IBM, RGA, Diageo, Woodside, Novant sell bonds in busy primary; Burlington Northern gains

By Andrea Heisinger and Paul Deckelman

New York, Nov. 3 - The new issue market for high-grade bonds was resuscitated on Tuesday with issues pricing from International Business Machines Corp., Reinsurance Group of America, Inc., Diageo Finance BV, Woodside Finance Ltd., Novant Health Inc. and Vale Overseas Ltd.

Yale University also sold bonds on the municipal side of the investment-grade market.

Half of the day's deals came from overseas, with Woodside hailing from Australia and Diageo from London. Vale Overseas is a unit of a Brazilian company.

Tuesday also marked the beginning of a two-day Federal Reserve meeting that ends Wednesday, and will likely leave the primary market relatively barren for the coming day.

IBM priced Tuesday's largest offering at $2 billion in two tranches of fixed- and floating-rate notes. The rest of the sales were small by comparison.

Reinsurance Group priced an upsized offering of $400 million in 10-year senior notes.

Diageo Finance priced $500 million of five-year notes. The Woodside deal was upsized and done via Rule 144A. It totaled $700 million in five-year notes.

Vale Overseas priced $1 billion of 30-year bonds.

The smallest investment-grade deal of the day came from Novant Health, which priced $100 million of seven-year notes.

Among the established issues in the secondary arena on Tuesday, a market source said the CDX Series 13 North American high-grade index was 1 basis point tighter versus Monday's level, at a mid bid-asked spread level of 107 bps.

Advancing issues trailed decliners by around a five-to-four ratio.

Overall market activity, reflected in dollar-volume totals, was up 6% from Monday's pace.

Spreads in general were seen tighter, in line with mostly higher Treasury yields; for instance, the yield on the benchmark 10-year note eased by 5 bps on Tuesday to 3.47%.

Woodside Finance's new bonds were seen to have tightened solidly from the spread versus Treasuries at which they priced earlier in the day.

There was a slight firming in Diageo's new bonds.

IBM's issue was little seen in secondary.

Burlington Northern Santa Fe Corp. tightened a little on news the company will be bought by Warren Buffett's Berkshire Hathaway Inc.

Brazilian state energy company Petrobras International Finance remained active Tuesday, as it has been recently.

IBM offers $2 billion in two parts

Armonk, N.Y.-based IBM sold $2 billion of notes in two tranches.

A $750 million tranche of two-year floating-rate notes sold at par to yield three-month Libor plus 4 basis points. This was slightly tighter than talk of Libor plus 5 bps, a source away from the deal said. The tranche is non-callable.

The $1.25 billion tranche of 2.1% unsecured notes due 2013 priced at a spread of Treasuries plus 70 bps. The notes priced in line with guidance of 70 bps.

The company last sold bonds on Oct. 9, 2008. That deal totaled $4 billion in three tranches.

Tuesday's sale was "decently oversubscribed," a source close to it said.

"Everyone likes IBM," he said of the investor interest.

Citigroup Global Markets, HSBC Securities and Morgan Stanley ran the books for the deal from the computer and IT company.

Proceeds will be used for general corporate purposes.

Diageo sells $500 million

London-based alcoholic drink maker Diageo Finance sold $500 million of 3.25% unsecured notes due in 2015 by early afternoon at Treasuries plus 97 bps.

They were talked in the 100 bps area, and priced at the tight end of that, a source away from the sale said.

The deal is guaranteed by parent company Diageo plc.

Citigroup Global Markets, Deutsche Bank Securities and Morgan Stanley ran the books.

Proceeds are being used for general corporate purposes.

Woodside upsizes sale

The Perth, Australia-based funding arm of Woodside Petroleum Ltd., Woodside Finance, priced an upsized $700 million of 4.5% five-year notes at 230 bps.

Price talk was initially 237.5 to 250 bps, a source away from the sale said. It was later revised to the 235 bps area, and priced at the tight end of that.

