Weatherford, British Telecom, Kroger, ComEd, MidAmerican among glut of issuers as window opens

By Andrea Heisinger and Paul Deckelman

Omaha, March 19 - A window opened Wednesday, allowing a glut of new issues into the market including deals from Weatherford International Ltd., British Telecommunications plc, The Kroger Co., Commonwealth Edison Co., Packaging Corp. of America, MidAmerican Energy Co., Appalachian Power Co., Bank of New York Mellon Corp., Caterpillar Financial Services Corp. and International Lease Finance Corp.

In the investment-grade secondary market Wednesday, advancing issues outnumbered decliners by around a seven-to-six ratio, while overall market activity, reflected in dollar volumes, eased about 6% from Tuesday's frenetic pace.

Investment-grade spreads in general widened out as Treasury yields came in markedly, the benchmark 10-year note, for instance, narrowing by 14 basis points, to 3.34%.

With the sudden revival of the new-issue market, traders saw aftermarket dealings in the newly priced bonds of such issuers as Weatherford International, Kroger, Commonwealth Edison, Appalachain Power, MidAmerican Energy and Caterpillar Financial.

With the Bear Stearns debacle receding from memory, financials felt a little better, among them Merrill Lynch, Bank of America and Goldman Sachs.

Morgan Stanley's CDS costs held steady, even as the company reported better-than-expected quarterly results.

Weatherford at tight end

Weatherford priced $1.5 billion of senior notes in three tranches

The $500 million of 5.15% five-year notes priced at 99.794 to yield 5.198% with a spread of Treasuries plus 283 bps.

This was on the tight end of talk of 287.5 bps.

The $500 million of 6% 10-year notes priced at 99.462 to yield 6.073% with a spread of Treasuries plus 270 bps.

The tranche also came at the tight end of talk of 270 to 275 bps.

The $500 million of 7% 30-year notes priced at 99.655 to yield 7.028% with a spread of Treasuries plus 283 bps.

They also priced at the tight end of talk of 287.5 bps area.

Goldman Sachs & Co., Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. ran the books.

The issue went well, pricing tighter than talk and with the books three times oversubscribed, a source close to the deal said.

BT reopens

British Telecom reopened a two-tranche deal of senior notes to add $750 million.

The issue is now at $1.95 billion, including $1.2 billion priced on Dec. 5, 2007.

The $250 million of 5.15% five-year notes priced at 98.438 to yield 5.521% with a spread of Treasuries plus 320 bps.

The $500 million of 10-year notes priced at 96.5 to yield 6.434% with a spread of Treasuries plus 310 bps.

Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank, HSBC Securities and RBS Greenwich Capital ran the books.

It was a good CDS trade, a source close to the BT deal said.

"It came about 100 bps to the CDS," he said. "I figured everyone would want the five-year notes, but that wasn't true."

Kroger oversubscribed

Kroger priced $775 million of senior notes in two tranches.

The $400 million of 5% five-year notes priced at 99.803 to yield 5.044% with a spread of Treasuries plus 268 bps.

The $375 million of 6.9% 30-year notes priced at 99.442 to yield 6.944% with a spread of Treasuries plus 270 bps.

Bookrunners were Banc of America Securities LLC, Barclays and Citigroup.

The deal was oversubscribed, a source close to the deal said.

Commonwealth Edison priced an upsized $700 million of 5.8% 10-year first mortgage bonds at 99.808 to yield 5.826% with a spread of Treasuries plus 245 bps.

The issue was increased from $500 million.

Bookrunners were Banc of America, Barclays and RBS.

Packaging Corp. priced $150 million of 6.5% 10-year senior notes at 99.959 to yield 6.506% with a spread of Treasuries plus 310 bps.

Deutsche Bank and J.P. Morgan Securities Inc. ran the books.

MidAmerican, Appalachian upsize

MidAmerican Energy priced an upsized $350 million of 5.3% 10-year notes at 99.657 to yield 5.345% with a spread of Treasuries plus 190 bps.

The issue was increased from $250 million.

Lehman Brothers Inc. and RBS ran the books.

Appalachian Power also increased its offering, from $400 million to $500 million.

The 7% 30-year notes priced at 99.34 to yield 7.053% with a spread of Treasuries plus 280 bps.

Barclays, J.P. Morgan and RBS ran the books.

Bank of New York Mellon priced another upsized offering, from $500 million to $750 million in medium-term notes.

The 4.5% five-year notes priced at 99.897 to yield 4.523% with a spread of Treasuries plus 215 bps.

The issue priced at the tight end of talk of 220 bps area.

Agents were Goldman Sachs and Lehman Brothers.

Caterpillar Finance priced $750 million of 5.45% 10-year medium-term notes at 99.751 to yield 5.482% with a spread of Treasuries plus 205 bps.

Barclays, Citigroup and J.P. Morgan were agents.

International Lease Finance priced $900 million of 6.375% five-year medium-term notes at 99.894.

