Coke issues at record low rates; Dow, GE Capital tap market; Treasuries rebound; volume up

By Andrea Heisinger

New York, Nov. 4 - Coca-Cola Co., General Electric Capital Corp. and Dow Chemical Co. were the boldface names in the high-grade bond market for Thursday, but smaller sales were also priced by Oglethorpe Power Corp. and Chicago Parking Meters LLC.

Dow Chemical and Coca-Cola's bonds both priced late in the day for the first time since 2009.

Soft drink maker Coca-Cola sold an upsized $4.5 billion in four tranches. The 0.75% notes due 2013 and 1.5% notes due 2015 both tied Wal-Mart for the record low interest rate.

Dow sold $2.5 billion in two tranches. Each of the notes priced at the tight end of guidance.

GE Capital had one of the first deals to price. The $2 billion of five-year notes sold at the tight end of price guidance range, a source said.

Electric company Oglethorpe sold a slightly upsized $450 million of 30-year first mortgage bonds. The size was increased by $50 million.

A similarly sized deal came from Chicago Parking Meters. The company priced $600 million of 10-year senior secured notes in the Rule 144A market.

The secondary side of the market saw a flood of new paper coming its way, although the two largest deals from Dow and Coca-Cola priced late and were not seen trading.

GE Capital's new five-year notes tightened a few basis points immediately after selling, a source said. Oglethorpe Power's bonds were considerably tighter in trading.

Coca-Cola priced too late to be seen in the secondary, but were slightly better in the gray market. Dow Chemical's two bonds did manage to come in nicely, a source said.

Overall trading volume was up to around $11 billion - an increase from the previous two days, a source said.

"Volume was strong today," she said. "[I] haven't seen it that high in a while."

Another source said that "market volume definitely picked up today as the Fed announcement yesterday caused a re-pricing of the rate curve."

They added that paper with 30-year maturities was generically 15 bps better, whereas mid-term five- to 10-year paper was 7 to 9 bps better.

"There was a very strong demand for higher quality 30-year paper in the morning, which seemed to hold throughout the day," the source said.

Coca-Cola's blockbuster deal

Coca-Cola sold an upsized $4.5 billion of senior notes (A3/A+) in four tranches late in the day.

All of the notes priced in line with or at the tight end of talk, sources said. The sale was oversubscribed and had about $6.5 billion on the books, a market source said.

A $1.25 billion tranche of floating-rate notes due 2012 priced at par to yield Libor plus 5 bps. The notes were talked in the Libor plus 5 bps area.

The second part of the sale was $1.25 billion of 0.75% three-year notes priced at a spread of 32 bps over Treasuries. Price talk was in the 35 bps area and the notes sold at the tight end of that.

The $1 billion tranche of 1.5% five-year notes sold at Treasuries plus 52 bps. It was talked in the 55 bps area and priced at the tightest end of that.

A final tranche of $1 billion of 3.15% 10-year notes priced at a spread of 72 bps over Treasuries. The notes priced at the tight end of talk in the 75 bps area.

Bank of America Merrill Lynch, Deutsche Bank Securities Inc., Goldman Sachs & Co. and HSBC Securities USA Inc. were bookrunners.

Proceeds are going to pay consideration and fees in connection with tender offers of $3.45 billion of 13 securities maturing between 2017 and 2093. Any balance will be used for general corporate purposes, including the repayment of debt.

Coca-Cola last sold bonds in a $2.25 billion sale in three tranches on March 3, 2009. The 3.625% five-year notes from that deal priced at 185 bps over Treasuries. The 4.875% 10-year notes were priced at 205 bps over Treasuries.

The soft drink maker is based in Atlanta.

Coke gets record rates

Two of the four tranches of notes from Coca-Cola tied Wal-Mart Stores Inc. for the lowest borrowing rates, a source said.

The 0.75% notes due 2013 and 1.5% notes due 2015 both tied Wal-Mart for the record low interest rate. The Wal-Mart notes set that record when they priced on Oct. 18 as part of a four-part, $5 billion sale.

The record for the lowest 10-year note coupon is still held by Johnson & Johnson at 2.95%.

30-year Treasury takes beating

Treasury bond yields tightened after a bumpy ride following the previous day's Federal Reserve meeting conclusion. There was an announcement that the government would buy $600 million of long-term Treasury bonds to jumpstart the economy by lowering rates.

All yields - except the 30-year bond - were unchanged or tighter than the previous day.

"[Treasuries] all ended up except the long bond," a trader said.

The five-year note yield was tighter by 8 bps from the previous day at 1.03%, and the 10-year note made an identical gain, dropping to 2.49%.

The 30-year bond moved 2 bps higher than Wednesday to 4.06%, a source said.

Primary comes to life

There were three large deals in the market today and a couple of smaller ones, making it by far the busiest day for new issues this week.