The size of the Rule 144A deal was increased from $500 million.

Citigroup, Deutsche Bank and J.P. Morgan Securities were bookrunners.

RGA upsizes by $100 million

Reinsurance Group of America priced an upsized $400 million of 6.45% 10-year senior unsecured notes at 300 bps over Treasuries, an informed source said.

The deal size was originally announced at $300 million by the life reinsurance provider based in St. Louis.

Barclays Capital and UBS Investment Bank were bookrunners.

New deals spice up primary

After a drought of new bond sales in the high-grade market, there was a healthy amount unleashed on a day that was expected to be quiet.

"I was a little surprised," a syndicate source said, adding that his desk had deals for later in the week.

"I guess they liked the market this morning."

He also guessed that the companies that issued on Tuesday wanted to get in ahead of the conclusion of the two-day Fed meeting on Wednesday.

There aren't any large changes expected in policy, but there could be a market reaction nonetheless.

A second source agreed, and said that Wednesday "will likely not see any [new deals]."

A couple of offerings are in the works, but aren't expected to price until Thursday "at the earliest," he said.

Vale sells $1 billion

Vale Overseas priced a $1 billion deal of 6.875% 30-year bonds at 265 bps over Treasuries, a market source said.

Deutsche Bank, HSBC Securities and J.P. Morgan were tapped as bookrunners by the Brazilian company. It is a subsidiary of Vale SA.

Novant does small deal

Non-profit health care provider Novant Health sold $100 million of 5.345% seven-year notes at Treasuries plus 230 bps, a market source said.

The notes priced at the wide end of guidance that was between 225 and 230 bps, the source said.

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

The issuer is based in Winston-Salem, N.C.

Woodside looks like a winner

A trader saw Woodside Finance's new 4.50% notes due 2014 having come in to a spread of 215 bps bid, versus the 230 bps level at which the $700 million of bonds - upsized from $500 million originally - priced.

Another trader saw the bonds get even better, seeing them last at around 200 bps bid.

IBM relatively inactive

IBM's new bonds weren't seen much in aftermarket dealings.

A trader saw the 2.10% notes due 2013 at 70 bps over, unchanged from the level at which that $1.25 billion of new bonds priced earlier.

Diageo tightens slightly

When the new Diageo bonds were cleared for secondary, a trader saw them at 93 bps bid, 90 bps offered.

That was in slightly from the 97 bps level at which those bonds had priced earlier.

Burlington Northern quoted tighter

A trader said that Burlington Northern's bonds were heard to have tightened about 10 bps on the news that the big railroad company is to be bought by investor Warren Buffett's Berkshire Hathaway in a deal valued at $4 billion, including assumption of $10 billion of Burlington Northern debt.

The trader said that "it's not a bond that trades very often anyway."

However, on Tuesday, that was not the case. A market source saw its 4.70% notes due 2019 quoted around 121 bps over, and said that as of mid-afternoon some $53 million of the bonds had changed hands.

Petrobras paper busy

A market source said that the recently priced Petrobras International Finance Co. issue was again actively traded on the day, with over $133 million of the Brazilian state energy concern's new 30-year bond having changed hands by mid-afternoon, according to the Trace bond-tracking service.

Another trader, nearer the close, estimated the total volume in the issue at around $150 million.

The source quoted those 6.875% notes due 2020 at 250 bps over, on heavy volume, in by a couple of bps from Monday's level.

Meantime, its 5.75% notes due 2020 traded at 210 bps bid, in a little from 212 on Monday.

Some $91 million of the bonds were seen having traded by mid-afternoon, the source said.

The $2.5 billion 2020 issue had priced at 238 bps on Oct. 23.

The other half of that $4 billion, two-tranche offering, the 6.875s, had priced at 270 bps on Oct. 23.

A trader said that "it continues to be an actively traded name," day in and day out.

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