Apple, Shell bring large deals to primary; existing Apple, Shell notes tighten

By Aleesia Forni and Cristal Cody

Virginia Beach, May 6 – Two massive new issues from Apple Inc. and Shell International Finance BV priced amidst a volatile market backdrop and declining Treasuries on Wednesday.

Apple garnered roughly $21 billion of orders for its $8 billion trade, with tranches of the new sale pricing between 5 basis points to 10 bps tight of initial price thoughts.

The book for Shell’s $10 billion offering was more than two times oversubscribed, according to a market source.

The two large trades joined Kingdom of Sweden, Host Hotels & Resorts LP, AvalonBay Communities, Inc., Harman International Industries, Inc. and Public Service Electric & Gas Co. in the primary market, bringing the day’s total supply to $20.03 billion.

So far this week has hosted $43,225,000,000 of new issuance, helped largely by AbbVie Inc.’s $16.7 billion trade that sold on Tuesday.

Existing notes from Apple and Shell traded tighter following the companies’ new issuance in Wednesday’s session, while credit spreads overall were weaker, sources said.

The Markit CDX North American Investment Grade series 23 index eased 2 bps to a spread of 66 bps.

Shell brings $10 billion

Shell International sold $10 billion of senior notes (A1/AA/) in six tranches on Wednesday, according to an FWP filing with the Securities and Exchange Commission.

The company sold $2 billion of 2.125% notes due 2020 at 99.788 to yield 2.17%, or Treasuries plus 60 bps.

There was also $750 million of floaters due 2020 priced at par to yield Libor plus 45 bps.

A $2.75 billion 3.25% note due 2025 sold at 99.695 to yield 3.286%, or Treasuries plus 105 bps.

The company also priced a $1.5 billion of 4.125% note due 2035 at Treasuries plus 120 bps.

Pricing was at 99.166 to yield 4.187%.

Lastly, a $3 billion 4.375% note due 2045 sold at 99.801 to yield 4.387%, or Treasuries plus 140 bps.

A planned seven-year tranche of notes was dropped following the deal’s announcement.

Barclays, HSBC Securities (USA) Inc. and Morgan Stanley & Co. LLC are the joint bookrunners.

The Hague, the Netherlands-based oil and gas company plans to use proceeds for general corporate purposes.

The notes will be guaranteed by Royal Dutch Shell plc.

Apple does $8 billion deal

Apple sold an $8 billion seven-part offering of senior notes (Aa1/AA+/) on Wednesday, according to an informed source.

The sale included $250 million of two-year floating-rate notes priced at par to yield Libor plus 5 bps.

A $750 million 0.9% two-year note sold at 99.931 to yield 0.935%, or Treasuries plus 30 bps.

Pricing was in line with guidance set in the 30 bps area after having tightened from initial talk in the 40 bps area over Treasuries.

A $500 million five-year floating-rate note sold at par to yield Libor plus 30 bps.

The company also sold $1.25 billion of 2% five-year notes at 99.845 to yield 2.033%, or Treasuries plus 45 bps.

The notes sold at the tight end of guidance in the range of 45 bps to 50 bps over Treasuries. Initial guidance was set in the range of 50 bps to 55 bps over Treasuries.

There was a $1.25 billion 2.7% seven-year note priced at 99.816 to yield 2.729%, or 75 bps over Treasuries.

Guidance was set in the range of Treasuries plus 75 bps to 80 bps after having tightened from talk in the Treasuries plus 85 bps area.

Apple also sold $2 billion of 3.2% 10-year notes with a spread of Treasuries plus 100 bps. Pricing was at 99.562 to yield 3.241%.

The notes were guided at 100 bps to 105 bps over Treasuries following initial talk set in the 110 bps area over Treasuries.

Finally, $2 billion of 4.375% 30-year bonds priced at 99.635 to yield 4.397%, or Treasuries plus 140 bps.

The tranche was guided in the range of Treasuries plus 140 bps to 145 bps. Initial talk was in the 150 bps area over Treasuries.

Goldman Sachs & Co., BofA Merrill Lynch and J.P. Morgan Securities LLC are the joint bookrunners.

Proceeds will be used for general corporate purposes, including repurchases of common stock and payment of dividends under the company’s recently expanded program to return capital to shareholders, funding for working capital, capital expenditures and acquisitions and repayment of debt.

The computer and mobile communications device company is based in Cupertino, Calif.

Sweden prices tight

Kingdom of Sweden priced a $2.25 billion offering of 1.125% three-year notes (Aaa/AAA/AAA) on Wednesday at mid-swaps minus 10 bps, according to a market source.

