Borrowers get US$8.4bn done despite change of tone

By Danielle Robinson and Mike Gambale

NEW YORK, Jan 12 (IFR) - Investors needing to put cash to work helped eight borrowers place US$8.4bn of bonds in the investment-grade market on Monday, despite a steady deterioration in tone as another drop in oil prices cast gloom over risk assets.

AIG, Nationwide Building Society (LSE: CCDS.L - news) , EcoLab (NYSE: ECL - news) , Northeast Utilities, DDR Corp (NYSE: DDR - news) and Brookfield Asset Management (Toronto: BAM-A.TO - news) announced deals as equity futures pointed to a positive open, while high quality Double A rated ANZ and Kexim were already out with deals overnight from Asia.

But stocks sold off later in the day as oil prices dropped by more than 5%, while Treasury yields fell in a flight to quality, with the 10-year yield back under the 2% level at 1.9% and the 30-year at 2.49%.

"The market felt okay to begin with but tailed off this afternoon," said one senior syndicate manager.

"We saw a bit of fatigue in some of the frequent borrowers," the manager said.

Still, most issuers were able to get enough price tension in their books to pull in spreads by around 5bp-20bp from initial price thoughts to launch, and most new issue concessions were in the single digits.

That, bankers said, was testament to investors' need to put cash to work.

"We've seen rallies in the long end of the Treasury curve and so the backdrop is volatile, but if you look at all the trades today, all seemed to perform well in terms of moving in from IPTs," said one debt capital markets coverage banker.

As the second full week of 2015 got under way, frequent issuers seemed to need to offer more in the way of NIC (NasdaqGS: EGOV - news) .

The amount of issuance from Australian banks over the past nine months, for instance, appeared to dampen ANZ's ability to get the kind of aggressive pricing that it's used to.

ANZ priced a US$600m three-year fixed-rate note and US$500m of three-year floaters on US$1.4bn of books.

The Treasuries plus 65bp pricing level on the fixed was only 5bp tighter than 70bp area IPTs, and was also on the wider end of its guidance.

The bank paid a roughly 13bp concession over the G+52bp trading level of Westpac's recent 1.5% December 2017s, and came about 4bp wide of its own 1.25% June 2017s at G+61bp.

CBA 1.4% September 2017s were seen trading at around G+61bp last Friday.

AIG on the other hand used the scarcity of long-dated paper offerings compared with the number of short-dated deals to draw US$5.5bn of demand for US$1.2bn of 20-year notes and US$800m of 40-year securities.

The rally in Treasuries at the long end helped AIG achieve attractive coupons on its 20-year and 40-year tranches, while it still offered decent new issue spreads.

By issuing in the odd 20 and 40-year maturities, AIG avoided adding to its 30-year maturity tower, where it issued US$2.25bn worth of bonds last year.

Those 4.5% July 2044s were trading around 151bp over Treasuries. AIG started out with attractive IPTs of 155bp area on the 20 and 195-200bp on the 40-year, and was able to pull those in to pricing of 140bp and 190bp respectively.

AIG looked to pay about 9bp of NIC on the 20-year, assuming a 20bp 20s/30s curve and fair value on a new 30-year at around 160bp.

At 190bp the 40-year priced 30bp wider than the 160bp fair value level for a 30-year, implying a 10bp NIC versus the 20bp 30s/40s curve gleaned from the trading levels of other similarly-rated industrials with paper longer than 30 years.

Nationwide also received a strong response to its first Yankee bond issue in five years, a US$1bn five-year issued at 98bp, the tight end of guidance, on US$2.6bn of demand after starting out with IPTs in the low 100s.

Nationwide first roadshowed the trade in September and is believed to view the transaction as a strategic re-entry into the Yankee market.

It decided to wait until now to nurture a strong following among accounts and to explain the building society business model and what the appropriate pricing difference should be versus standalone bank comps like Lloyds and Abbey National.

"I think 90bp is fair value if you consider that they should trade wide of Lloyds and Abbey National," said one banker away from the deal.

