% five-year notes (Aaa/AAA/) at a spread of mid-swaps plus 50 bps, or Treasuries plus 83.95 bps, a source close to the trade said.

The bonds were sold in line with talk in the mid-swaps plus 50 bps area, the source said.

The deal was priced under Rule 144A and Regulation S.

The bookrunners were Citigroup, Daiwa Securities America Inc., JPMorgan and RBC Capital Markets LLC.

Kommunalbanken provides funding to municipalities and is based in Oslo.

EIB gives terms

European Investment Bank sold $3 billion of 1% notes due 2015 (Aaa/AAA/AAA) at a spread of Treasuries plus 65.9 bps, according to an FWP filing with the Securities and Exchange Commission.

The bonds were talked in the mid-swaps plus 32 bps area prior to pricing on Wednesday.

The bookrunners were Bank of America Merrill Lynch, Deutsche Bank and HSBC.

The lender to the European Union is based in Kirchberg, Luxembourg.

Citigroup tightens

In secondary trading, Citigroup Inc.'s notes due 2014 tightened 15 bps to 266 bps bid at Thursday's close, according to a market source.

The bank priced $2.5 billion of the 6.375% notes at 380 bps over Treasuries in mid-2009.

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