ArcelorMittal sells bonds; new issuance slows on earnings, dismal tone; Enel tranches widen

By Andrea Heisinger

New York, Oct. 1 - ArcelorMittal was about the only company to issue bonds amid the dismal tone of the investment-grade primary market on Thursday.

Issuance was expected to slow somewhat Thursday and Friday as employment numbers are released and because of other factors.

"We're almost at [earnings] blackout time," a market source said at the end of the day.

ArcelorMittal sold an upsized $1 billion of 30-year notes fairly early in the day. The size was doubled from its original offering.

In the secondary market, there weren't a lot of solid moves, with some bonds tightening slightly and other widening or unchanged.

The ArcelorMittal notes traded down at the dollar level, a trader said. Wednesday's three-tranche offering from Italian utility company Enel Finance International SA was mixed at best, but mostly wider. Two of the bonds moved out considerably.

Spreads were considerably wider as Treasury yields moved tighter. The five-year note was 13 basis points better with a 2.18% yield. The 30-year bond moved similarly, coming in 10 bps to yield 3.95%.

ArcelorMittal sells $1 billion

ArcelorMittal priced $1 billion of 7% 30-year notes early in the afternoon to yield Treasuries plus 345.2 bps, an informed source said.

The size was increased from $500 million, he said. The sale was initially announced as possibly having two tranches, according to a 424B5 filing with the Securities and Exchange Commission.

"That was just a possibility," the source said. "Sometimes they'll do that and go with one [tranche]."

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. were joint bookrunners.

Proceeds will be used for general corporate purposes.

The steel maker has its U.S. headquarters in Chicago.

Market tone, issuance slump

The high-grade market, along with equities and about everything else, took a turn for the worse on Thursday, a market source said late in the day.

"The market was crappy," he said. "Basically, equity was crappy, and a rally in rates put pressure on credit spreads."

"I think new-issue markets will be quiet for a couple of weeks," he said.

Most U.S. companies are heading into third-quarter earnings blackout in the next week or two, which will provide a welcome respite to the primary market.

It will not be entirely void of deals, however, as issuers outside the United States take advantage of a lack of competition.

"Emerging markets will take advantage of the quiet market," a syndicate source said. "We're heading into this blackout, and it's good because we've seen so much supply lately. It will give the market a chance to even out."

Friday is expected to have little to no new deals as employment figures are released and due to Thursday's tone.

ArcelorMittal note trades down

The new 7% note due 2039 from ArcelorMittal was quoted lower at the dollar price than where it was sold a couple of hours prior, a trader said.

The bond priced at 95.202 and was quoted at 94.375 offered, with no bid.

Enel Finance bonds widen

Two of the three tranches of bonds from Italy's Enel Finance International sold a day earlier were wider in the secondary market by late in the afternoon, a trader in the non-financial sector said.

The 5.125% notes due 2019 were the worst-performing of the bunch, widening to 200 bps bid, 195 bps offered. It priced at 187.5 bps over Treasuries.

The 6% bonds due 2039 fared slightly better, pricing at 200 bps over Treasuries and quoted at 210 bps bid, 207 bps offered.

A tranche of 3.875% notes due 2014 were unchanged from their Treasuries plus 162.5 bps priced and were quoted at 162 bps bid.

Alliant Energy bond tightens

Alliant Energy Corp. saw its 4% bond due 2014 tighten slightly from its 175 bps over Treasuries price a day before, a trader said. The bond was quoted at 160 bps offered, with no bid.

Tyco International five-year better

Diversified industrial company Tyco International Finance SA's new five-year note tightened the most of the newer issues, according to a trader.

The 4.125% note due 2014 was quoted nearly 20 bps tighter, at 168 bps bid, with no offer. It priced at 187.5 bps over Treasuries.

Old Arcelor bond tops trading

An outstanding bond from the day's only issuer topped trading volume as of early afternoon, a secondary source said.

A 6.125% bond due 2018 from ArcelorMittal Luxembourg SA was popular with investors as ArcelorMittal priced $1 billion of 30-year paper.

Another bond, from ArcelorMittal, was also active. That was a 9.85% note due 2019.

Also among the most-active issues was a 7.375% note due 2014 from Bank of America Corp. This comes a day after it was announced that the bank's chief executive officer, Ken Lewis, would be resigning.

Banks, brokers uniformly wider

Credit-default swaps for bank and brokerage names were wider across the board by late in the day, a trader in that sector said.

He quoted the bank at 5 to 10 bps wider. Brokerages were only slightly better at 5 to 8 bps wider.

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