"Building societies are not something that the US market understands well, because we don't have them here."

It has outstanding 2020s trading at a cash price of US$118 for 100bp over Treasuries or G+98bp. Deducting 8bp to adjust for the high dollar price suggests fair value for a new five-year at around 90bp.

Other comparables include Lloyds TSB Bank's 2.35% September 2019s at T+70bp, or G+78bp, and Abbey National Treasury Services' 2.35% September 2019s, which trade at T+71bp, or G+79bp.

Barclays (LSE: BARC.L - news) is another comparable, with outstanding 2.5% February 2019s at T+54bp or G+75bp.

AMERICAN INTERNATIONAL GROUP (NYSE: AIG - news)

American International Group, Inc, Baa1/A-/BBB+ (s/s/s), announced a US$ benchmark SEC-Reg (Madrid: SL001.MC - news) senior unsecured 2-part note offering via Citigroup (NYSE: C - news) , JP Morgan, US Bank and Wells Fargo as active, with BNP Paribas (Xetra: 887771 - news) , Deutsche Bank (Xetra: 514000 - news) , HSBC and Morgan Stanley (Xetra: 885836 - news) as passive. Structure will consist of a 20-year (1/15/2035) and a 40-year (1/15/2055). Make-whole call applies, par call 6-months prior to maturity (both tranches). UOP: General Corporate Purposes, which may include retirement of debt. Settlement date 1/15/2015.

IPTs: 20-year T+155bp area, 40-year T+195-200bp

PRICE GUIDANCE: 20-year T+140-145bp, 40-year T+190-195bp.

LAUNCH: US$2bn 2-part deal.

- US$1.2bn 20-year at T+140bp

- US$800m 40-year at T+190bp

PRICED: US$2bn 2-part deal. First (Other OTC: FSTC - news) pay 7/15/2015.

- US$1.2bn. Cpn 3.875%. Due 1/15/2035. Ip USD99.669. Yld 3.899%. T+140bp.

- US$800m. Cpn 4.375%. Due 1/15/2055. Ip USD99.550. Yld 4.399%. T+190bp.

BOOK: Total (Swiss: FP.SW - news) book US$5.5bn. 20-year: US$3.5bn, 40-year: US$2bn

NIC: 20-year: 9bp, 40-year: 10bp

COMPS:

4.500% July 16, 2044 at T+151bp (US$108)

AUSTRALIA & NEW ZEALAND BANKING GROUP

Australia & New Zealand Banking Group NY branch, Aa2/AA- (s/s), announced a USD benchmark 2-tranche senior unsecured note offering via joint-bookrunners ANZ, Citigroup, Goldman Sachs and Royal Bank of Canada (Other OTC: RBCDF - news) . Structure will include a 3-year fixed 3(a)(2) exempt and/or 3-year 144a/RegS frn. UOP: GCP. Settlement date 1/16/2015.

IPTs: 3-year FXD T+70bp, 3-year FRN Midswaps+50bp.

PRICE GUIDANCE: 3-year FXD T+65bp area (+/-2bp), 3-year FRN 3mL+equivalent.

LAUNCH: US$1.1bn 2-tranche deal.

- US$600m 3-year FXD at T+65bp

- US$500m 3-year FRN at 3mL+44bp.

PRICED: US$1.1bn 2-tranche deal.

- US$600m. Cpn 1.50%. Due 1/16/2018. Ip USD99.895. Yld 1.536%. T+65bp.

- US$500m. Cpn 3mL+44bp. Due 1/16/2018. Ip par. 3mL+44bp.

