Toyota prices; Mutual of Omaha, CBL plan deals; trading volume low; J.C. Penney bonds higher

By Andrea Heisinger

New York, Oct. 12 - Third-quarter earnings season continued to impact the high-grade bond market on Tuesday as issuers mostly stayed on the sidelines.

Toyota Motor Credit Corp. was about the only name pricing bonds. It sold $100 million of bonds due in 2013.

Mutual of Omaha Insurance Co. and CBL & Associates Properties, Inc. each announced that it is tapping the market, and both deals are expected to price on Wednesday.

CBL, a real estate investment trust, is reopening an issue of 7.375% perpetual preferred stock, and Mutual of Omaha is planning a $300 million sale of 30-year surplus notes.

The past week was dominated by overseas names and sovereigns taking advantage of the empty market. Issuance dropped sharply and is expected to be even less this week because many financials and corporates are either in earnings blackout or do not need any capital.

Trading was light to start the short week. In the morning, one trader said that there was "not much happening at all today."

That hadn't changed much by late afternoon.

"Volume is light, and I would say the market is 1 to 2 basis points better," the trader said.

Transportation name CSX Corp. saw no trading in its bonds about a half-hour after announcing its third-quarter earnings, a source said. The company reported a record $414 million in earnings, or a 48% jump from the same period last year.

Also on high-grade traders' radar was movement in crossover bonds from J.C. Penney Co. Inc. and Fortune Brands, Inc. following the acquisition of sizeable stakes in the companies by Pershing Square Capital.

Treasury yields moved almost universally higher compared to the previous day of trading. The five-year note was out 4 bps to yield 1.14%, while the 30-year bond did worse by widening 7 bps from the previous day to yield 3.82%, a source said.

Toyota arm prices

Toyota Motor Credit sold $100 million of 0.82% medium-term notes due 2013 (Aa2/AA) at par, according to an FWP filing with the Securities and Exchange Commission.

The agent was J.P. Morgan Securities LLC.

The U.S. funding arm of Toyota Financial Services is based in Torrance, Calif.

Short supply for week

Wednesday could be the busiest day of the week, a source said late in the afternoon. At least two deals are expected to price after a slow pace on Tuesday.

"We are hearing that what everyone else has is pricing Wednesday," he said.

One syndicate desk reported two corporates pricing across the curve, both benchmark sizes, and two others on the sidelines.

Another source said that they are "hearing it's slow all around" and that issuance will never really get off the ground for the week.

"We're all ready to jump back in," the source said. "We need issuers."

Mutual of Omaha plans 30-years

Mutual of Omaha Insurance is planning a $300 million issue of 30-year surplus notes for Wednesday, a source away from the deal said late Tuesday.

The notes (A2/A) will be sold under Rule 144A and Regulation S with Goldman Sachs & Co. and JPMorgan as the bookrunners.

Proceeds will be used for general corporate purposes.

The insurance and financial services provider is based in Omaha.

CBL reopening preferreds

CBL & Associates Properties is planning to reopen its issue of 7.375% series D perpetual cumulative redeemable preferred stock, and pricing is expected Wednesday morning, an informed source said.

The preferreds will be $25 each.

Total issuance will include $332.5 million, or 13.3 million preferreds, previously issued.

Wells Fargo Securities LLC is running the books, and RBC Capital Markets is co-manager.

Proceeds are being contributed to the company's operating partnership in exchange for preferred units of limited partnership issued by the operating partnership. The operating partnership will use the proceeds to reduce amounts under its credit facilities and for general corporate purposes.

The real estate investment trust is based in Chattanooga, Tenn., and invests in malls, community centers and office properties.

JCP, Fortune paper weaker

A trader on the high-grade side said that bonds from J.C. Penney were "down $2 to $3" by the end of the day, while another trader in the high-yield sector said they were 50 bps higher on the news Monday that hedge fund Pershing Square Capital had bought 39 million shares of common stock in the retailer.

Bonds from another crossover name, Fortune Brands, were also "weaker on the back of the J.C. Penney news," the high-grade trader said.

Pershing Square also bought a 10.9% stake in Fortune Brands.

Another trader said that J.C. Penney bonds "took a nice beating" as investors worried about what recent investments made by Pershing Square and Vornado Realty Trust could mean for the company.

The trader called the 6 3/8% notes due 2036 5 points weaker around 93 and said the 5.65% notes due 2020 dipped 3 points, ending around 981/2.

Another trader said about $50 million to $60 million of J.C. Penney's assorted bonds changed hands, with the "longer paper down more."

He pegged the 5.65% notes at 97 3/8, 3 points off from Friday levels. The 5¾% notes due 2018 slipped "a couple points" to around 99, and the 6 3/8% notes closed around 941/4.

There is some chatter in the market about what investors Pershing and Vornado intend to accomplish with their recently acquired stakes in the Plano, Texas-based retailer.

Pershing said Friday that it had acquired a 16.5% stake in J.C. Penney. Vornado said it had acquired a 9.9% stake.

Even rating agency Standard & Poor's expressed confusion, specifically about Vornado's stake and what it plans to do with it. S&P said it was considering downgrading the real estate trust because of the investment.

The purpose of the investment is "unclear to us at this time," the agency said last week. As such, the agency intends to meet with Vornado management over the next few weeks in order to get "clarity as to the company's allocation intentions, including the longer-term strategy regarding the J.C. Penney stake."

Bank, broker CDSs higher

Credit default swaps for big banks and brokerages moved higher by late in the day, a trader in that sector said.

Bank paper was out 5 to 7 bps, and investment bank and brokerage paper fared slightly better, moving between 3 and 5 bps higher, the trader said.

Paul Deckelman contributed to this report

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