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US high-grade gets spring in its step

By Shankar Ramakrishnan and Danielle Robinson

NEW YORK (Frankfurt: HX6.F - news) , Feb 5 (IFR) - The US high-grade market had some extra spring in its step on Wednesday, adding to issuance momentum that has been building throughout the week so far.

Three issuers, including one FIG name raised a total USD5.65bn - and all found decent investor appetite that allowed them to exert some pricing leverage during bookbuilding.

"It was another strong day, which showed that investors are set up to buy corporate paper, as supply has been light so far," said one syndicate banker.

"Sentiment in the market changes quickly, and investors are selective around names. But broadly speaking, the semblance of market stability has revived the interest to put money into bonds - which should encourage a pick-up in supply."

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Enterprise Products (Munich: EPD.MU - news) issued long-dated bonds and raised USD2bn without having to pay too much in concession.

It printed 10-year and 31-year bonds that were shown with IPTs of mid to high 130bp and mid to high 150bp. Final pricing was a tight plus 125bp and 145bp respectively.

Structural demand from pension funds and insurance companies ensured the 31-year garnered most of the USD6.8bn final order book.

Both tranches paid concessions that ranged between 5bp to 10bp, which did not seem overly generous in the current climate.

BP Capital Markets issued a five-year fixed and floater and a 10-year bond that all tightened about 10bp from IPT levels. The final USD2.5bn raised attracted an order book of USD6bn. Concessions were about 5bp-8bp in the fixed tranches.

France's BPCE similarly paid just 11bp in concessions for its three-year fixed and floater, which raised a total USD1.15bn.

Given the surfeit of FIG paper in January, and the clear inclination of investors towards corporate paper, BPCE did well to end up with an order book of USD2.5bn, with the fixed attracting about USD1.5bn.

The bonds tightened about 10-15bp from IPT levels at final pricing, so overall it was a solid result for the issuer.

"We are definitely back to where the market is looking for some new issue concession given the volatility," said a DCM banker. "But when you put the right number on a trade, it goes really well."

Citigroup (NYSE: C - news) meanwhile got a start on its Tier 1 capital needs before rates rise again, issuing a US$480m perpetual non-call five-year Tier 1 offering in the retail US$25 par market.

Like JPM in January, Citi issued a fixed-for-life deal, possible by targeting a retail buyer more focused on the size of the coupon than extension risk in a rising-rate environment.

Ultimately about 85% was sold to retail and about 15% to institutional accounts, which included managers of private banking funds.

Citi indicated to market participants that it was looking to raise between US$450m to US$500m, and ended up pricing a $480m deal at 6.875%, the same as initial price thoughts.

At that level the deal offered a pick-up over its outstanding 5.8% fixed-for-life perp NC5s trading at a stripped yield of 6.78%.

The joint lead managers Citi included on the trade were Bank of America Merrill Lynch, JP Morgan (Other OTC: JPYYL - news) , Morgan Stanley (Berlin: DWD.BE - news) , UBS (Xetra: UB0BL6 - news) and Wells Fargo Securities.

With the latest winter storm hopefully out of the way, Thursday should see a fairly active primary market - though bankers are wary of calling for too much.

Expectations are at least two or three deals will keep the desks busy with similar technical dynamics, concessions and order book sizes.

ENTERPRISE PRODUCTS

Enterprise Products Operating LLC (EPD), Baa1/BBB+ (s/s), announced a USD benchmark 2-part offering that consists of a 10-year (2/15/2024) and 31-year (2/15/2045) senior unsecured fixed notes. The notes are guaranteed by Enterprise Products Partners L.P. The notes also contain a MWC, and a 3mo par call on the 10yr notes and 6mo par call on the 31yr notes. The active bookrunners are Barclays (LSE: BARC.L - news) , Citigroup, Deutsche Bank (Xetra: DBK.DE - news) and Mizuho. UOP: repayment of debt, including the repayment of amounts outstanding under the revolving credit facility, 364-day credit agreement or CP program, and for GCP. Settle: T+5 (2/12/2014).

IPT: 10yr mid-high +130s, 31yr mid-high +150s

PRICE GUIDANCE: 10yr T+130bp area, 31yr T+150bp area. Area = +/- 5bp

LAUNCH: USD2bn 2-part, USD850m 10yr at T+125bp, USD1.15bn 31yr at T+145bp.

PRICED: US2bn 2-part. Settlement date 2/12.

- USD850m. Cpn 3.90%. Due 2/15/2024. Ip USD99.811. Yld 3.923%. T+125bp. MWC T+20bp. First (Other OTC: FSTC - news) pay 8/15/2014.

- USD1.15bn. Cpn 5.10%. Due 2/15/2045. Ip USD99.845. Yld 5.110%. T+145bp. MWC T+25bp. First pay 8/1/2014.

