Emerson Electric, International Finance, Rio Tinto sell deals; Emerson tightens, Goldman eases

By Andrea Heisinger and Paul Deckelman

New York, April 14 - Deals from Emerson Electric Co., International Finance Corp. and Rio Tinto Finance (USA) Ltd. priced on an otherwise quiet Tuesday. The day was mostly devoid of headlines good or bad, and those bonds that did come to market were priced early.

"It was a quiet one," a syndicate source said. "Nothing much to talk about."

In the secondary sphere on Tuesday, a market source said the CDX Series 12 North American high-grade index widened on the day to a mid bid-asked spread level of 178 bps, versus 173 bps on Monday.

Advancing issues kept their better-than three-to-two lead over decliners.

Overall market activity, reflected in dollar volumes, rose 53% from the levels seen on Monday.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year note fell by 6 bps to 2.79%.

The new Emerson Electric issue was seen to have tightened by around 10 bps when the bonds were freed for secondary dealings.

In the financial sector, Goldman Sachs Group Inc.’s bonds were seen to have given back some of the gains which they notched on Monday when the company unexpectedly reported favorable first-quarter earnings a day ahead of schedule.

Emerson sells three tranches

Technology and manufacturing company Emerson Electric priced $750 million notes in three tranches Tuesday in a “cut-and-dried deal,” a market source said.

The tranches were evenly split, with $250 million of 4.125% six-year notes pricing at Treasuries plus 245 basis points.

A $250 million tranche of 5% 10-year notes priced at Treasuries plus 233 bps, and $250 million of 6.125% 30-year notes priced at Treasuries plus 250 bps.

The St. Louis-based company is using proceeds to repay a portion of commercial paper borrowings, among other uses.

Banc of America Securities LLC and J.P. Morgan Securities were bookrunners for the six- and 30-year tranches, with J.P. Morgan acting solo on the 10-year notes.

The size of the sale was kept “pretty much constant” throughout the launch and sale, with no upsizing, the source said.

Rio Tinto offers two tranches

Rio Tinto Finance priced $3.5 billion of senior unsecured notes in two tranches, an informed source said.

A full term sheet was not available by late afternoon, he said.

The issue priced at a yield, and consisted of $2 billion of five-year notes yielding 9.25% and $1.5 billion of 10-year notes at a yield of 9.375%.

The deal’s proceeds will be used to repay amounts under a $40 billion credit facility, drawn down in connection with the acquisition of Alcan.

There was a lot of investor interest in the sale, the source said.

“It was very oversubscribed,” he said. “I would say about five times.”

“With the bond markets open for business it makes sense for us to be taking advantage of the opportunity,” commented Rio Tinto’s chief financial officer Guy Elliott, in a news release.

“We have had a high level of interest and are very pleased with the outcome. This issue is part of ‘business as usual’ capital management and the normal process of terming out existing debt facilities.”

The mining and exploration company is based in Melbourne, Australia, and London.

IFC prices $3 billion

The International Finance Corp. sold $3 billion of 3% five-year notes at Treasuries plus 137.75 bps.

This unit of the World Bank Group, based in Washington, D.C., provides private sector investments in developing countries.

Price talk for the sale was significantly lower than where it came, a source away from the sale said. Guidance was in the 78 bps area, he said, remarking that it was “pretty ugly.”

“It’s kind of weird,” he said. “I’m not sure why it would have come that high.”

BNP Paribas Securities, HSBC Securities and J.P. Morgan Securities ran the books.

IADB sale remains

Two market sources said late Tuesday they had not seen a sale from the Inter-American Development Bank price, despite being announced the day before with guidance.

“I haven’t seen anything on it today,” one of the sources said. “There was guidance last night, but then it kind of disappeared.”

The sale is of triple-A rated five-year notes.

The IADB is part of the World Bank Group, based in Washington, D.C., and promotes development in Latin American and Caribbean countries.

Pace pick up expected

The investment-grade primary was “OK” on Tuesday, a market source said. He was more enthusiastic about the remainder of the week, which he said after a slow start is expected to get busier.

“This week is less active than we anticipated,” he said. “It should pick up though.”

Earnings season is winding down, he said, explaining why there should be more deals in coming days.

“A lot of companies are coming out of blackout,” he said. “Things aren’t terrible.”

Emerson Electric executes excellently

When the new Emerson Electric issue was freed for aftermarket dealings, a trader saw all three trenches having firmed by around 10 bps on the session.

He quoted the company’s 4.125% notes due 2015 at a bid level of 235 bps over comparable Treasuries; the company had priced $250 million of the bonds at 245 bps over earlier in the session.

Emerson’s $250 million of 5% notes due 2019 were trading at 223 bps bid, 218 bps offered - the only two-sided market he saw among the three tranches. Earlier, they had priced at 233 bps over.

And its $250 million of new 6.125% bonds due 2039 were seen having moved up to a bid level of 240 bps offered, versus the 250 bps over level at which the tranche had priced.

ConAgra bonds continue firming

Among other recently priced issues, the trader saw both tranches of ConAgra Foods Inc.’s issue from last week continuing to tighten.

He saw the company’s $500 million of 5.875% notes due 2014 at 350 bps bid - a 15 bps pick-up from Monday’s level, and an even bigger tightening from the 40 bps over level at which the Omaha, Neb.-based foods producer priced those bonds on April 6, as part of a two-tranche $1 billion mega-deal.

The other half of that offering - the $500 million of 7% notes due 2019, which originally priced at 412.5 bps over - were seen offered Tuesday at 345 bps, but with no bid side, versus the 365 bps bid, but no offers at which the bonds were seen on Monday.

Dell does well

Another gainer among the recently priced issues was Dell Inc.’s 5.625% notes due 2014. A market source saw the bonds at 294 bps over, on brisk volume of over $55 million.

The round rock, Tex.-based computer manufacturer priced $500 million of the bonds at 400 bps over on April 1.

Goldman gives back some

A trader meantime said Goldman Sachs’ bonds - which had firmed on Monday after the surprise release of better-than-expected quarterly numbers a day ahead of schedule - “gave some of it back” on Tuesday. “They were pretty strong going out on Monday.”

He said the bonds “didn’t fall out of bed or anything - but [Goldman] did get a little weaker,” with the 5.793% “hybrid” bonds of 2043 - which on Monday had moved up to around 44 from prior levels at 42, following the better numbers - ending around 45, down from their peak levels earlier in the session at 481/2, with over $50 million traded. “It’s a little better bid,” he noted.

Goldman’s busiest issue, its 7½% notes due 2019, “started the day at 405 [bps] bid, then traded back to 410, hit 415 bid, and finished around 420/410.”

Goldman had firmed Monday after the big New York-based investment bank-turned-commercial bank reported a first-quarter profit of $1.66 billion, or $3.39 per share, easily beating Wall Street’s expectations of profits of $1.64 per share. The numbers also topped year-ago levels of $1.47 billion, or $3.23 per share, in the quarter ended Feb. 29 of last year, and represent a huge improvement over the $2.29 billion Goldman lost in the fourth quarter. Goldman also announced a $5 billion stock sale to help it pay back government TARP bailout funds.

A trader who watches the credit-default swaps market said Goldman five-year CDS tightened Tuesday by 20 bps to 200 bps bid, 250 bps offered.

He meantime saw bank credit-protection costs 3 bps to 10 bps tighter on the day, while brokerage bonds, including Goldman, were 10 bps to 20 bps tighter.

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