"[Issuers] saw a window," a source said. "They wanted to get in after the Fed."

Rates for shorter-dated bonds were low on a drop in Treasury yields. This may have lured some companies into the market for the day, the source said.

Both the Coca-Cola and Dow deals had been expected to price, the source added.

There aren't any new deals announced for Friday as several data points on jobs, pending home sales and consumer credit are announced.

Dow prices $2.5 billion

Dow Chemical sold $2.5 billion of senior notes (Baa3/BBB-/BBB) in two tranches late in the day, a source who worked on the deal said.

The $750 million of 2.5% notes due 2016 priced at Treasuries plus 150 bps. This was at the tightest end of guidance in the 155 bps area, plus or minus 5 bps.

A second part of the sale was $1.75 billion of 4.25% 10-year notes priced at a spread of Treasuries plus 180 bps. This was at the tight end of talk in the 185 bps area, plus or minus 5 bps.

Barclays Capital Inc., BNP Paribas Securities Corp. and Deutsche Bank Securities Inc. were bookrunners.

Proceeds are being used for general corporate purposes, including the repayment or refinancing of debt, pension contributions, capital expenditures, working capital and pursuing growth initiatives like acquisitions.

Dow's last sale totaled $2.75 billion in three tranches on Aug. 4, 2009. The 5.9% five-year notes from that offering came at Treasuries plus 325 bps.

The specialty chemical, plastics and technology company is based in Midland, Mich.

GE Capital's $2 billion

General Electric Capital sold a benchmark $2 billion of 2.25% five-year senior notes at Treasuries plus 125 bps, a market source said in mid-afternoon.

This was at the tight end of price talk in the 125 bps to 130 bps range. The size was increased from a minimum benchmark size of $500 million, a source said.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc., Morgan Stanley & Co. Inc. and RBS Securities Inc.

Proceeds are going toward general corporate purposes.

On the secondary side, the notes were seen tighter by a trader soon after pricing.

The source quoted them at a bid of 121 bps and offer of 119 bps. Later in the afternoon, they were seen trading at 123 bps bid, 117 bps offered, a second source said.

The funding arm of General Electric Co. is based in Norwalk, Conn.

Oglethorpe sells $450 million

Oglethorpe Power priced an upsized $450 million of 5.375% 30-year series 2010 A first mortgage bonds (Baa1/A/A) to yield 135 bps over Treasuries, a syndicate source said.

The bonds were priced at the tight end of guidance in the range of 135 to 140 bps. The size was increased slightly from $400 million.

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

Proceeds are being used for costs associated with participation in two addition nuclear units at the Alvin W. Vogtle Plant, to redeem outstanding short-term debt and for general corporate purposes.

The bonds tightened considerably after being released for trading. A source quoted them at a bid of 122 bps and offer of 119 bps for a gain of more than 20 bps.

The electric company is based in Tucker, Ga.

Chicago Parking offers 10-year

Chicago Parking Meters sold $600 million of 5.489% 10-year first-lien senior secured notes under Rule 144A, a source close to the sale said.

The company had initially planned a $500 million bond sale in July, but then postponed it.

The notes (Baa3/BBB-) priced at Treasuries plus 300 bps.

Bookrunners were Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. Inc.

The parking meter manager is based in Chicago.

Dow Chemical trades better

Both of the Dow Chemical bonds were seen trading after pricing later in the afternoon, a trader said.

The 2.5% notes due 2016 were between 10 bps and 15 bps tighter, they said, at 139 bps bid, 135 bps offered. The notes priced at 150 bps over Treasuries.

A second 4.25% note due 2020 was priced at Treasuries plus 180 bps. It was between 13 bps and 20 bps improved at 167 bps bid, 163 bps offered.

Coke notes tighter in gray

The three fixed-rate tranches of the Coca-Cola deal priced too late for trading, but were seen a little better in the gray market, a source said.

The three-year note was quoted at 31 bps bid, or 1 point better than its 32 bps over Treasuries price. Both the five-year note and the 10-year note tightened by 2 bps to 50 bps bid and 70 bps bid, respectively.

Later, a source said that 10-year notes appeared to be about 8 bps better in the gray, while the three-year and five-year maturities looked about 5 bps tighter.

"[They] seem very well bid," the trader said.

Financials, Dow among actives

Outstanding bonds from Goldman Sachs Group Inc. and Dow Chemical were among those with the most activity in the high-grade market as of early afternoon, a source said.

Goldman's 6% bond due 2020 was one of the most active and was trading at 188 bps over Treasuries.

The Dow Chemical 8.55% notes due 2019 were seeing heavy trading volume for the second day in a row. They had widened by close to 10 bps from Wednesday, a source said. The company's new bonds had not yet priced.

Two bonds due 2016 and 2018 from Bank of America Corp. were also seeing trading activity.

© 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.