Google prices debt debut; Texas Instruments, BNSF, others crowd primary; energy bonds firm

By Andrea Heisinger and Cristal Cody

New York, May 16 - There was plenty of activity in the high-grade bond market on Monday, but the most talked about deal in the primary was the debut debt offering from tech giant Google Inc.

The company announced the $3 billion sale in three parts early in the day, with the book size expected to be massive.

Several accounts bought large amounts, a source close to the deal said. There was more than $10 billion total on the books. The sale was split evenly among tranches, and all were sold at the low end of guidance.

Google wasn't the only sizeable sale in the market. Texas Instruments Inc. sold $3.5 billion in four parts: a tranche of two-year floating-rate notes along with fixed-rate tranches due 2013, 2014 and 2016.

Other sales came from Burlington Northern Santa Fe, LLC, Duke Energy Carolinas, LLC, Kellogg Co., Energizer Holdings, Inc. and Great Plains Energy Inc.

Electric utility Duke Energy Carolinas sold $500 million of 10-year mortgage bonds in a deal that had a do-not-grow provision.

Burlington Northern sold $750 million of notes with maturities in 2021 and 2041. Each priced at the tight end of guidance.

Cereal maker Kellogg sold $400 million of seven-year notes while Great Plains Energy priced $350 million of 10-year notes.

There was a sale from Energizer Holdings done under Rule 144A and Regulation S. The consumer goods company sold $600 million of 10-year notes to refinance debt.

It was a "banner day" for high-grade bonds, a syndicate source said.

"You can't get much better than a Google deal," she added.

Nearly all of the day's sales were sold at the tight end of guidance. Despite huge demand for high-grade bonds, the deals from Google, Energizer and Kellogg came with do-not-grow provisions.

"I think some of these were opportunistic because of [borrowing] rates," the source said. "Google didn't need the cash; they just came in because they could."

The $9.1 billion of sales for the day is roughly half of the $20 billion to $25 billion projected for the week. Tuesday is expected to have several deals, although none likely to top Google or Texas Instruments in size, sources said.

The new deals priced on Monday were mostly stronger in the secondary market, with one standout, traders said. Great Plains Energy's notes due 2021 firmed 10 bps in trading.

Also in the secondary, the new bonds from Google, Duke Energy and Kellogg firmed. BNSF's 10-year notes widened on the bid side.

Overall investment-grade Trace volume stayed low on Monday, down nearly 5% to about $7.7 billion, according to a market source.

The Markit CDX Series 14 North American investment-grade index eased 1 basis point to a spread of 89 bps, Markit Group Ltd. said.

Treasuries were higher, sending yields down 1 bp to 4 bps. Monday marked the day the government hit the $14.3 trillion debt ceiling. The Treasury Department said it would be able to stay out of default until August. Yields fell more on the longer end of the curve, with the 10-year note yield down 2 bps at 3.15% and the 30-year bond yield down 4 bps to 4.27%.

Google's $3 billion debut

Google priced $3 billion of senior notes (Aa2/AA-) in three parts in what was the company's debut bond offering, according to sources close to the trade.

Orders for the trade were "over $10 billion," the source said. This confirmed predictions earlier in the day when books were approaching $10 billion.

"They were pretty much set," he said of the deal. "It's a great company, high-quality name."

There were no outstanding bonds to use for guidance, so outstanding bonds from other high-quality names were used.

"They're trading on the back of Microsoft and were in line with AAA [rated companies]," the source said.

The size of the sale was "pretty much set" at $3 billion, and there wasn't discussion with the company of growing the deal, he said.

A $1 billion tranche of 1.25% three-year notes sold at a spread of Treasuries plus 33 bps. The notes were talked in the 35 bps area and priced tight to that.

The $1 billion of 2.125% five-year notes priced at 43 bps over Treasuries. Guidance was in the 45 bps area and the tranche sold at the tight end of that.

The third part was $1 billion of 3.625% 10-year notes priced at 58 bps over Treasuries. It was talked in the 60 bps area and priced at the tight end of that level.

Active bookrunners were Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC.

Proceeds are being used to repay commercial paper and for general corporate purposes.

In the secondary market, Google's notes due 2014 were mostly flat at 33 bps bid, 31 bps offered, a trader said. The motes due 2016 firmed to 42 bps bid, 39 bps offered. Another trader saw the five-year notes at 40 bps bid, 38 bps offered.

