Roaring high-grade market easily tops issuance forecast

By Mike Gambale and Danielle Robinson

NEW YORK, Nov 5 (IFR) - The US high-grade market has easily met syndicate forecasts of a minimum US$30bn for the week's issuance after another US$12bn of supply printed in a very busy Wednesday session.

Eleven deals from financials and corporates brought the week's tally to US$28.35bn - and US$30.85bn if the General Motors US$2.5bn crossover deal from Tuesday is included.

"Supply just keeps coming and more is expected tomorrow," said one syndicate manager. "I wouldn't be surprised if we end up at US$40bn-US$45bn for the week."

Overall market tone was positive, driven by higher equities after the Republican party took majority control of both houses of Congress in Tuesday's midterm elections.

New issue concessions are still higher than they were earlier in the year, but are needed to keep investors on board in a month when at least US$110bn of supply is expected.

Among the flood of acquisition financing deals in the US pipeline, Walgreen (NYSE: WAG - news) looks set to announce a triple-currency bond on Thursday.

The drug store giant is raising US$14bn of debt financing, US$10bn of which is likely to be in bonds, according to sources. Another US$2bn will be done in commercial paper and US$2bn in the loan market.

Proceeds will primarily be used to help pay the cash portion of its acquisition of the remaining 55% of Alliance Boots stock it doesn't already own.

"The debt they issue will be enough to fund the acquisition (contributing to the cash portion) to take out the Alliance Boots debt and to give the combined entity post-merger the right amount of liquidity," a London market source said.

Bank of America Merrill Lynch, Deutsche Bank (Xetra: 514000 - news) and Goldman Sachs are global coordinators and active bookrunners on the euro and sterling tranches, which are expected to follow a dollar piece scheduled for issuance tomorrow.

Bookrunners on the dollar portion, which is expected to be the biggest tranche by far, are BAML, DB, GS (KSE: 078935.KS - news) , HSBC, JP Morgan, Morgan Stanley (Xetra: 885836 - news) and Wells Fargo (Swiss: WFC.SW - news) .

Walgreen hasn't issued in the US dollar market since 2012, when it printed five, 10 and 30-year notes maturing in 2017, 2022 and 2024.

The Baa2/BBB rated company's 1.8% 2017s were quoted at T+81bp or a G-spread of 85bp on Wednesday; its 3.1% 2022s at T+136bp or G+127bp; and its US$500m 4.4% 2042s at T+165bp.

An obvious comp is CVS 2.25% August 2019s, quoted Wednesday at T+70bp or G+78bp, while the 3.375% August 2024s were quoted at G+107bp.

CVS also has some 5.3% 2043s at T+135bp. Walgreen also has a US$500m 4.4% 2042 bonds outstanding, quoted at around 165bp.

Deal highlights on Wednesday included a US$3bn 10-year subordinated Tier 2 issue by the Bank of China (HKSE: 3988-OL.HK - news) , which drew a book of US$18.3bn and priced at T+270bp, 30bp tighter than initial price thoughts.

HSBC received a strong US$4.75bn order book for its US$2.45bn offering of three and five fixed and floating-rate notes, which priced a good 10bp tighter than IPTs, at 55bp on the three-year fixed and 75bp on the five.

HSBC paid just 6bp of new issue concession versus its secondaries.

American Express was another favorite on the day, offering its first perpetual non-call five-year preferred.

The US$750m Tier 1 security was done in the institutional market, had a floating rate back-end, and received a US$3.5bn order book.

That enabled Amex to price at just 5.2%, versus 5.375%-5.5% IPTs and well through most other yield-to-call levels quoted on other US bank perpNC5s done in the institutional market.

"Amex has a lot of rarity value," said one market participant. "They only have US$1.5bn to do, so it's unlikely they'll be doing much more than three preferred trades."

HSBC

HSBC USA Inc, A2/A+, announced a US$ benchmark SEC registered 4-part senior note offering that consists of a 3-year fixed and floating rate notes, and a 5-year fixed and floating rate notes. HSBC is sole books. UOP: GCP, which may include investments in and advances to affiliates or subsidiaries, including the Bank. Settle: 11/13/2014.

