Union Pacific, Sysco, Tyson, Duke Realty sell into improved tone; Sysco tightens

By Aleesia Forni and Andrea Heisinger

New York, June 6 - New high-grade bond deals poured into the primary on Wednesday following several successful sales the previous day that saw strong investor demand.

Among the transactions Wednesday were multi-tranche offerings from Union Pacific Corp. and Sysco Corp.

Union Pacific sold $600 million of notes due 2023 and 2042 while Sysco sold $750 million of three-year and 10-year notes.

The 10-year notes from Sysco were seen 8 bps tighter at the end of the day.

Tyson Foods, Inc. priced $1 billion of 10-year notes.

Smaller sales came from Liberty Property LP with an upsized $400 million of 10-year paper and Ohio National Life Insurance Co. with $250 million of 30-year bonds priced via Rule 144A and Regulation S. Terms of the Ohio National Life deal were not available at press time.

The new notes from Liberty Property had "basically been trading better all day," a syndicate source remarked.

Real estate investment trust Duke Realty LP was in the market with $250 million of 10-year notes.

Public Storage sold $250 million of 5.625% cumulative perpetual preferred shares. They were priced at the tight end of guidance given on Tuesday when the deal was announced.

The market tone was brighter at the open on Wednesday, improving on conditions from Tuesday when a handful of issuers braved the market including Deere & Co., which priced $2.25 billion in two maturities.

"It was just fine," a source said of the tone at the open. "I know a bunch were ready to go."

Syndicate desks are gearing up for more activity on Thursday, though mostly smaller deals are expected.

"It should be active," a market source said after the close. "I know we have a couple for sure and more looking. It should be about as busy as today."

Investment-grade bank and brokerage credit default swaps costs fell again on the Wednesday.

Banks were better on the day. Bank of America's CDS costs declined 15 bps to 285 bps bid, 295 bps offered. Citi's CDS costs decreased 18 bps to 250 bps bid, 260 bps offered. Additionally, Wells Fargo's CDS costs tightened 9 bps to 115 bps bid, 125 bps offered.

Brokers also tightened. Merrill Lynch's CDS costs traded 18 bps tighter at 310 bps bid, 320 bps offered. Morgan Stanley's CDS costs fell 26 bps 410 bps bid, 420 bps offered. Goldman Sachs' CDS costs tightened 20 bps to 305 bps bid, 315 bps offered.

Union Pacific prices tight

Union Pacific sold $600 million of notes (Baa2/A-/) in two parts, a market source said.

The $300 million of 2.95% notes due 2023 were priced at a spread of Treasuries plus 130 bps. The tranche sold tighter than talk in the 140 bps to 145 bps range.

A $300 million tranche of 4.3% 30-year bonds sold at 158 bps over Treasuries. The bonds also were priced tighter than guidance in the 170 bps area.

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

Proceeds are being used for general corporate purposes including common stock repurchase.

The Omaha-based railroad transportation company was last in the market with a $500 million deal of 4.75% 30-year bonds priced at 110 bps over Treasuries on Aug. 4, 2011.

Sysco prices $750 million

Sysco sold $750 million of senior notes (A1/A+/) in two maturities, a market source said.

The $300 million of 0.55% three-year bonds sold at a spread of 42 bps over Treasuries. The tranche tied the record-low coupon for three-year notes set by IBM Corp. earlier this year.

A $450 million tranche of 2.6% 10-year paper sold at Treasuries plus 110 bps.

The 10-year tranche traded at 102 bps bid, 99 bps offered at the end of New York's session.

Active bookrunner was Goldman Sachs & Co.

Proceeds are being used for general corporate purposes.

The deal is guaranteed by subsidiaries that guarantee other senior notes from Sysco.

The Houston-based food service marketing and distribution company was last in the market with a $500 million offering of notes in two parts on March 12, 2009. The 5.375% 10-year notes from that trade were priced at 260 bps over Treasuries.

Liberty's upsized $400 million

Liberty Property sold an upsized $400 million of 4.125% 10-year senior notes on Wednesday to yield Treasuries plus 250 basis points, a source close to the trade said.

The deal size was increased from $300 million, the source said. There was about $2.5 billion in demand on the books. The bonds were priced significantly tighter than talk for a spread in the 175 bps area.