The notes due 2021 were mixed in trading. One trader saw the notes wider on the bid side at 60 bps bid, 57 bps offered, while another quoted the notes at 58 bps bid, 55 bps offered.

The technology company is based in Mountain View, Calif.

Texas Instruments' tranches

Texas Instruments sold $3.5 billion of senior notes (A1/A+) in four parts, a market source away from the sale said.

A $1 billion tranche of two-year floating-rate notes priced at par to yield Libor plus 18 bps. They notes talked in the Libor plus 20 bps area and sold at the tight end of that.

There was also a $500 million tranche of 0.875% two-year fixed-rate notes priced at a spread of 37.5 bps over Treasuries. Guidance was in the 40 bps area and the notes sold tight to that level.

The $1 billion of 1.375% three-year notes priced at Treasuries plus 50 bps. The notes were talked in the 50 to 55 bps range, and they also priced at the low end of that range.

A final part was $1 billion of 2.375% five-year notes priced at 60 bps over Treasuries. This tranche was talked in the range of 60 bps to 65 bps, and the notes were sold at the low end.

Morgan Stanley & Co., Inc. and J.P. Morgan Securities LLC were active bookrunners.

Proceeds are being used to pay a portion of the merger with National Semiconductor Corp. and for general corporate purposes, including a possible common stock repurchase.

The semiconductor designer and manufacturer is based in Dallas.

Kellogg sells seven-years

Kellogg sold $400 million of 3.25% seven-year senior notes (A3/BBB+/A-) at a spread of 80 bps over Treasuries, according to an FWP with the Securities and Exchange Commission.

Bookrunners were Morgan Stanley & Co., Inc. and Wells Fargo Securities LLC.

Proceeds are being used for general corporate purposes, including commercial paper repayment.

Kellogg's new deal also tightened in the secondary market, a trader said. The notes due 2018 firmed to 77 bps bid, 75 bps offered.

The maker of cereal and convenience foods is based in Battle Creek, Mich.

BNSF's $750 million

Burlington Northern Santa Fe sold $750 million of debentures (A3/BBB+) in two parts, a market source said.

The $250 million of 4.1% 10-year notes priced at Treasuries plus 100 bps. The tranche was talked in the range of 100 bps to 105 bps and sold at the tight end of that.

A second tranche was $500 million of 5.4% 30-year bonds priced at a spread of 115 bps over Treasuries. Guidance was in the 120 bps area, and the notes sold at the low end of that.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds are being used for general corporate purposes, including working capital, capital expenditures and debt repayment.

The notes due 2021 widened on the bid side to 103 bps bid, 97 bps offered, a trader said. Also in trading, the bonds due 2041 moved late afternoon at 115 bps bid, 110 bps offered.

The holding company for railroad subsidiaries is based in Fort Worth, Texas.

Duke Energy's mortgage bonds

Duke Energy Carolinas priced $500 million of 3.9% 10-year first and refunding mortgage bonds (A1/A) to yield Treasuries plus 75 bps, said a source close to the deal.

These were talked in the 75 bps area and sold in line with that level.

Bookrunners were Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, RBS Securities Inc. and Wells Fargo Securities LLC.

Proceeds are being used to fund capital expenditures for an ongoing construction program and for general corporate purposes.

Late afternoon, the notes due 2021 firmed more than 3 bps in trading to 72 bps bid, 70 bps offered, a trader said.

The electric subsidiary of Duke Energy Corp. is based in Charlotte, N.C.

Energizer prices tight

Energizer Holdings sold $600 million of 4.7% 10-year notes (Baa3/BBB-) to yield Treasuries plus 155 bps, an informed source said.

Guidance was in the 160 bps area, and the notes were sold at the low end.

The securities sold under Rule 144A and Regulation S.

Bookrunners were Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities Inc.

Proceeds will be used to refinance outstanding debt and for general corporate purposes.

The maker of consumer goods is based in St. Louis.

Great Plains sells 10-years

Great Plains Energy priced $350 million of 4.85% 10-year notes (Baa3/BBB-) at a spread of Treasuries plus 170 bps, according to an FWP with the SEC.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Mitsubishi UFJ Securities (USA) LLC were bookrunners.

Proceeds are going to make an intercompany loan to Kansas City Power & Light Co. Greater Missouri Operations Co.

The notes due 2021 were seen late Monday 10 bps firmer at 160 bps bid, 158 bps offered in the secondary, according to a trader.

The holding company for electric subsidiaries is based in Kansas City, Mo.

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