Discovery, Eaton sell as Greece reenters headlines; CenturyLink, Best Buy, Nokia bonds widen

By Andrea Heisinger and Cristal Cody

New York, June 13 - Discovery Communications LLC and Eaton Corp. each sold bonds in the high-grade bond market on an otherwise uneventful Monday.

Eaton's $300 million deal of three-year floaters was done quickly and priced early in the afternoon at the same size at which it was announced.

Discovery Communications priced its upsized $650 million of 10-year notes soon after. The deal size was increased from $500 million on demand.

The market ended on a tentative note on Friday as issuers had only trickled into the primary throughout the week and spreads had begun to widen.

By Monday, news hit that Standard & Poor's had downgraded Greece's debt by three notches, signaling that there was a loss of confidence that the country could repay its debt.

The weaker tone continued, one syndicate source said after the close, adding that while no deals were pulled, other potential issuers held off "to see what happens" on Tuesday.

"We maybe have one or two - it just depends [on the tone at the open]," a syndicate source said.

The Markit CDX Series 15 North American investment-grade index eased 2 bps to a spread of 100 bps on Monday, according to Markit Group Ltd.

In the secondary market, CenturyLink, Inc.'s new 10-year notes widened in trading. Best Buy Co.'s bonds widened 2 bps in trading ahead of the company's earnings report on Tuesday, a trader said.

Nokia Corp.'s bonds also widened another 15 bps in trading on Monday.

On the stronger side of the market, Discovery Community's notes firmed 4 bps in trading, a source said.

Overall trading volume rose 10% to more than $10.5 billion on Monday.

Treasuries briefly rallied before slipping sending yields up a basis point to 2 bps the longer end of the curve as the market waits for retail sales data on Tuesday. The 10-year Treasury note yield rose 2 bps to 2.98%. The 30-year bond yield closed up 2 bps at 4.2%.

Discovery sells tight to talk

Discovery Communications sold an upsized $650 million of 4.375% 10-year guaranteed senior notes (Baa2/BBB/BBB) to yield 150 bps over Treasuries, a source close to the deal said.

The paper was priced at the tight end of guidance in the 150 to 155 bps range, the source said. The size was initially $500 million.

There was about $2.25 billion of demand for the trade, the source said, which was why the size was increased.

Active bookrunners were Citigroup Global Markets, Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes, including acquisitions of companies or businesses, repayment and refinancing of debt, working capital, capital expenditures and the repurchase of common stock.

The notes are guaranteed by Discovery Communications Inc.

Discovery Communications last sold bonds in a $3 billion deal in three parts on May 26, 2010. The 10-year tranche from that deal was priced at 190 bps over Treasuries.

In the secondary market, the notes tightened to 146 bps bid, 144 bps offered, according to a trader.

The media and entertainment company is based in Silver Spring, Maryland.

Eaton sells floaters

Eaton sold $300 million of three-year floating-rate notes (A3/A-/A-) by early afternoon at par to yield Libor plus 33 bps, an informed source said.

Barclays Capital Inc., Morgan Stanley & Co., Inc. and UBS Securities LLC were bookrunners.

Proceeds will be used to repay commercial paper.

The diversified power technology management company is based in Cleveland.

Best Buy wider

Best Buy reports first-quarter earnings on Tuesday, and the company's short-dated bonds widened ahead of the report.

"Best Buy is pretty active in the 3.75% 16s. They're closing the day plus 210, 200, a couple basis points wider from Friday," a trader said.

The notes priced on March 8 at a spread of 162.5 bps over Treasuries.

The company's 5.5% notes due 2021 were unchanged from Friday at 270 bps bid, 260 bps offered. The 10-year notes priced also were sold on March 8 at a spread of 200 bps over Treasuries.

The electronics and entertainment retailer is based in Richfield, Minn.

CenturyLink weaker

Communications company CenturyLink split-rated senior notes (Baa3/BB/BBB-) that priced in three parts on Thursday were mixed in trading, a source said.

A tranche of 6.45% 10-year notes sold at 350 bps over Treasuries and widened in secondary trading on Monday to 360 bps bid, 355 bps offered.

The company also reopened its 7.6% notes due 2039 to add $400 million priced at a spread of Treasuries plus 380 bps. The notes traded tighter on Monday at 377 bps bid, 373 bps offered.

The integrated communications company is based in Monroe, La.

Crossover dominates

A junk bond trader said that volume-wise, "the NewPages led the way, and after that, it was just a bunch of crossover names like Anadarko, stuff like that."

He also noted a fair amount of trading in the new split-rated CenturyLink bonds(Baa3/BB/BBB-), but said he saw little or no interest from junk accounts in the Monroe, La.-based telecommunications company's big new three-part issue, which priced on Friday.

"Everything was quoted off the high-grade desks on a spread basis," he said. "We just didn't get involved."

A market source saw the company's new 7.6% notes due 2039 near the top of the Trace volume list on Monday, with over $26 million having changed hands. He quoted the bonds at 96 ¼ bid - down ¾ point from the levels seen at the end of trading on Friday, but still up more than 7/8 point from the 95.377 level at which the $400 million tranche had priced on Friday to yield 8.014%.

The source had also seen fairly active trading in the other two parts of that quickly shopped $2 billion issue, with nearly $10 million each of the 5.15% notes due 2017 and the 6.45% notes due 2021 as of the early afternoon - strong enough volume to put those tranches near the top of the most actives list as well.

Nokia widens

Nokia's long-dated bonds widened 15 bps in trading on Monday, a bond source said.

The 6.625% bonds due 2039 traded at 292 bps bid, 282 bps offered.

The company's bonds have widened since Fitch downgraded the company two notches to BBB- from BBB+.

The mobile phone manufacturer and internet services provider is based in Espoo, Finland.

Goldman CDS tightens

A trader who watches the credit-default swaps market said that the cost of protecting holders of major-bank bonds against a possible event of default was anywhere from 1 basis point lower, a slightly bullish signal of investor sentiment about the sector, to 2 bps higher, a slightly bearish indicator.

He saw CDS protection costs for major investment-bank paper between 2 bps lower and 2 bps higher.

He noted that, in particular. Goldman Sachs & Co.'s CDS protection cost was 2 bps lower on the day, at 154 bps bid, 157 bps offered, which he said was "kind of amazing, since [various analysts and other market-watchers] are talking on the TV like there may be a criminal action against them" in the wake of recent allegations of possible wrongdoing against major banks stemming from the 2007-2008 subprime mortgage meltdown and the economic problems that followed.

New York-based investment banking giant Goldman has faced scathing criticism on Capitol Hill and elsewhere for buying parts of risky mortgages and then essentially placing bets against those same mortgages - a profitable strategy, which company chairman Lloyd Blankfein defended during his congressional testimony last year.

"People [in televised interviews] are discussing whether that means the end of the firm and all kinds of other crap," the trader fumed.

"It's just unbelievable that they talk about this stuff - whether [Goldman] might go out of business - so openly, and this is one of the biggest institutions in the country, certainly a kingpin of the financial system, and they're sitting there discussing this stuff," he said.

"Yeah, why not air this dirty laundry? It's just unbelievable. How do you feel if you're sitting there working at Goldman Sachs and you hear this [stuff]?" he demanded.

"I admire the way some of these people can keep going to work every day" with such negative speculation floating around, he concluded.

Paul Deckelman contributed to this review

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