Deal pipeline continues as ITT spinoffs, AGL tap market; financials firm; trading strong

By Andrea Heisinger and Cristal Cody

New York, Sept. 15 - The flow of deals slowed slightly on Thursday, but names like AGL Capital Corp., Xylem, Inc. and Exelis Inc. continued to price debt amid low borrowing costs.

Future spinoffs of diversified manufacturing company ITT Corp. priced deals after they went overnight, partly due to a packed new issue market on Wednesday.

Defense technology unit Exelis priced $650 million of debt with 10- and-30-year maturities.

And future water technology spinoff Xylem sold $1.2 billion of paper due 2016 and 2021. Each of the deals is guaranteed by ITT until the completion of the spinoffs.

AGL priced $500 million of notes, including a new 10-year note and the reopening of its 5.875% paper due 2041.

There was a reopening of two notes from GATX Corp. that totaled $150 million. The transportation company is using proceeds to repay commercial paper, among other purposes.

Kansas City Power & Light Co. priced $400 million of 30-year senior notes to repay outstanding debt.

Split-rated name El Paso Pipeline Partners Operating LLC was in the market with a $500 million deal that priced off the high-grade syndicate desk. The 10-year notes are guaranteed by El Paso Pipeline Partners LP.

There was another sovereign sale from a Canadian province following Wednesday's sale from Ontario. The Province of British Columbia sold $750 million of 10-year bonds.

This issuer was joined in the market by the Council of Europe Development Bank, which priced $1 billion of five-year notes, also AAA rated.

Both Rio Tinto Finance (USA) Ltd. and DCP Midstream LLC released terms for their debt sales done Wednesday.

The volume decreased in the primary for the day, but there was still plenty of new paper being sold despite some negative headlines.

"That UBS story kind of gave us pause, but everyone went ahead," a syndicate source said. He was referring to news of a UBS trader who lost $2 billion on trades for the Swiss bank.

Overall trading volume was up slightly to about $12.5 billion.

El Paso Pipeline Partners' new notes firmed more than 10 basis points in trading. All three of Rio Tinto Finance's tranches were stronger going out.

The Province of British Columbia's new bonds firmed about 1 bp on the bid side, a trader said.

DCP Midstream's new notes due 2021 tightened 5 bps in trading.

The Markit CDX Series 16 North American high-grade index firmed 4 bps to a spread of 125 bps on Thursday.

"Very strong trading" on the day, a trader said. "Generically, everything's probably 5 [bps] to 10 better in [the telecommunications sector]. Financials are 5 to 15 better."

Bank of America Corp.'s notes were seen trading about 15 bps better.

American Express Credit Corp.'s new notes also traded better.

Credit default swaps costs to protect bank and broker paper declined, indicating increased investor confidence in sector, a trader said.

Bank of America's fell 15 bps to 310 bps, 320 bps. J.P. Morgan's CDS costs fell 3 bps to 117 bps, 122 bps.

On the brokerage side, Morgan Stanley's CDS costs were down 12 bps to 303 bps, 313 bps. Merrill Lynch's CDS costs fell 10 bps to 360 bps, 375 bps. Goldman Sachs' CDS costs also were down 10 bps to 215 bps, 225 bps.

Treasuries dropped on the European Central Bank's latest measure. The benchmark 10-year Treasury note yield climbed 9 bps to 2.08%. The 30-year bond yield rose to 3.36% from 3.27%.

Exelis does debut deal

Exelis priced $650 million of senior notes (Baa3/BBB/BBB+) in two tranches, an informed source said.

Both this and the Xylem sale went overnight from Wednesday, partly due to the sheer volume of deals from that day and the fact that neither name had outstanding paper to use for price guidance.

Price talk for the Exelis sale was "all over the place," said a source who worked on it.

"Finding a clearing range and credits - for triple-B names especially - was hard today," he said. "There was no benchmark."