Citigroup, Credit Suisse Securities LLC, J.P. Morgan and HSBC were agents.

Another issue was announced Wednesday and then pulled.

Dun & Bradstreet pulls

Dun & Bradstreet Corp. announced it planned to price an issue of five-year senior notes, according to a 424B3 Securities and Exchange Commission filing.

The issue did not price, a source close to the deal said, adding that he did not know why.

A market source said it was pulled, and that there had not been a release issued as to why.

Proceeds from the issue were to be used to repay debt under a revolving credit facility.

Citigroup and J.P. Morgan were bookrunners.

Seizing the opportunity

The abundance of new issues Wednesday was due to a combination of factors including stability, the Federal Reserve rate cut announcement, and coming holidays.

"It was a tough day to price a deal," a source said. "There was a glut of supply, which isn't a bad thing.

"We had a strong day yesterday and then we have a half-day tomorrow, with a holiday Friday. It was a day smack in the middle of the Fed announcement and holidays in the U.S. and UK, so people wanted to get things done."

After the Fed announcement Tuesday of a 75 bps cut to the federal funds rate, sources were predicting a window of opportunity Wednesday.

"The new issue market expected to have a busy day," a market source said. "All of the deals priced, except the one. Most of them came at the tight end of what was expected, as well."

The rest of the week and possibly Monday are expected to have little business, sources said.

Thursday brings an early bond market close, and a holiday Friday should ensure what one source referred to as "a dead day."

Barring negative headlines, business should pick back up next week, he said.

New deals trade

A trader said that there was fairly brisk activity in the newly issued bonds of a half-dozen borrowers.

He saw Weatherford's new 10-year notes at 272 basis points bid, 270 bps offered, versus the bonds' spread at issue earlier in the session of 270 bps. He saw the 30-year notes bid at the same 283 bps spread at which the bonds priced, and said he had seen "nothing at all" on the 5-year notes, which also priced at a 283 bps spread.

Kroger's new bonds were seen having tightened a little, with its five-year notes a little better at 265 bps bid, 260 bps offered, versus a 268 bps spread at issue, and its 30-year notes were also firmer at 264 bps bid, 262 bps offered, in from 270 bps at the pricing.

Among the new power names, he saw Commonwealth Ed's upsized 5.80% notes due 2018 at 246 bps bid, 240 bps offered, versus 246 bps bid, 240 bps offered. Appalachian Power's 7% notes due 2038 straddled their issue price of 280 bps, at 283 bps bid, 278 bps offered.

Among the non-power names, Caterpillar Financial 5.45% notes due 2018 tightened to 200 bps bid, 195 bps offered, from their 205 bps issue price.

Packaging Corp. of America's 6½% notes due 2018 firmed to 300 bps bid, 290 bps offered, in from 310 bps at the pricing.

The trader said that "there's plenty of cash out there. It's just that people want to have things priced at extremely cheap levels. Once they price the deals cheap, they come screaming in and buying the stuff."

Financials strong

Financial bonds were generally firmer, as Wall Street recovers from its shock at the fall of Bear Stearns.

Bank of America's 6.1% notes due 2017 came in by more than 30 bps to about the 200 bps level. Merrill Lynch did even better, its 5.45% notes due 2013 improving by 40 bps to around the 320 bps area. Goldman's 5.25% notes due 2013 were seen 30 bps tighter, at the 280 mark. In the credit-default swaps market, a trader saw Morgan Stanley's debt-protection costs steady at 195 bps bid, 205 bps offered, although another market source saw the bonds 20 bps tighter at those levels. That followed the big Wall Street firm's release of better-than-expected numbers.

He saw banks "in a little more" by the sector's turnaround of 5 bps to 25 bps. Brokerages were mixed, with Lehman Brothers tighter by 15 bps and Merrill Lynch 15 bps wider at 235 bps bid, 255 bps offered.

CIT plunges

But a big exception among the financials was CIT Group Inc., which became the latest in the growing line of ostensibly investment-grade companies to see its bonds plunged sharply down to distressed junk bond level. In CIT's case, the drop came after the financial services concern's ratings were downgraded by all three agencies amid concerns about its ability to access the capital markets.

One trader said that its paper "was all over" after downgrades in its ratings from Moody's Investors Service and Fitch Ratings. Their actions Wednesday followed a similar downgrade Tuesday by Standard &Poor's, and left the company's bond ratings at A3/A-/A.

A market source quoted its 4.65% notes due 2010, issued by its CIT Group Funding Co. of Canada as ending just below 71, down 18 points on the day, in busy trading.

In downgrading the credit, Moody's said that "the downgrades and review reflects CIT's reduced funding flexibility amidst severe credit market dislocations and expected weaker profitability stemming from higher borrowing and credit costs."

It added that "the current credit market environment is challenging the strength of CIT's liquidity profile to a degree not previously experienced by the firm. Moody's has often cited CIT's reliance on confidence-sensitive wholesale funding, primarily institutional unsecured debt, as a principal constraint to its credit profile."

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