Alberto-Culver, L-3, Entergy Texas, IBRD sell notes; primary weakens; EOG Resources firms

By Andrea Heisinger and Cristal Cody

New York, May 18 - Alberto-Culver Co., L-3 Communications Corp., Entergy Texas, Inc. and the International Bank for Reconstruction and Development all priced quick-moving deals on Tuesday.

All of the sales were done well before the market close, with some getting priced by early afternoon.

Another sale came from J.C. Penney Corp., Inc., which priced a $400 million split-rated deal of five-year notes early in the day.

The largest industrial sale of the day came from L-3 Communications. The aerospace and defense contractor priced $800 million of 10-year senior notes that are guaranteed by its domestic subsidiaries.

Consumer products marketer and distributor Alberto-Culver priced $150 million of 10-year unsecured notes.

In the utility sector, there was a $200 million sale of five-year mortgage bonds by Entergy Texas.

The IBRD, a unit of the World Bank Group, sold $4.5 billion of five-year global bonds by early afternoon.

Sources said they remain downbeat about the market in the short term as the negative headlines that are keeping issuers out of the market could continue.

Investment-grade bond spreads were wider in trading on Tuesday, a source said.

"Spreads started out about unchanged but widened out when stocks got hit and the euro started falling again on new rules in the euroland financial markets," one trader said. "Hence the positive day for Treasuries."

Treasuries rallied on a flight to safety by investors rattled by the risks of overseas debt defaults, sources said.

Yields on the 10-year note were 14 basis points lower at 3.35%. Yields on the 30-year bonds moved to 4.23% from 4.36%.

While quite a few new investment-grade bond deals were brought on Tuesday, the "market is very sloppy," a trader said.

The CDX Series 14 North American high-grade index eased 9 bps to a mid bid-asked spread level of 118 bps, according to a market source.

Overall Trace volume in the investment-grade market jumped more than 50% to just under $11.5 billion, according to a source.

Investors in the secondary market found several new deals that piqued their interest, including from L-3 Communications, J.C. Penney and EOG Resources Inc., sources said.

L-3 Communications' new notes sold earlier on Tuesday were in "big demand," while EOG Resources' short paper firmed in trading after pricing the previous day, according to traders.

L-3 sells notes

New York-based L-3 Communications priced $800 million of 4.75% 10-year senior unsecured notes (Baa3/BBB-/BBB-) at Treasuries plus 138 bps, an informed source said.

The company was lifted to investment grade by Moody's Investors Service on Tuesday with a positive outlook.

The bookrunners were Barclays Capital Inc., Bank of America Merrill Lynch and Deutsche Bank Securities Inc.

Proceeds are being used to redeem the company's 6.125% senior subordinated notes due in 2013 and 2014.

Primary weakens further

Once again, there were issues in the investment-grade market despite a less-than-rosy outlook on its tone. Several issuers have braved the market in the past few days, pricing mostly smaller deals.

"What else are they going to do?" a source said. "Some of them were waiting, and we had enough interest."

One sign that desks and accounts are being cautious is that none of Tuesday's sales were upsized, and most either didn't go out with price guidance or priced in line with it. The trend of upsizing and pricing at the extreme tight end of talk seems to have abated momentarily.

With the exception of IBRD's sale, the day's sales fell far below $1 billion.

A source who "didn't work on any of the day's deals" called the market "bad to very bad."

Weakening has continued to cripple the influx of sales, and that's not expected to change soon.

"It's not often we see nothing but bad news out there," he said, referring to the headlines on Europe, the Gulf of Mexico oil spill and the financial sector.

"I'm not very optimistic about the market at this point."

Alberto-Culver prices small deal

Alberto-Culver sold $150 million of 5.15% 10-year unsecured notes (Baa2/BBB) to yield Treasuries plus 175 bps, a source away from the sale said.

Goldman, Sachs & Co. and J.P. Morgan Securities Inc. were active bookrunners.