The notes were talked in the mid-swaps minus 9 bps area.

The bookrunners are Citigroup Global Markets Inc., HSBC Securities and Nordea.

The notes will be sold via Rule 144A and Regulation S.

Host Hotels new issue

The session also saw Host Hotels & Resorts sell $500 million of 4% series E senior notes due 2025 at Treasuries plus 178 bps, according to a market source and an FWP filed with the SEC.

The notes (Baa2/BBB/BBB-) priced at 99.838 to yield 4.02%.

Pricing was at the tight end of guidance.

Goldman Sachs, BofA Merrill Lynch, JPMorgan and Wells Fargo Securities LLC were the bookrunners.

Proceeds will be used to redeem all of the company’s outstanding 5 7/8% series X senior notes due 2019 at an aggregate redemption price of $515 million.

Host Hotels & Resorts is a lodging real estate investment trust based in Bethesda, Md.

PSE&G secured notes

Public Service Electric & Gas priced $600 million of secured medium-term notes, series K, (Aa3/A/A+) in tranches due May 15, 2025 and May 1, 2045, according to an informed source and two separate FWP filings with the SEC.

The $350 million of 3% 10-year notes priced with a spread of 78 bps over Treasuries at an issue price of 99.897 with a yield of 3.012%.

The notes priced at the tight end of guidance.

The $250 million of 4.05% 30-year bonds sold at 99.502 to yield 4.079%.

Pricing was in line with talk at a spread of Treasuries plus 110 bps.

The bookrunners were BNP Paribas Securities Corp., BNY Mellon Capital Markets LLC, JPMorgan, MUFG, Mizuho Securities USA Inc. and Scotia Capital (USA) Inc.

Proceeds will be used for general corporate purposes.

PSE&G is a Newark, N.J.-based utility.

AvalonBay upsizes

AvalonBay Communities, Inc. priced an upsized $525 million offering of 3.45% 10-year medium-term notes on Wednesday at Treasuries plus 123 bps, according to a market source and an FWP filing with the SEC.

The notes (Baa1/A-/) sold at 99.822 to yield 3.471%.

Pricing was at the tight end of guidance.

Deutsche Bank Securities Inc. and JPMorgan are the joint bookrunners.

Proceeds will be use to reduce debt under a $1.3 billion unsecured revolving credit facility and for general corporate purposes.

The manager and developer of apartment communities is based in Arlington, Va.

Harman offering

In other primary action on Wednesday, Harman International sold $400 million issue of 4.15% senior notes (Baa3/BBB-/) due 2025 in line with talk at Treasuries plus 200 bps, according to an FWP filed with the SEC.

Pricing was at 99.336 to yield 4.232%.

The bookrunners are BofA Merrill Lynch, JPMorgan and Wells Fargo Securities.

Proceeds will be used to repay a portion of the current balance of a revolving credit facility and for general corporate purposes.

Stamford, Conn.-based Harman designs, manufactures and markets audio and infotainment products.

Apple firms

Apple’s existing 2.5% notes due 2025 tightened to 87 bps bid going out on Wednesday, a market source said.

The notes traded flat at 93 bps bid at the start of the session.

Apple sold $1.5 billion of the notes (Aa1/AA+/) on Feb. 2 at a spread of Treasuries plus 85 bps.

The computer and mobile communications device company is based in Cupertino, Calif.

Shell tightens

Shell International Finance’s existing 4.3% notes due 2019 firmed 3 bps over the day to 30 bps bid, a source said.

Shell sold $2 billion of the notes on Sept. 15, 2009 at Treasuries plus 90 bps.

The company is a subsidiary of the Hague, the Netherlands-based Royal Dutch Shell plc.

Bank/brokerage CDS costs flat

Investment-grade bank and brokerage CDS prices were unchanged on Wednesday, according to a market source.

Bank of America Corp.’s CDS costs were unchanged at 67 bps bid, 70 bps offered. Citigroup Inc.’s CDS costs were flat at 77 bps bid, 80 bps offered. JPMorgan Chase & Co.’s CDS costs remained at 64 bps bid, 67 bps offered. Wells Fargo & Co.’s CDS costs were also flat at 41 bps bid, 46 bps offered.

Merrill Lynch’s CDS costs remained at 69 bps bid, 73 bps offered. Morgan Stanley’s CDS costs were up 1 bp to 80 bps bid, 83 bps offered. Goldman Sachs Group, Inc.’s CDS costs were flat at 88 bps bid, 91 bps offered.

Paul Deckelman contributed to this review.

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