IPTs: 3yr FXD +65bp area, 5yr FXD +85bp area, Libor equiv on FRNs

PRICE GUIDANCE: 3-year FXD T+60bp area (+/- 5bp), 3-year FRN libor equiv, 5-year FXD T+80bp area (+/- 5bp), 5-year FRN libor equiv

LAUNCH: US$2.45bn 4-part. US$750m 3-year FXD at T+55bp, US$350m 3-year FRN at 3mL+34bp, US$1bn 5-year FXD at T+75bp, US$350m 5-year FRN at 3mL+61bp.

PRICED: US$2.45bn 4-part.

- US$750m 1.50% 3-year (11/13/2017) FXD. At 99.982, yld 1.506%. T+55bp.

- US$350m 3-year (11/13/2017) FRN. At 100, floats at 3mL+34bp.

- US$1bn 2.375% 5-year (11/13/2019) FXD. At 99.939, yld 2.388%. T+75bp.

- US$350m 5-year (11/13/2019) FRN. At 100, floats at 3mL+61bp.

BOOK: US$4.75bn

NIC (NasdaqGS: EGOV - news) : 6bp on 5yr. 3yr the same if assuming 20bp 3s/5s curve

COMPS:

1.3% 2017s T+27, G+41bp

2.25% 2019s T+57, G+69bp.

AMERICAN EXPRESS

American Express Company (Xetra: 850226 - news) , exp Baa3/BB+/BBB-, announced a US$ benchmark SEC registered perpetual NC5 (11/15/2019) $1,000 par fixed to floater noncumulative preferred notes. The active bookrunners include Bank of America (Swiss: BAC.SW - news) , Citigroup (NYSE: C - news) , Deutsche Bank, Goldman Sachs (NYSE: GS-PB - news) and Wells Fargo. UOP: GCP. Settle: T+3.

IPTs: 5.375%-5.50%

PRICE GUIDANCE: 5.25% area (+/- 5bp)

LAUNCH: US$750m at 5.20%

PRICED: US$750m 5.20% NC5 (11/15/2019). Floats at 3mL+342.8bp.

BOOK: About US$3.5bn

NIC: priced through comparables

COMPS:

STRH (Ba1/BB+/BB-) 5.625% Perp nc5 (pxd yesterday)

FITB (Ba1/BB+) 4.900% Perp NC5 at 5.60%

JPM (Ba1/BBB) 5.00% Perp NC5 at 5.46%

BAC (Ba3/BB) 5.125% Perp NC5 at 5.84%

C (Ba3/BB) 5.80% Perp NC5 at 5.80%

GS (Ba2/BB) 5.70% Perp NC5 at 5.04%

MS (Ba3/BB) 5.45% Perp NC5 at 5.39%

FIRST AMERICAN FINANCIAL

First American Financial (FAF), Baa3/BBB-/BBB, announced a US$300m (no grow) 10-year (11/15/2024) senior notes. The notes contain a MWC. The active bookrunners include Goldman Sachs, JP Morgan and US Bank, with WFS as a passive bookrunner. UOP: General corporate purposes. In anticipation of the offering, FAF recently repaid all borrowings under its revolving credit facility. Settle: T+3.

IPTs: +mid 200s

PRICE GUIDANCE: T+230-235bp

LAUNCH: US$300m at T+225bp

PRICED: US$300m 4.60% 10-year (11/15/2024). At 99.975, yld 4.603%. T+225bp. MWC+35bp. 1st pay: 5/15/2015.

BOOK: US$1.5bn

NIC: 13bp (add 10bp for 1.5yr maturity differential, FV=G+212bp)

COMPS:

4.300% February 1, 2023 at G+202bp

LEGGET & PLATT INC

Leggett & Platt Inc (LEG), Baa1/BBB+, announced a US$300m (no grow) SEC registered 10-year (11/15/2024) senior unsecured notes. The notes contain a 101% put and a 3-month par call. The active bookrunners include JP Morgan, US Bank and Wells Fargo, with Mitsubishi and Suntrust as passive bookrunners.

UOP: UOP: general corporate purposes, which may include t.he repayment or refinancing of existing indebtedness, including repayment of the 4.65% Senior Notes due November 15, 2014 at maturity and commercial paper indebtedness incurred or general corporate purposes, the funding of possible future acquisitions and/or stock repurchases. Settle: T+3.