The notes (Baa1/BBB/BBB+) came to market at 99.805 to yield 4.149%.

There is a make-whole call at 40 bps over Treasuries.

The notes had been moving "in the right direction" throughout the day on Wednesday, a syndicate source said near the end of New York's session.

The notes opened at 248 bps bid before tightening to 245 bps bid later in the day.

The 10-year notes closed the session at 214 bps bid, the source continued.

Citigroup Global Markets Inc., J.P. Morgan Securities LLC and UBS Securities LLC were bookrunners.

Proceeds are being used to repay a portion of debt under a $500 million credit facility and for general corporate purposes.

The real estate investment trust for industrial and office properties is based in Malvern, Pa.

Duke Realty sells 10-years

Duke Realty sold an upsized $300 million of 4.375% 10-year senior notes (Baa2/BBB-/) to yield Treasuries plus 280 bps, a source who worked on the deal said.

The size of the deal was increased from $250 million. The notes were priced at the low end of guidance in the 285 bps area, plus or minus 5 bps, the source said.

There was about $1.25 billion in investor demand for the notes, the source added.

Bookrunners were Barclays Capital Inc., RBC Capital Markets LLC and Wells Fargo Securities LLC.

Proceeds are being used to repay debt with near-term maturities, including borrowings under a revolving credit facility and other general corporate purposes.

Duke, a real estate investment trust based in Indianapolis, was last in the market with a $250 million sale of 6.75% 10-year notes priced at 287.5 bps over Treasuries on March 25, 2010.

Tyson's $1 billion deal

Tyson Foods priced $1 billion of 4.5% 10-year senior notes (Baa3/BBB-/BBB) at a spread of Treasuries plus 290 basis points, a source away from the deal said.

The initial deal size was a minimum of $750 million, the source said. Full terms were not available at press time.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RBC Capital Markets LLC were active bookrunners.

Proceeds are being used to fund the repurchase of Tyson's 10.5% notes due 2014 and for general corporate purposes.

The deal is guaranteed by domestic subsidiaries that are guarantors under a revolving credit facility.

The meat and food production company is based in Springdale, Ark.

Public Storage's preferreds

Public Storage issued $250 million of 5.625% series U cumulative perpetual preferred stock, a trader reported Wednesday.

Price talk was 5.625% to 5.75%.

The deal was first announced Tuesday. Pricing came at the low end of talk, to the dismay of one market source.

As previously reported, the source was unhappy that the Glendale, Calif.-based real estate investment trust would attempt to bring preferreds with such a low dividend.

"They're usually a little more reasonable," he said on Tuesday, after the deal was announced.

After pricing, a trader saw the paper trading at $24.65 bid, $24.70 offered in the gray market.

"It's a strong name," the trader said. "Those levels, for a name like Public Storage, it's not bad."

After the close, a source quoted the issue at $24.68 bid, $24.74 offered.

Public Storage will apply to list the new preferreds on the New York Stock Exchange under the symbol "PSAPU." Settlement is expected June 15.

Bank of America Merrill Lynch, Morgan Stanley & Co. Inc., UBS Securities LLC and Wells Fargo Securities LLC were bookrunners.

Proceeds from the sale will be used to redeem $172.5 million of 7% series N cumulative preferred shares. Any remaining funds will be used for general corporate purposes, which may include investments in self-storage facilities and other possible redemptions.

Bank of Nova Scotia tightens

The secondary saw Bank of Nova Scotia's bonds due 2017 tighten on Wednesday, trading 8 bps better at 107 bps bid.

The Halifax, N.S.-based bank priced $1.25 billion of bonds at Treasuries plus 172 bps in January.

Goldman 2037's tighter

Goldman Sachs's notes due 2037 were also tighter.

The notes traded more strongly by 2 bps at 30 bps bid.

The bank sold $2.5 billion 6.75% senior notes in September 2007 at a spread of Treasuries plus 190 bps.

Goldman Sachs is headquartered in New York.

RBC notes tighten

Also in the secondary, Royal Bank of Canada's notes due 2014 narrowed on Wednesday, trading 2 bps tighter at 74 bps bid.

The bank sold $1.25 billion 1.45% senior notes in October at a spread of Treasuries plus 105 bps.

The financial services company is based in Toronto.

Stephanie N. Rotondo contributed to this review

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