BOOK: USD6.8bn, skewed to 31yr

NIC (NasdaqGS: EGOV - news) : 10-year 5bp (add 5bp to 3.35% '23, fair value G+120bp), 30 year 10bp

COMPS:

6.500% January 31, 2019 at G+85bp (USD119.6)

3.350% March 15, 2023 at G+115bp

4.850% March 15, 2044 at T+135bp

MMP (Baa2/BBB+) 4.250% February 1, 2021 at G+97bp (USD107.3)

MMP (Baa2/BBB+) 5.150% October 15, 2043 at T+130bp (USD104.2)

KMP (Baa2/BBB) 4.150% February 1, 2024 at G+166bp

KMP (Baa2/BBB) 5.000% March 1, 2043 at T+177bp (USD94.3)

PAA (Baa2/BBB) 3.850% October 15, 2023 at G+123bp

PAA (Baa2/BBB) 4.300% January 31, 2043 at T+127bp (USD91.5)

SEP (Baa2/BBB) 2.950% September 25, 2018 at G+95bp

SEP (Baa2/BBB) 4.750% March 15, 2024 at G+136bp

SEP (Baa2/BBB) 5.950% September 25, 2043 at T+147bp (USD113.4)

BP CAPITAL MARKETS

BP Capital Markets plc (BPLN), A2/A/A (s/s/s), announced a USD benchmark SEC registered 3-part offering that consists of a 5.25-year (5/10/2019) fixed and/or FRN and a 10-year (2/10/2024) fixed senior unsecured notes. The notes contain a MWC. The active bookrunners are Barclays, BNP Paribas (Milan: BNP.MI - news) , Credit Suisse (NYSE: CS - news) , Morgan Stanley, Mitsubishi (Dusseldorf: MBI.DU - news) and Royal Bank of Scotland (LSE: RBS.L - news) . UOP: GCP. Settle: T+3 (2/10/2014).

IPT: 5yr FXD +85bp area, 5yr FRN Libor equiv, 10yr +125bp area

PRICE GUIDANCE: 5yr FXD T+75-80bp, 5yr FRN Libor equiv, 10yr T+115bp area (+/- 2bp)

LAUNCH: USD2.5bn 3-part total. USD1bn 5yr FXD at T+75bp, USD250m 5yr FRN at 3mL+54bp, USD1.25bn 10yr at T+115bp.

PRICED: USD2.5bn 3-part total. USD1bn. Cpn 2.237%. Due 5/10/2019. Ip par. Yld 2.237%. T+75bp. MWC T+15bp. USD250m. Cpn 3mL+54bp. Due 5/10/2019. Ip par. Yld 3mL+54bp. USD1.25bn. Cpn 3.814%. Due 2/10/2024. Ip par. Yld 3.814%. T+115bp. MWC T+20bp.

BOOK: USD6bn

NIC: 5yr 8bp (add 8bp to 2.241% '18, fair value G+67bp),

10yr 5bp (add 2bp to 3.994% '23, fair value G+110bp)

COMPS:

2.241% September 26, 2018 at G+59bp

3.994% September 26, 2023 at G+108bp

TOTAL (Brussels: FP.BR - news) (Aa1/AA-) 2.150% January 10, 2019 at G+47bp

TOTAL (Aa1/AA-) 3.750% April 10, 2024 at G+88bp

BPCE

BPCE SA (BPCEGP), A2/A/A, announced a USD benchmark 3(a)2 exempt senior notes that consists of a 3-year (2/10/2017) fixed and/or FRN. The notes are guaranteed by Natixis New York branch. UOP: GCP. The bookrunners are Citigroup, Goldman Sachs (NYSE: GS-PB - news) , Natixis (Paris: FR0000120685 - news) and Royal Bank of Canada (Toronto: RY-PC.TO - news) . Settle: T+5 (2/12/2014).

IPT: 3yr FXD T+115bp area

PRICE GUIDANCE: 3yr FXD T+100bp (the #), 3yr FRN at Libor equiv

LAUNCH: USD1.15bn 2-part. USD750m 3yr FXD at T+100bp, USD400m 3yr FRN at 3mL+85bp

PRICED: USD1.15bn 2-part. Settlement date 2/12.

- USD750m. Cpn 1.625%. Due 2/10/2017. Ip USD99.942. Yld 1.645%. T+100bp. First pay 8/10/2014.

- USD400m. Cpn 3mL+85bp. Due 2/10/2017. Ip par. Yld 3mL+85bp. First pay 5/10/2014.

BOOK: USD2.5bn (USD3bn peak), USD1.5bn FXD, USD1bn FRN

NIC: 11bp (3/5 curve worth about 25bp, 2.5% '18 fair value G+89bp)

COMPS:

2.50% December 10, 2018 at G+114bp

BFCM 1.70% January 20, 2017 at G+105bp

BFCM 2.75% January 22, 2019 at G+130bp (Reporting by Shankar Ramakrishnan and Danielle Robinson; Editing by Marc Carnegie)