BOOK: US$1.4bn

NIC: 13bp to Westpac comp

COMPS:

1.250% June 13, 2017 at G+61bp

Westpac (Aa2/AA-) 1.500% Dec 1, 2017 at G+52bp

CBA (Aa2/AA-) 1.400% September 8, 2017 at G+55bp

EXPORT-IMPORT BANK OF KOREA (KEXIM)

Export-Import Bank of Korea, Aa3/A+/AA-, announced a SEC-registered US$ benchmark 2-tranche senior unsecured deal via Bank of America (Swiss: BAC.SW - news) , Barclays, Citigroup, Deutsche, HSBC, JP Morgan, Royal Bank of Scotland (LSE: RBS.L - news) and Samsung Securities. Structure will consist of 5-year and 10 year.

IPTs: 5-year T+105bp, 10-year T+120bp

PRICE GUIDANCE: 5-year T+90-95bp, 10-year T+100-105bp

LAUNCH: US$2.25bn 2-tranche deal

- US$1bn 5-year at T+90bp

- US$1.25bn 10-year at T+102.5bp

PRICED: US$2.25bn 2-tranche deal

- US$1.00bn. Cpn 2.250%. Due 1/21/2020. Ip USD99.821. Yld 2.288%. T+90bp.

- US$1.25bn. Cpn 2.875%. Due 1/21/2025. Ip USD99.483. Yld 2.935%. T+102.5bp.

BOOK: Total books US$6bn. 5-year: US$2.7bn, 10-year: US$3.3bn

COMPS:

2.375% August 12, 2019 at G+70bp

4.000% January 14, 2024 at G+91bp (US$109)

DDR CORP

DDR Corp, Baa2/BBB-/BBB- (s/s/s), announced a US$350m 10-year (2/1/2025) SEC-Reg senior unsecured notes via Deutsche Bank, Jefferies and Wells Fargo as active, with Bank of New (KOSDAQ: 160550.KQ - news) York, Goldman Sachs (NYSE: GS-PB - news) and Royal Bank of Scotland as passive. Make-whole call applies, along with a par call 3-months prior to maturity. UOP: To repay debt under the US$350mm term loan, and if available, under the US$750mm unsecured revolving credit facility and GCP. Settlement 1/22/2015.

IPTs: T+190-195bp

PRICE GUIDANCE: T+185bp area (+/-5bp)

LAUNCH: US$500m (upsized from US$350m) 10-year at T+180bp.

PRICED: US$500m. Cpn 3.625%. Due 2/1/2025. Ip USD99.260. Yld 3.714%. T+180bp.

BOOK: Final book US$1.6bn (peak US$1.75bn)

NIC: Flat (add 10bp for maturity extension, FV=G+180bp

COMPS:

3.500% January 15, 2021 at G+147bp

3.375% May 15, 2023 at G+170bp

NATIONWIDE BUILDING SOCIETY

Nationwide Building Society, A2/A/A (n/n/s), announced a USD benchmark 5-year (1/21/2020) senior unsecured note offering via Barclays, Citigroup, Credit Suisse (NYSE: CS - news) and UBS (NYSEArca: FBGX - news) . 144a/RegS. UOP: GCP. Settlement date 1/21/2015.

IPTs: Low 100s

PRICE GUIDANCE: T+100bp area (+/-2bp)

LAUNCH: US$1bn at T+98bp

PRICED: US$1bn. Cpn 2.350%. Due 1/21/2020. Ip USD99.967. Yld 2.357%. T+98bp.

BOOK: US$2.6bn

NIC: 8bp

COMPS:

NWIDE 6.250% February 25, 2020 at G+98bp (US$118)

BACR (A2/A) 2.500% February 20, 2019 at G+75bp

LLOYDS (A1/A) 2.350% September 5, 2019 at G+78bp

ABBEY (A2/A) 2.350% September 10, 2019 at G+79bp

NORTHEAST UTILITIES (NYSE: NU - news)

Northeast Utilities, Baa1/BBB+/BBB+ (s/p/s), announced a US$450m (no grow) 2-tranche SEC-Reg unsecured notes via Bank of America, Barclays and Royal Bank of Canada as active, with JP Morgan and Mitsubishi as passive. Co-manager RAM. Structure will consist of a US$150m (no grow) 3-year (1/15/2018) FXD and a US$300m (no grow) 10-year (1/15/2025) FXD. Make whole call applies to both tranches, 3-month par call prior to maturity applies to just 10-year. UOP: To repay a portion of outstanding short-term debt. Settlement date 1/15/2015.

