Goldman follows earnings with new deal; Rowan brings notes; CareFusion strong, Goldman gains

By Andrea Heisinger and Paul Deckelman

New York, July 15 - The steady pace of issuance continued Wednesday with sales from Goldman Sachs Group Inc. and Rowan Cos., Inc.

Goldman Sachs wasted no time after emerging from earnings blackout, offering bonds after its positive second-quarter announcement the previous day.

The overall market tone shifted little from its slight boost from these earnings, a syndicate source said. "There wasn't much noticeable change," he said.

Among the established issues in the secondary arena on Wednesday, a market source said the CDX Series 12 North American high-grade index tightened by 11 basis points to a mid bid-asked spread level of 131 bps.

Advancing issues - had narrowly led the decliners on Tuesday - fell back on Wednesday, trailing them by a more than nine-to-seven margin.

Overall market activity, reflected in dollar-volume totals, gained 8% from Tuesday's pace.

Spreads in general were seen tighter, in line with notably higher Treasury yields; for instance, the yield on the benchmark 10-year government note gapped out by 13 bps on Wednesday to 3.60%.

The new CareFusion Inc. bonds, which had priced on Tuesday, were seen having firmed smartly on Wednesday, with all three tranches having tightened by around 37 or 38 bps.

Goldman Sachs paper was seen better -- both Wednesday's new issue and the company's existing bonds, given a further boost by the blowout earnings which the New York-based financial powerhouse had posted on Tuesday.

Goldman sells non-FDIC bond

Goldman Sachs Group priced $1 billion of 3.625% three-year notes early in the afternoon without the backing of the FDIC. They came at a spread of 212.5 bps over Treasuries.

That was in line with talk, a source close to the sale said.

The bookrunner was Goldman Sachs & Co.

The financial services and bank holding company is based in New York City.

The deal follows the positive second-quarter earnings announcement from the company on Tuesday. The $3.44 billion in earnings beat analyst expectations and gave a boost to the secondary market - especially in the financial sector.

Rowan sells 10-year

Houston-based contract drilling services provider Rowan Cos. sold $375 million in 7.875% 10-year senior notes late in the afternoon at Treasuries plus 437.5 bps, a source close to the sale said.

Active bookrunners were Barclays Capital and Goldman Sachs & Co. Passives were Citigroup Global Markets, Deutsche Bank Securities and Wells Fargo Securities.

Proceeds will be used for general corporate purposes.

Banks to bring more deals

As many financial names emerge from earnings blackouts, it could mean an uptick in deals from that sector, a market source said.

His desk was "working on a few things" for the remainder of the week, he said, and these were heavy on the bank deals.

"A lot of banks are coming out of earnings, so we should see more of them," he said.

Issuance should continue to increase, if only slightly, in the coming week as other non-financial names also announce earnings. A source said Tuesday that some companies are striving to do earnings early to get in on attractive market conditions.

Wednesday was "a great day," said one source who was in on at least one of the deals. "Things looked good."

Thursday and Friday may not be completely void of offerings as they have been the past couple of weeks. Anything other than the bank offerings is set to be on the small side, a source said.

"I know what we're working on isn't anything huge, but it's something," he said.

New CareFusion issue carried higher

A trader saw all three tranches of CareFusion's $1.4 billion mega-deal having tightened solidly from the spreads over comparable Treasuries at which those bonds had priced on Tuesday.

Its $250 million of 4.125% notes due 2012 were trading at 250 bps bid, 245 bps offered, in from the 287.5 bps level at which they had priced.

Its $450 million of 5.125% notes due 2014 had tightened up to 262 bps bid, 258 bps offered, from 300 bps over at the pricing.

And its 6.375% notes due 2019 traded at 264 bps bid, 269 bps offered. The San Diego-based medical products company - a spinoff from Cardinal Health Inc. - priced $700 million of the 10-years at 312.5 bps on Tuesday.

New Discover trades busily

Among other recently priced issues, a trader said that Discover Financial Services Inc.'s new 10¼% notes due 2019 were very actively traded on Wednesday, calling the Riverwoods, Ill.-based credit-card company's $400 million of bonds the second-busiest issue of the day, with $43 million traded. He saw them at 100¼ bid, up from Tuesday's par level, which was same level at which they had priced on Friday.

However, noting that the issue is split-rated, at Ba1/BBB-/BBB, and has attracted interest from both high-grade players looking for yield and junk investors wanting quality, he was unable to say how much of that busy trading volume came from which camp.

Goldman is golden

A trader said that the new Goldman Sachs 3.625% non-FDIC notes due 2012 had tightened on the break to a "generic" 200 bps bid, 195 bps offered level.

That was well in from the 212.5 bps over level at which the $1 billion issue had priced earlier in the day.

He said that other Goldman paper had moved up as well, spurred on by the favorable quarterly earnings at Wall Street's financially soundest institution.

He saw its 6.15% notes due 2018, which had traded in a 265-262 bps context, tightening up to 255 bps over.

A market source quoted Goldman's most actively traded issue of the day, the 6% notes due 2014, as having tightened to 194 bps over - in handily from 216 bps on Tuesday. Some $125 million of those bonds traded on Wednesday.

Goldman reported Tuesday that it had earned $2.72 billion, or $4.93 per share, after preferred stock dividends, in the fiscal second-quarter ended June 26, beating its year-ago profit of $2.05 billion, or $4.58 per share.

As it had previously announced, Goldman recorded a charge of 78 cents per share as it repaid the government's $10 billion investment in the bank as part of the Troubled Asset Relief Program.

USAA firms up

Also in the financials, the new USAA Capital Corp. 3.50% notes due 2017 were quoted at 110 bps bid, 105 bps offered.

The San Antonio-based financial services company had priced its $200 million of bonds Tuesday at 125 bps over.

Bank, brokerage CDS tighten up

A trader who watches the credit-default swaps market said that the cost of protecting a holder of big-bank bonds against a possible event of default was 7 bps to 25 bps tighter, while brokerage company CDS costs were 12 bps to 25 bps tighter.

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