AmEx, Standard Chartered, JPMorgan, Arcelor, Ontario sell bonds; JPMorgan active; spreads ease

By Andrea Heisinger and Paul Deckelman

New York, May 13 - The high-grade market turned toward the financial side Wednesday, with sales from American Express Co. and JP Morgan Chase & Co., both bringing deals without the Federal Deposit Insurance Corp. guarantee. Standard Chartered Bank also sold bonds.

On the non-financial side there were sales from ArcelorMittal and the Province of Ontario.

Wyndham Worldwide Corp. did a split-rated offering that had been announced the previous day, along with a sale of convertible notes.

Three of the day's deals were priced late in the day. American Express was the worst offender. Its late-morning announcement pushed back the entire schedule for the sale, a source close to the deal said.

In the secondary realm on Wednesday, a market source said the CDX Series 12 North American high-grade index was wider by 5 basis points at a mid bid-asked spread level of 153bps.

Advancing issues again led decliners, by a ratio of about five-to-four.

Overall market activity, reflected in dollar volumes, fell by nearly 4% from Tuesday's levels.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue was 6 bps tighter at 3.11%.

The focus in the secondary market remained the new deals which came to market during the day, such as the big offering from JP Morgan Chase, as well as other recent new deals for such names as Microsoft Corp.

AmEx sells benchmark deal

American Express priced a $3 billion benchmark-size deal late Wednesday, an informed source said.

The sale wasn't done until after 5 p.m. ET.

The source said this wasn't due to any difficulty with investor interest, but with when the deal was announced.

"It had gone out late," he said. "We didn't announce it until 10 or 11 [a.m. ET], so when you factor that in..."

The $1.25 billion of 7.25% five-year notes priced at 530 bps over Treasuries, with the $1.75 billion of 8.125% 10-year notes sold at Treasuries plus 505 bps.

The use of proceeds will include helping to fund the intended repurchase of $3.4 billion in preferred stock sold to the U.S. Department of the Treasury on Jan. 9.

The global payment, travel and bank holding company tapped Banc of America Securities, Citigroup Global Markets, Goldman Sachs & Co., J.P. Morgan Securities and UBS Investment Bank as bookrunners.

JPMorgan prices $2.5 billion

JPMorgan Chase sold $2.5 billion of five-year notes without the guarantee of the FDIC. This continues a recent trend from financial names branching out from the Temporary Liquidity Guarantee Program launched last fall.

The 4.65% notes priced at 275 bps over Treasuries. This was in line with price guidance in the high 200 bps area, a market source said earlier in the day.

J.P. Morgan Securities ran the books.

ArcelorMittal offers two tranches

Luxembourg-based steel producer ArcelorMittal sold $2.25 billion of unsecured notes in tranches due 2015 and 2019 late Wednesday.

The $750 million of 9% notes due 2015 priced at Treasuries plus 727.7 bps, while the $1.5 billion of 9.85% 10-year notes sold at 713.4 bps over Treasuries.

The company plans to use proceeds to refinance existing debt.

Citigroup Global Markets, HSBC Securities and J.P. Morgan Securities were bookrunners.

The deal comes on the same day as news that the company is laying off about 1,000 workers at a plant in Indiana.

Ontario sells floaters

The Province of Ontario priced $1.75 billion in three-year floating-rate notes at par to yield three-month Libor plus 45 bps.

The Toronto-based issuer used Barclays Capital, Citigroup and RBC Capital Markets as bookrunners.

Standard Chartered prices five-years

London-based Standard Chartered Bank sold $1.5 billion of notes due 2014 on Wednesday via Rule 144A.

They came to market at 362.5 bps over Treasuries.

Full terms were not available from the managers at press time.

Barclays Capital, Deutsche Bank Securities, Goldman Sachs and Societe Generale were bookrunners.

Wyndham offers split-rate notes

Wyndham Worldwide sold $250 million 9.875% five-year senior notes to yield 11% late Wednesday. They priced at a spread of Treasuries plus 901.9 bps.

The notes are rated Ba2/BBB-, and priced on top of yield talk.

Proceeds will be used to pay down the Parsippany, N.J., hospitality company's revolver.

Wyndham is issuing $200 million of convertibles concurrently.