IPTs: 3-year FXD T+90bp area, 10-year T+137.5bp area

PRICE GUIDANCE: 3-year T+80bp area (+/-5bp), 10-year T+130bp area (+/-5bp).

LAUNCH: US$450m 2-tranche deal.

- US$150m 3-year at T+75bp

- US$300m 10-year at T+125bp

PRICED: US$450m 2-tranche deal. First pay 7/15/2015.

- US$150m. Cpn 1.60%. Due 1/15/2018. Ip USD99.920. Yld 1.641%. T+75bp. MWC T+12.5bp

- US$300m. Cpn 3.15%. Due 1/15/2025. Ip USD99.898. Yld 3.162%. T+125bp. MWC T+20bp.

BOOK: Total book US$2.35bn. 3-year: US$750m, 10-year: US$1.6bn

NIC: 3-year: Flat (vs. 1.45% '18s)

10-year: 4bp (vs. 2.8% '23)

COMPS:

2.800% May 1, 2023 at G+121bp

1.450% May 1, 2018 at G+75bp

DUK (A3/BBB) 3.75% April 15, 2024 at G+111bp

BRKHEC (A3/BBB+) 3.500% February 1, 2025 at G+122bp (US$122)

SRE (Baa1/BBB+) 3.550% June 15, 2024 at G+120bp

CMS (Baa2/BBB) 3.875% March 1, 2024 at G+122bp

DTE (A3/BBB) 3.50% June 1, 2024 at G+120bp

D (Baa2/BBB+) 3.625% December 1, 2024 at G+129bp

PPL (Baa3/BBB-) 3.950% March 15, 2024 at G+132bp

ECOLAB INC

EcoLab Inc, Baa1/BBB+, announced a US$600m SEC-Reg 2-tranche senior notes via Citigroup and JP Morgan. Structure will consist of a 3-year and a 5-year. US$101 COC put.

IPTs: 3-year T+80bp area, 5-year T+105bp area.

PRICE GUIDANCE: 3-year T+70bp area, 5-year T+90bp. Area = +/-2bp

LAUNCH: US$600m 2-tranche deal.

- US$300m 3-year at T+68bp

- US$300m 5-year at T+88bp

PRICED: US$600m 2-tranche deal.

- US$300m. Cpn 1.55%. Due 1/12/2018. Ip USD99.962. Yld 1.563%. T+68bp. MWC T+10bp.

- US$300m. Cpn 2.25%. Due 1/12/2020. Ip USD99.953. Yld 2.260%. T+88bp. MWC T+15bp.

BOOK: Total book US$2.6bn. 3-year: US$900m, 5-year: US$1.7bn

NIC: 3-year: Flat (vs. 4.35% '21s, maturity differential and high dollar price worth about 22bp, FV=68bp)

5-year: Flat (3/5s curve worth 20bp)

COMPS:

4.350% December 8, 2021 at G+90bp (US$111)

BROOKFIELD ASSET MANAGEMENT

Brookfield Asset Management, Baa2/A-/A, announced a US$350m 10-year SEC-Reg senior unsecured notes via Citigroup and Credit Suisse. Make-whole call plus a 3-month par call. US$101 COC put. UOP: GCP, the net proceeds may be temporarily used to reduce short term borrowings Settlement date T+3.

IPTs: T+212.5bp area

PRICE GUIDANCE: 4.00% (the #)

LAUNCH: US$500m (upsized from US$350m) 10-year at 4.00%

PRICED: US$500m. Cpn 4.00%. Due 1/15/2025. Ip par. Yld 4.00%.

BOOK: US$950m

(Reporting by Mike Gambale and Danielle Robinson; Editing by Natalie Harrison and Marc Carnegie)