IPTs: T+155-160bp

PRICE GUIDANCE: T+150bp area (+/-2bp)

LAUNCH: US$300m at T+148bp.

PRICED: US$300m 3.80% 10-year (11/15/2024). At 99.744, yld 3.831%. T+148bp. MWC+25bp.

BOOK: US$1bn

NIC: Flat (8/10s curve worth 20bp, FV=G+148bp)

COMPS:

3.400% August 15, 2022 at G+128bp

CYTEC INDUSTRIES (NYSE: CYT - news)

Cytec Industries Inc, Baa2/BBB-, announced a US$250m SEC registered long 10-year (5/01/2025) senior notes. The active bookrunners include Citigroup, Royal Bank of Scotland (LSE: RBS.L - news) and Wells Fargo. UOP: general corporate purposes, which may include, among other things, working capital, capital expenditures, the repurchase of shares of common stock, the repayment of short-term borrowings or other debt or acquisitions.

IPTs: T+170bp area

PRICE GUIDANCE: T+160-165bp

LAUNCH: US$250m at T+160bp

PRICED: US$250m 3.95% 10-year (5/01/2025). At 99.959, yld 3.955%. T+160bp.

BOOK: US$900m

NIC: 2bp (add 10bp for long 10-year, FV=G+158bp)

COMPS:

3.500% April 1, 2023 at G+148bp

NORTHWESTERN CORP

NorthWestern Corporation (NYSE: NWE - news) (NWE), A1/A-/A-, announced a US$450m (no grow) SEC registered 30-year (11/15/2044) first mortgage bonds. The active bookrunners include Bank of America and Credit Suisse (NYSE: CS - news) , with JP Morgan as a passive bookrunner. Redemption: All bonds at 101% if the Hydro Transaction has not closed by February 15, 2015. Optional Redemption: MWC; 6-month par call prior to maturity. UOP: Together with the net proceeds of the equity offering of common stock and borrowings under our short-term credit facility, to be used as the financing for the Hydro Transaction. Settle: 11/14/2014.

IPTs: low 100s

PRICE GUIDANCE: T+110-115bp

LAUNCH: US$450m at T+112.5bp

PRICED: US$450m 4.176% 30-year (11/15/2044). At 100, yld 4.176%. T+112.5bp. MWC+20bp. 1st pay: 5/15/2044.

BOOK: US$850m

NIC: Market Cap: NWE: US$2.06bn, PPL: US$23.44bn

Negative 5bp to flat (vs. PPL 4.65% Nov '43 comp, add 10-15bp for market cap differential, FV=G+112-117bp)

COMPS:

XEL (Aa3/A) 4.125% May 2044 at T+92bp (Northern States-Minn)

DTE (Aa3/A) 4.300% July 2044 at T+97bp

PPL (A1/A-) 4.650% November 2043 at T+102bp (Kentucky)

CMS (HKSE: 0867-OL.HK - news) (A1/A-) 3.950% May 2043 at T+96bp

NU (A2/A) 4.300% April 2044 at T+102bp

PPL (A2/A-) 4.125% June 2044 at T+102bp (PPL Electric)

ASSOCIATED BANC-CORP (NasdaqGS: ASBC - news)

Associated Banc-Corp (ASBC), snr rating Baa1/BBB & sub rating Baa2/BBB-, announced a 2-part offering that consists a $250m 5-year (11/15/2019) senior note and a US$250m 10-year (1/15/2025) subordinated holding company notes. Structure: Regulatory call following a regulatory capital treatment event on 10yr sub hold co. Par calls: 30 day par call on 5yr, 90 day par call on 10yr.

The active bookrunners include Goldman and JP Morgan. UOP: to finance in whole or part, the redemption and retirement of our $430mm in aggregate principal amount of our 5.125% senior notes due 03/28/2016 when they become redeemable, and to repurchase up to $100mm of outstanding common stock under our stock repurchase programs and for general corporate purposes. Settle: T+5.

IPTs: 5yr +125bp area, 10yr low 200s

PRICE GUIDANCE: 5-year T+115-120bp, 10-year T+195-200bp

LAUNCH: US$500m 2-part. US$250m at T+115bp, US$250m at T+195bp.

