Yum!, News America, AmEx Credit offer bonds, tone recovers; financials wider, Watson gains

By Andrea Heisinger and Paul Deckelman

New York, Aug. 20 - The new deal market perked up slightly Thursday, with industrial names Yum! Brands, Inc. and News America Inc. each selling two-tranche deals, while American Express Credit Corp. sold a large offering.

The Yum! bond sale totaled $500 million, split evenly between six- and 10-year notes. News America did longer bonds, pricing $400 million of 11-year bonds and $600 million of 30-years. Both of these sales were oversubscribed and did well with pricing at the tight end of guidance, sources close to them said.

American Express was the largest deal of the day, with a $1.5 billion sale of five-year notes launching by mid-afternoon.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 12 North American high-grade index tightened by 3 basis points to a mid bid-asked spread level of 120 bps.

Advancing issues - which led decliners for a sixth straight session on Wednesday, by a nearly four-to-three margin - stayed ahead on Thursday, leading by about a nine-to-seven ratio.

Overall market activity, reflected in dollar-volume totals, fell nearly 7% from Wednesday's pace.

Spreads in general were seen mostly little changed, in line with generally steady Treasury yields; for instance, the yield on the benchmark 10-year edged downward by 2 bps on Thursday to 3.43%.

American Express Credit Corp.'s new bonds were seen little changed from the spread over Treasuries at which they had priced earlier in the session.

Elsewhere in the financial sector, some major-bank bond, like Citigroup Inc. and Bank of America Corp., were seen having widened out on the session in busy dealings.

Watson Pharmaceuticals Inc.'s recently priced bonds were meantime seen to have firmed solidly - particularly its 10-year issue -- from the levels seen Wednesday and at the bonds' pricing on Tuesday.

Yum! sells $500 million

Yum! Brands priced $500 million of senior notes evenly split between two tranches.

The $250 million of 4.25% six-year notes priced at Treasuries plus 187.5 bps.

A $250 million tranche of 5.3% 10-year notes priced at Treasuries plus 187.5 bps.

Bookrunners were Citigroup Global Markets, Goldman Sachs & Co., J.P. Morgan Securities and Morgan Stanley & Co.

The size remained the same throughout the pricing process, the informed source said.

Both tranches came in at the tight end of price guidance for a spread in the 190 bps area, with a margin of plus or minus 2.5 bps, she said.

When asked if the sale was oversubscribed, the source said: "Oh yeah. It was a blowout."

Proceeds will be used for a contribution of between $150 million and $200 million to a defined benefit pension plan before the end of the fiscal year. They will also be used to repay borrowings under a term loan credit facility due July, 2011.

The operator of fast food chains is based in Louisville, Ky.

News America offers long bonds

Media conglomerate News Corp. subsidiary News America priced $1 billion notes in tranches of 11- and 30-year notes.

The $400 million of 5.65% 11-year notes priced at Treasuries plus 223 bps.

The $600 million of 6.9% 30-year notes priced at Treasuries plus 265 bps.

In general, the sale "went very well," a source close to it said. "It was oversubscribed. It priced correctly and actually tightened in a little."

The sale was done via Rule 144A and Regulation S.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank Securities and J.P. Morgan ran the books.

The company is based in New York City.

Primary tone recovers

The weakness that invaded the primary high-grade market Wednesday seemed to have mostly disappeared by Thursday morning, a syndicate source who worked on one of the day's deals said.

"Today was much better than the same time Wednesday," he said. "The tone was better at the start of the day. I think that's why you saw some issuers jump in."

News America was one of these opportunistic issuers, he said.

Both of the day's industrial deals were heavily oversubscribed, with a source close to the Yum! offering describing it as "a blowout."

The improved tone could have been due to spreads improving from their wider Wednesday levels, a market source said.

"I'm not sure what the reason behind the turnaround [was]," he said. "It could be spreads or whatever. We felt like we were in the driver's seat more. There was more response from accounts."

It's possible, he said, that Yum! was also an issuer that held off from pricing Wednesday and made the call to jump in on Thursday morning.

Two sources from major syndicate desks said their calendars are finished for the week.

"It should be pretty quiet," one of these sources said. "It was pretty active [this week]. We had a few things."

AmEx Credit sells five-year

American Express Credit priced a benchmark-size $1.5 billion in 5.125% five-year notes at Treasuries plus 275 bps.

This was the last deal of the day to launch and price, a source away from the deal said.

Bookrunners were Bank of America Merrill Lynch, Citigroup, Credit Suisse Securities and RBS Securities.

The subsidiary of financial services provider American Express Co. is based in New York City.

When the new American Express 5.125% notes were freed for secondary dealings, a trader saw them little moved from their 275 bps over spread at pricing. He quoted the $1.5 billion issue at 274 bps bid, 265 bps offered.

Overall, he said, it was "a quiet day" in the sector, with many participants' attention more fixed on new deals in the industrial sector.

Citi, B of A bonds widen out

However, a market source at another desk noted some activity in New York-based banking giant Citigroup's existing paper, seeing its 6.375% notes due 2014 having gapped out to just under 400 bps - a more than 40 bps widening on the day.

The source also saw Citi's 5% notes due 2014 trading at just under 500 bps over, a 25 bps widening out.

The source further saw the 6.5% notes due 2016 of Citi's Charlotte, N.C.-based arch-rival, Bank of America, as having also widened out, by more than 20 bps, to the 300 bps over mark.

Bank, brokerage CDS costs narrow

A trader who follows the credit default swaps market said that the cost of protecting holders of big-bank debt against a possible event of default, which had been unchanged on Wednesday after having narrowed by anywhere from 5 bps to 15 bps the session before, again narrowed on Thursday, by anywhere from 3 bps to 15 bps.

He also said that CDS costs for major brokerage company paper, which had likewise remained steady on Wednesday after having tightened on Tuesday by 5 bps to 10 bps, again tightened Thursday, by about 10 bps "across the board."

Watson bonds narrow smartly

Apart from the financials, a trader said that Watson Pharmaceuticals' new bonds had firmed robustly from the levels at which they had priced on Tuesday, as well as from where they had been trading on Wednesday.

The split-rated (Ba1/BBB-/BBB-) bonds have drawn interest from junk market accounts looking to play in new deals, now that the high yield primary seems to have dried up for the summer, as well as from traditional high-grade accounts. The issue was priced off the high-grade desk of the underwriting banks.

The trader saw the Corona, Calif.-based drugmaker's 5% notes due 2014 trading at 101½ bid - up from 100½ on Wednesday, and up further still from the 99.589 level at which the company had priced that $450 million of bonds. He saw some $23 million of the bonds trading, making it one of the day's busier issues.

On a spread basis versus Treasuries, a market source quoted the bonds at a spread of 243 bps - about 5 bps tighter than their levels on Wednesday, and in considerably from the 262.5 bps level at which they had priced.

Watson's other issue, the $400 million of 6.125% notes due 2019, had firmed to 101 5/8 bid from 101½ on Wednesday, and from 99.796 at Tuesday's pricing. There were $22 million of the bonds changing hands.

The market source quoted the Watson 10-years at a 221 bps over spread - well in from its levels in the 240s on Wednesday and in still further from the issue's 262.5 bps spread at pricing.

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