The downsized $250 million of 4.25% 10-year notes priced at a spread of Treasuries plus 335 bps. The size of the tranche was initially $350 million, but was reallocated into the 30-year bonds.

An upsized second tranche was $400 million of 5.55% 30-year bonds sold at a spread of 350 bps over Treasuries. The tranche size was initially $300 million.

Barclays Capital Inc., Citigroup Global Market Inc. and J.P. Morgan Securities LLC were active bookrunners.

The notes were sold under Rule 144A and Regulation S.

Proceeds are being used for general corporate purposes, including working capital and a special distribution to parent company ITT Corp.

The sale is guaranteed by ITT until Exelis' split from the company.

The defense technology segment - and eventual spinoff - from diversified manufacturing company ITT is based in White Plains, N.Y.

Xylem's $1.2 billion

Xylem priced $1.2 billion of senior debt (Baa2/BBB/BBB) in two tranches, a market source said.

Full terms were not available at press time.

The $600 million of five-year notes was priced at a spread of Treasuries plus 265 bps.

A second tranche was $600 million of 10-year notes priced at a spread of 280 bps over Treasuries.

J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities LLC ran the books.

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

Proceeds are being used for general corporate purposes and to pay a special cash distribution to parent company ITT Corp.

The notes are guaranteed by ITT until the segment's split from the company.

In the gray markets, Xylem's notes due 2015 were seen at 261 bps offered, a trader said. The notes due 2021 traded in the grays at 277 bps bid.

The water technology segment, and eventual spinoff, from diversified manufacturing company ITT is also based in White Plains, N.Y.

AGL's $500 million

AGL Capital sold $500 million of new and reopened senior debt (Baa1/BBB-), a source who worked on the deal said.

A $400 million tranche of 3.5% 10-year notes was priced at a spread of 160 bps over Treasuries.

AGL also reopened its 5.875% notes due 2041 to add $100 million. They were priced to yield Treasuries plus 165 bps.

Total issuance is $600 million, including $500 million of paper priced on March 16 at 150 bps over Treasuries.

Goldman Sachs & Co., Morgan Stanley & Co. LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were active bookrunners.

Proceeds will be partially used to pay the cash consideration and expenses for the merger with natural gas distributor Nicor Inc., to repay short-term debt or for general corporate purposes.

The deal is guaranteed by AGL Resources Inc.

The finance arm of energy services holding company AGL is based in Atlanta.

GATX retaps two bonds

GATX reopened two separate issues of senior notes (Baa1/BBB/BBB) to add $150 million total, an informed source said.

A 3.5% note due 2016 was reopened to add $100 million. The notes were priced at a spread of Treasuries plus 250 bps.

Total issuance is $350 million, including $250 million priced on Nov. 16, 2010 at Treasuries plus 200 bps.

A 4.85% note due 2021 was also reopened to add $50 million. The notes were sold at Treasuries plus 275 bps.

Total issuance is $300 million, including $250 million sold on May 24 at 175 bps over Treasuries.

Bookrunners were Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC. Lead manager was Bank of America Merrill Lynch.

Proceeds are being used to repay commercial paper maturing within 30 days and for general corporate purposes, including working capital and capital expenditures.

The transportation leasing service is based in Chicago.

KC P&L sells long bond

Kansas City Power & Light sold $400 million of 5.3% 30-year senior bonds (Baa2/BBB) to yield Treasuries plus 200 bps, a market source close to the trade said.

Bookrunners were Barclays Capital Inc., RBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are being used to repay all or a portion of outstanding commercial paper and to repay all or a portion of $150 million of 6.5% notes due Nov. 15 at maturity.

The electric utility is based in Kansas City, Mo.

El Paso's split paper

El Paso Pipeline Partners Operating sold $500 million of 5% 10-year split-rated senior notes (Ba1/BB/BBB-) at a spread of Treasuries plus 300 bps, according to an informed source and FWP with the Securities and Exchange Commission.

