Wal-Mart sells $5 billion; BMO prices dual tranches; spreads in secondary market move tighter

By Aleesia Forni and Andrea Heisinger

New York, April 4 - A $5 billion trade in four parts from Wal-Mart Stores Inc. was the marquee sale in the investment-grade bond market on Thursday.

The size of Wal-Mart's sale was increased from $4 billion, and all of the tranches - due 2015, 2018, 2023 and 2043 - priced tighter than initial guidance.

A market source said the discount retailer got the lowest borrowing rates so far in 2013 for its three-year notes and five-year notes.

"They're a quality name, so not surprising," the source added.

There was roughly $11.4 billion of investor demand for the bonds, including $2.8 billion for the three-year notes, $2.8 billion for the five-year notes, $3.3 billion for the 10-year notes and $2.5 billion for the 30-year bonds.

Bank of Montreal tapped the market for $1.35 billion of five-year notes in two tranches. One part had a fixed rate and the other, floating. The floaters were added at the launch.

Issuance is likely done for the week, with sources reporting they knew of nothing solid in the pipeline for Friday.

A $100 million sale of cumulative preferred stock was done by Goodrich Petroleum Corp.

After pricing, a source said the paper was trading in a range of $24.65 to $24.75 in the gray market.

The source also expressed squeamishness about the deal.

"It will give them temporary liquidity ... until another problem comes up," he said.

NorthStar Realty Finance Corp.'s 8.5% series D cumulative redeemable preferreds - a $175 million issue that priced Wednesday but had yet to free as of midday Thursday - was seen in a $24.80 to $24.90 context.

"That 8.5% coupon should make that one popular amongst the retail crowd," a trader remarked.

The Markit CDX Series 20 North American Investment Grade index was 1 basis point tighter at 90 bps.

Trading in the secondary market performed better on Thursday, one trader noted.

"Spreads moved mostly tighter on the session," the source said near the day's close.

Bank of America Corp.'s credit default swap costs were unchanged at 134 bps bid, 139 bps offered. Citigroup Inc.'s CDS costs were unchanged at 114 bps bid, 118 bps offered. JPMorgan Chase & Co.'s CDS costs were flat at 86 bps bid, 90 bps offered. Wells Fargo & Co.'s CDS costs tightened 1 bp to 69 bps bid, 74 bps offered.

Merrill Lynch's CDS costs were 1 bp tighter at 105 bps bid, 115 bps offered. Morgan Stanley's CDS costs were unchanged at 150 bps bid, 155 bps offered. Goldman Sachs Group, Inc.'s CDS costs were also flat at 136 bps bid, 140 bps offered.

Wal-Mart's mega deal

Wal-Mart Stores priced $5 billion of notes (Aa2/AA/AA) in four maturities, an informed source said.

The size was increased from an initial $4 billion.

A $1 billion tranche of 0.6% three-year notes sold at a spread of Treasuries plus 30 bps. Initial talk was in the mid 30 bps area.

There was $1.25 billion of 1.125% five-year notes priced at 45 bps over Treasuries. Whispered talk was in the mid 50 bps area.

A $1.75 billion tranche of 2.55% 10-year notes sold at a spread of Treasuries plus 82 bps. Initial whispers were in the mid to high 80 bps area.

Finally, there was $1 billion of 4% 30-year bonds priced at Treasuries plus 102 bps. Whispered talk was in the 105 bps to 110 bps range.

The bookrunners were Barclays, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC.

Proceeds are being used for general corporate purposes.

Wal-Mart was last in the U.S. bond market with a similar $5 billion offering in four tranches on April 11, 2011. That trade included 1.625% three-year notes sold at 40 bps over Treasuries, 2.8% five-year bonds priced at Treasuries plus 57 bps, 4.25% 10-year notes sold at 75 bps over Treasuries and 5.625% 30-year bonds priced at 110 bps over Treasuries.

The discount retailer is based in Bentonville, Ark.

BMO sells $1.35 billion

Bank of Montreal was in the day's session with a $1.35 billion sale of five-year senior medium-term notes, series B (Aa3/A+/AA-) in two parts, a source away from the trade said.

A $350 million tranche of five-year floating-rate notes priced at par to yield Libor plus 60 bps.

There was $1 billion of 1.45% five-year bonds sold at a spread of Treasuries plus 80 bps.

The tranche of floating-rate notes was added to the sale on reverse inquiry, a source said.

The bookrunners were BMO Capital Markets Corp., J.P. Morgan Securities LLC, Goldman Sachs & Co., HSBC Securities (USA) Inc. and Wells Fargo Securities LLC.

Proceeds will be contributed to the bank's general funds for general corporate purposes.

BMO was last in the U.S. bond market with a $2 billion sale in two maturities on Nov. 1.

Bank of Montreal is a financial services company based in Toronto and Montreal.

Goodrich's preferreds

Goodrich Petroleum sold $100 million of 10% series C cumulative preferred stock at par to yield 10%, a market source said.

Morgan Stanley, UBS Securities LLC and Barclays are the joint bookrunning managers.

Goodrich will apply to list the new securities on the New York Stock Exchange under the ticker symbol "GDPPC."

Proceeds will be used to repay outstanding amounts under a senior credit facility and for general corporate purposes.

Goodrich Petroleum is a Shreveport, La.-based independent oil and natural gas company.

Stephanie N. Rotondo contributed to this review

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