PRICED: US$500m 2-part total.

- US$250m 2.75% 5-year (11/15/2019). At 99.865, yld 2.78%. T+115bp.

- US$250m 4.25% 10-year (1/15/2025). At 99.647, yld 4.293%. T+195bp.

BOOK: Total book US$975m. 5-year: US$450m, 10-year: US$525m

NIC: N/A

COMPS:

FITB 2.375% April 25, 2019 at G+83bp

ISRAEL ELECTRIC

Israel Electric (Baa3/BBB-/NR) has launched a USD1.25bn 10 year bond at 262.5bp over mid-swaps. This compares to IPTs of 275bp over mid swaps released earlier on Wednesday. The issuer finished its roadshow in Boston on Tuesday. Barclays (LSE: BARC.L - news) and Citi are leading the 144A/Reg S deal.

IPT: M/S+275bp

LAUNCH: US$1.25bn 10-year at M/S+262.5bp

PRICED: US$1.25bn 5.0% 10-year (11/12/2024). At 99.031, yld 5.125%. MS+262.5bp.

BOOK: Just over US$2.5bn

MUBADALA GE CAPITAL

Mubadala GE Capital, the joint venture between Abu Dhabi state fund Mubadala and US firm GE, is planning a USD500m five-year note via global coordinators Barclays and Citigroup, who are also joint lead managers along with First Gulf Bank, HSBC and Natixis (Paris: FR0000120685 - news) .

IPT: T+150-162.5bp

LAUNCH: T+150bp

PRICED: US$500m. Cpn 3.00%. Due 11/10/2019. Ip USD99.375. Yld 3.136%. T+150bp. S/D 11/10/2014.

BOOK: US$1.5bn

BANK OF CHINA LTD

Bank of China Limited (HKSE: 3988.HK - news) is readying a US dollar benchmark 10-year bullet Tier 2 144A/Reg S offering. Bank of China, Bank of America Merrill Lynch, HSBC and Wells Fargo Securities are joint global coordinators as well as joint lead managers and bookrunners alongside Credit Agricole CIB, Deutsche Bank, JP Morgan, Mizuho Securities and Morgan Stanley. BOC is rated A1/A/A while the new Basel III compliant notes are expected to be rated Baa3/BBB+ (Moody's/Fitch).

IPT: T+300bp area

PRICE GUIDANCE: T+275bp area

LAUNCH: US$3bn at T+270bp

PRICED: US$3bn 5.0% 10-year (11/13/2024). At 99.588, yld 5.053%. T+270bp. 1st pay: 5/13/2015.

BOOK: US$18.3bn

ICBC (HKSE: 1398-OL.HK - news)

Industrial and Commercial Bank of China, New York branch, has released initial guidance for a 3-tranche offering of US dollar bonds this morning. The 3-year fixed and floating tranches are indicated at a yield in the area of 160bp over 3-year US Treasuries and the Libor equivalent, respectively.

The 5-year tranche is indicated at a yield in the area of 180bp over 5-year US Treasuries. A benchmark-sized trade is expected to price later today. The issuer is rated A1 (stable) by Moody's and A (stable) by S&P. Bank of America Merrill Lynch and Citi are joint bookrunners, with BNP Paribas (Xetra: 887771 - news) and Wells Fargo Securities as co-managers.

PRICE GUIDANCE: 3yr FXD T+145bp area (+/- 5bp), 3yr FRN Libor equiv, 5yr T+165bp (+/- 5bp)

LAUNCH: US$2.25bn 3-part. US$750m 3-year FXD at T+140bp, US$500m 3-year FRN at 3mL+119bp, US$1bn 5-year FXD at T+160bp.

PRICED: US$2.25bn 3-part total.

- US$750m 2.531% 3-year (11/13/2017) FXD. At 100, yld 2.531%. T+140bp. MWC+20bp.

- US$500m 3-year (11/13/2017) FRN. At 100, floats at 3mL+119bp.

- US$1bn 3.231% 5-year (11/13/2019). At 100, yld 3.231%. T+160bp. MWC+25bp.

BOOK: About US$8bn (Reporting by Mike Gambale and Danielle Robinson; Editing by Shankar Ramakrishnan and Marc Carnegie)