The debt was sold at the low end of initial price talk in the 300 to 312.5 bps range and in line with revised guidance of 300 bps, a source said.

There was a do-not-grow provision on the sale, the source said.

J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. were active bookrunners. Passives were BNP Paribas Securities Corp. and Scotia Capital USA Inc.

Proceeds are being used to reduce outstanding debt under a revolving credit facility and for general partnership purposes.

The deal is guaranteed by El Paso Pipeline Partners LP.

In the secondary markets, the notes due 2021 firmed to 284 bps bid, 281 bps offered, a trader said.

Another source saw the notes at 285 bps bid, 280 bps offered.

The natural gas transportation and storage company is based in Houston.

British Columbia's 10-years

The Province of British Columbia sold $750 million of 2.65% 10-year bonds, series BCUSG-6, (Aaa/AAA/AAA) at a spread of mid-swaps plus 40 bps, or Treasuries plus 57.95 bps, according to an FWP with the SEC.

Bank of America Merrill Lynch, CIBC World Markets Corp., HSBC Securities (USA) Inc. and RBC Capital Markets Corp. were bookrunners.

In the secondary market, the bonds were seen moderately tighter at 56 bps bid, a trader said.

The issuer is based in Victoria.

COE's sovereign

Council of Europe Development Bank priced $1 billion of 1.25% five-year notes (Aaa/AAA/AAA) to yield mid-swaps plus 9 bps, or Treasuries plus 37.2 bps, according to an FWP with the SEC.

Bookrunners were Goldman Sachs & Co., HSBC Securities (USA) Inc., J.P. Morgan Securities LLC and UBS Securities LLC.

The institution for the financing of social projects is based in Paris.

Rio Tinto gives terms

Rio Tinto Finance (USA) gave terms for its $2 billion sale of guaranteed senior bonds (A3/A-/A-) sold the previous day in three parts, according to an FWP with the SEC.

A $500 million tranche of 2.25% five-year notes sold at a spread of Treasuries plus 148 bps.

The second part was $1.15 billion of 3.75% 10-year notes priced at a spread of 178 bps over Treasuries.

Finally, the company reopened its 5.2% of notes due 2040 to add $350 million. The notes were priced at Treasuries plus 178 bps. Total issuance is $1.15 billion, including $500 million issued on Nov. 2, 2010 and $300 million issued on May 20.

Barclays Capital Inc., BNP Paribas Securities Corp. and Morgan Stanley & Co. LLC were active bookrunners.

The deal is guaranteed by Rio Tinto plc and Rio Tinto Ltd.

Proceeds are being used for general corporate purposes.

Rio Tinto Finance last priced paper in a $2 billion deal in three tranches on May 17.

In trading, the notes due 2016 firmed to 133 bps bid, 130 bps offered, a trader said.

The second tranche of notes due 2021 was quoted stronger at 171 bps bid, 166 bps offered. The bonds due 2040 were seen going out tighter at 163 bps bid, 158 bps offered.

The mining company is based in Melbourne and London.

DCP's 10-year terms

DCP Midstream sold an upsized $500 million of 4.75% 10-year debt (Baa2/BBB) to yield Treasuries plus 275 bps, a market source said.

The deal size was increased from $500 million.

They were sold under Rule 144A and Regulation S.

J.P. Morgan Securities LLC, RBS Securities Inc. and SunTrust Robinson Humphrey Inc. were bookrunners.

In the secondary market, DCP Midstream's new notes due 2021 firmed to 270 bps bid, 267 bps offered, a trader said.

The joint venture between Spectra Energy and ConocoPhillips is based in Denver.

AmEx firms

American Express Credit's new notes traded 5 bps better on Thursday, a trader said.

The company sold $1.3 billion of 2.8% five-year senior medium-term notes (A2/BBB+/A+) at Treasuries plus 192 bps, an informed source said.

The arm of financial services company American Express Co. is based in New York City.

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.