Rio Tinto, US Bancorp, U.S. Bank offer bonds in upbeat tone; new debt firms in secondary

By Andrea Heisinger and Cristal Cody

New York, Oct. 28 - A steady of stream of new deals in the high-grade market continued Thursday with Rio Tinto Finance (USA) Ltd. and with US Bancorp and U.S. Bank NA selling debt.

United Business Media Ltd. gave terms for its downsized $350 million sale of 10-year notes that had been announced on Monday and priced late Wednesday. The size was originally $500 million.

A split-rated deal was announced by the Seminole Tribe of Florida. Pricing of the seven-year Gaming Division Bonds is expected in the coming week under Rule 144A.

"Not much" changed with the market's tone for the day, a syndicate source at a smaller desk said. A release of jobs numbers in the morning may have given a slight boost, he said, but nothing "too noticeable."

The previously announced Rio Tinto deal was the talk of the market, with all of the tranches coming in at the tight end of guidance.

"They haven't issued for a while, so I think everyone was seeing how much they would get done," a market source said.

Both of the day's sales had tranches that priced in line with or at the tight end of guidance.

There could be "something" in the way of new deals on Friday from a company coming out of earnings blackout or trying to get paper priced before the end of October, the source said.

"It should be quiet," he added. "We priced a lot this week."

New paper firms

In secondary trading, the new debt from Rio Tinto and US Bancorp and U.S. Bank NA firmed, according to sources.

But trading generally was weaker on the day.

The Markit CDX Series 14 North American investment-grade index ended the day unchanged at a spread of 94 basis points, according to Markit Group Ltd.

Overall investment-grade Trace volume dropped 12% to about $11 billion, according to a market source.

Treasuries rose on renewed expectations the Federal Reserve's quantitative easing program will focus on short-term debt and as the government's auction of $29 billion in seven-year notes was met with strong demand on Thursday.

Yields fell across the curve, except for low on the 30-year bond.

"U.S. Treasury bonds and bills were unchanged with mid-dated notes moving higher," a source said.

The yield on the 10-year note fell to 2.66% from 2.72%. The yield on the 30-year bond ended unchanged at 4.06%.

The Federal Reserve is expected to announce the amount of bonds it will buy back after the two-day meeting on Tuesday and Wednesday.

Rio Tinto offers $2 billion

Rio Tinto Finance (USA) priced $2 billion of guaranteed notes (A3/BBB+/A-) in three tranches late in the afternoon, said a source close to the deal.

The company had announced the deal on Oct. 20 in connection with a note tender offer.

The $500 million tranche of 1.875% five-year notes priced at 68 bps over Treasuries. Price talk was in the 70 bps area, and the notes priced at the tight end of that area.

A second tranche of $1 billion in 3.5% 10-year notes sold at a spread of Treasuries plus 93 bps. The notes priced at the tight end of guidance in the 95 bps area.

The $500 million of 5.2% 30-year bonds priced at 115 bps over Treasuries. They sold at the tightest end of price talk in the range of 115 to 120 bps.

Morgan Stanley & Co. Inc. and Credit Suisse Securities (USA) LLC were the active bookrunners.

Proceeds are being used to fund a cash tender offer for outstanding 5.875% notes due 2013 and for general corporate purposes.

The notes are guaranteed by Rio Tinto plc and Rio Tinto Ltd.

Rio Tinto Finance last sold bonds in a $3.5 billion deal on April 14, 2009. The 8.95% five-year notes priced at 752.6 bps over Treasuries, and the 9% 10-year notes came in at 658.1 bps over Treasuries. Both were more than six times the spread of the new notes.

In secondary trading, all three of the most recent tranches were tighter from pricing levels, a trader said.

Rio Tinto's notes due 2015 firmed to 66 bps bid, 64 bps offered, the trader said. The tranche of notes due 2020 was tighter at 90 bps bid, 85 bps offered. The tranche of bonds due 2040 firmed to 113 bps bid, 111 bps offered.

The mining company is based in Melbourne and Dublin.

US Bank units sell bonds

US Bancorp and U.S. Bank priced an upsized $1.5 billion of notes in two parts before the market close, a source close to the sale said.

The size was increased from an initial $1 billion, split evenly between the two notes. The two-year floating-rate note amount was doubled in size.

US Bancorp sold $500 million of 1.125% three-year notes (Aa3/A+/AA-) at a spread of Treasuries plus 63 bps. They priced at the tight end of guidance in the 65 bps area, a source said.

The second part of the deal from U.S. Bank was $1 billion in two-year floating-rate notes (Aa1/AA-) priced at par to yield three-month Libor plus 22 bps. They were sold in line with guidance in the Libor plus 22 bps area.

Bookrunners were Goldman Sachs & Co., Morgan Stanley and US Bancorp Investments.

The company reported third-quarter earnings the previous week that showed a jump in profit from the previous year. The profit of $908 million bested the previous year's Q3 number of $603 million by 51%.

Both tranches firmed in secondary trading, according to a source.

The 1.125% notes due 2013 firmed to 58 bps bid, 57 bps offered.

U.S. Bank's floating-rate notes firmed in trading on the offer side to 18 bps, a source said.

The financial services company is based in Minneapolis.

UBM downsizes deal

United Business Media priced a downsized $350 million of 5.75% 10-year notes late on Wednesday at 325 bps over Treasuries, according to a press release and a market source.

The offering had been announced Monday at a size of $500 million.

The Rule 144A notes (Baa3/BBB-) priced at 98.295 to yield 5.979%. They have a make-whole call at 50 bps over Treasuries.

Barclays Capital Inc., Credit Suisse, HSBC Securities USA Inc. and JPMorgan were the bookrunners.

The business information services company is based in London and Dublin.

Seminole Tribe plans sale

Seminole Tribe of Florida plans to price a $330 million offering of first-lien Gaming Division Bonds, series 2010 due 2017 during the middle part of the Nov. 1 week, according to an informed source.

The deal is expected to be split rated, with Moody's Investors Service expected to assign its Ba1 rating to the notes, Standard & Poor's expected to assign its BBB- rating and Fitch expected to assign its BB+ rating.

Bank of America Merrill Lynch has the books for the Rule 144A for life deal.

The notes, which are secured with a first lien on gaming revenues of Seminole Gaming Division's six properties, come with three years of call protection.

Proceeds will be used to fund capital expenditures and for tribal uses.

The Hollywood, Fla.-based tribal gaming company operates six casinos in that state.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.