Banc of America Securities, Credit Suisse Securities, J.P. Morgan Securities and Citigroup ran the books for the sale that was done off the high-grade desk.

Primary not showing fatigue

Despite the number of deals already priced in the first half of the week, there are a least a couple more to come through Friday, a source said.

Investor interest remains strong, he and others noted, and there is more diversity in the market now that financial names are not issuing under the FDIC guarantee.

"People are still interested, but they're paying a price," a market source said.

He was referring to the American Express sale that had a somewhat wide spread despite its low-A ratings from both Moody's and Fitch.

"People will still buy it," he said. "It's a [well-known] name."

It was a "somewhat boring" day, the market source said.

"There was stuff going on, but it wasn't very exciting," he said. "Everything kind of came and went."

JP Morgan trades near issue

A trader saw JP Morgan's $2.5 billion of non-FDIC 4.65% notes due 2014 trading at 283 bps bid, 280 bps offered. That was several bps wider, he said, than the 275 bps over level at which the big New York-based financial services company had priced the deal earlier in the day.

Overall, he characterized the secondary market as "kind of heavy."

Other paper in the market besides JP Morgan "have widened out a little bit - though not tremendously."

He added that "when you have that kind of size and issuance coming, there's not a lot going on secondarily." Things were "a little quiet."

Primary pace slackens a little

Another trader agreed that overall, "the day was quiet today, compared with [Tuesday]" and with Monday, when the new deals were coming fast and furious.

The trader did not see, for example, the ArcelorMittal $2 billion-plus mega-deal, which priced fairly late in the session.

Among Tuesday's offerings, he said that Ameren Corp.'s $425 million of 8.875% notes due 2014, which were being quoted as trading in dollar-price terms rather than on spread, had eased slightly to a bid level of 991/2, with no offer seen. Those bonds had priced at par on Tuesday.

Sempra steps forward

He also saw Sempra Energy's new 6.50% notes due 2016 as having firmed solidly to an offered level of 370 bps, with no bid.

That contrasts with the 387.5 bps over level at which the San Diego-based global power producer had priced its $750 million of bonds - upsized from the originally planned $400 million - to yield 6.539%.

Canadian Pacific stays firm

Also trading above its issue level was another Tuesday issue, Canadian Pacific Railway Co.'s $350 million of new 7.25% notes due 2019, upsized from the original $300 million.

He saw the those bonds at 398 bps bid, 392 bps offered, essentially unchanged from their initial secondary levels on Tuesday, but up from where the railroad operator had priced those bonds at a spread of 412.5 bps over.

Occidental widens slightly

However, Occidental Petroleum Corp.'s new $750 million of 4.125% notes due 2016 were seen to have widened a little to a level of 165 bps bid, 160 bps offered. That was out from Tuesday's level at 160 bps bid, 152 bps offered. The bonds - upsized from the original $600 million envisioned - priced earlier Tuesday at 160 bps over.

Microsoft remains mixed

Elsewhere, Redmond, Wash.-based software giant Microsoft's three-part mega-deal, which priced on Monday, continued to be a sort of a mixed bag, participants said.

Its $2 billion of 2.95% notes due 2014 continued to firm - those bonds had priced at 95 bps over, and then tightened in initial dealings to 87 bps bid, 80 bps offered. They were quoted Wednesday at 77 bps bid, 73 bps offered.

However, its $1 billion of new 4.20% notes due 2019, which had priced at 105 bps over, and then had initially tightened to 95 bps bid, 90 bps offered, were seen on Wednesday at 106 bps bid, 104 bps offered, little changed on the day.

And its $750 million of 5.20% bonds due 2039, which had also priced at 105 bps over and then firmed in the secondary later Monday to 98 bid, 90 offered, had widened out to 110 bps bid, 107 bps offered on Tuesday and continued widening Wednesday, ending at 116 bps over bid, 110 bps offered , the trader said.

Bank, broker CDS costs widen out

In the credit-default swaps market, a trader said that CDS costs to protect holders of big-bank paper against a possible default were anywhere from 10 bps to 30 bps wider on the day, while CDS costs for the bonds of former investment banks - which have turned into commercial banks - were between 10 bps and 20 bps wider.

For instance, JP Morgan's debt-protection costs for $10 million of paper ended the day 10 bps higher at 120 bps bid, 125 bps offered.

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