Proceeds are being used for general corporate purposes, including acquisitions and to repurchase common stock.

The distributor and marketer of health, beauty, food and household products is based in Melrose Park, Ill.

Entergy Texas offers five years

Entergy Texas priced $200 million of 3.6% five-year mortgage bonds (Baa2/BBB+) by early afternoon to yield Treasuries plus 150 bps, a source said.

There was no price guidance on the bonds, the source said, adding that the deal was small and got done quickly.

The bookrunners were BNP Paribas Securities, Credit Suisse Securities and RBS Securities.

The utility is based in New Orleans.

IBRD sells $4.5 billion

The IBRD priced $4.5 billion in 2.375% five-year global bonds (Aaa/AAA/AAA) early in the day to yield Treasuries plus 32.45 bps, a source away from the sale said.

Barclays, Credit Suisse, HSBC Securities and JPMorgan were bookrunners.

The arm of the World Bank that provides loans to developing countries is based in Washington, D.C.

J.C. Penney prices split-rated deal

Department store chain J.C. Penney priced a $400 million issue of split-rated 5.65% five-year senior notes (Ba1/BB+/BBB-) at a spread to Treasuries of 225 bps, according to market sources.

The deal, which priced off the high-grade desk, was initially discussed at Treasuries plus 250 bps and was subsequently launched at a 225 bps spread.

Barclays was the active bookrunner for the quick-to-market deal.

Proceeds will be used to make a cash contribution to the company's pension plan.

The issuer is based in Plano, Texas.

Big demand for L-3

L-3 Communications priced $800 million of 4.75% senior notes due 2020 at Treasuries 138 bps.

The notes were "said to be in big demand" from investment-grade and high-yield accounts, a trader said. "The book was well over $1.5 billion."

The 10-year notes were seen late afternoon trading at 140 bps bid, 137 bps offered and were last seen at 140 bps bid, 138 bps offered, according to traders.

Meanwhile, another trader said the notes were "trading a little above par," versus the 99.679 level at which the bonds had priced, equivalent to 138 bps over. "There were a lot of trades at 993/4," he said, but they went home "a touch over par."

EOG tightens

EOG Resources' new $1 billion of senior unsecured debt sold in two tranches on Monday tightened in next-day trading, a trader said.

The 2.95% five-year notes, which priced at Treasuries plus 80 bps, were seen tighter in the secondary at 75 bps bid, 72 bps offered, the trader said.

The Houston-based oil and gas company also sold a tranche of 4.4% notes due 2020 at Treasuries plus 95 bps. Those notes were last seen on Tuesday at 95 bps bid, 92 bps offered.

J.C. Penney wider on bid

J.C. Penney's split-rated 5.65% notes due 2015 sold on Tuesday were seen widening on the bid side, a trader said.

The notes were priced at Treasuries plus 225 bps and seen late afternoon at 228 bps bid, 222 bps offered.

Although the new J.C. Penney notes have a mostly junk rating (Ba1/BB+/BBB-), other traders heard the new bonds being quoted on a spread-versus-Treasuries basis as though they were investment grade.

One said that the bonds had improved to 215/205 bps over, versus the 225 bps spread at which the $400 million issue had priced earlier in the session. But another said that the bonds had improved to 220/215 bps initially but then "widened back to issue," quoting them going out at 227/224 bps. However, a third did see the bonds at 215/23 bps off.

CDS costs rise

A trader who follows the credit default swaps market said that "the banks got hit pretty hard today," sending the cost of protecting holders of their paper against a possible event of default up, a sign of increased investor anxiety about the sector.

He saw CDS costs for bonds of major banks like Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. increase between 10 bps and 23 bps, while the CDS costs for protecting holders of investment-bank bonds such as Goldman Sachs Group, Inc. or Morgan Stanley had risen by 12 bps to 18 bps on the day.

Paul A. Harris and Paul Deckelman contributed to this story

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