Choice Hotels sells notes; GE Capital reopens as primary clears; Goldman tighter in trading

By Andrea Heisinger and Cristal Cody

New York, Aug. 18 - Choice Hotels International Inc. priced the only substantial bond deal in the high-grade market on Wednesday.

There was also a reopening of hybrid notes by General Electric Capital Corp. The company added $100 million to some fixed- to floating-rate five-year notes, bringing total issuance to $300 million.

Choice Hotels took much of the day to price its deal, which stuck to its size throughout the pricing process. The company knew how much it wanted to get done, a source said, and the sale ended up pricing at the tight end of guidance.

The market was virtually unchanged in tone from the previous day, but that had little impact on the issuance volume, the source said.

The Markit CDX Series 14 North American investment-grade index was 1 basis point tighter on Wednesday at a spread of 106 bps, according to Markit Group Ltd.

Overall investment-grade Trace volume fell 7% to under $12 billion, according to a market source.

In secondary trading, the new debt from Choice Hotels tightened, a trader said. Also, Goldman Sachs Group, Inc.'s paper firmed, while debt from Kraft Foods Inc. was active in trading, according to sources.

U.S. Treasury prices fell, mostly keeping yields flat as the stock markets rallied a second day on Wednesday.

The yield on the benchmark 10-year Treasury note was unchanged at 2.63%. The yield on the 30-year bond fell to 3.73% from 3.77%.

Choice Hotels sells $250 million

Choice Hotels International sold $250 million of 5.7% 10-year senior unsecured notes (Baa3/BBB) late in the afternoon at Treasuries plus 310 bps, a source who worked on the trade said.

This was at the tight end of guidance in the 312.5 bps area, the source said. Talk on the yield was in the 5.75% area, and the deal also priced below that at 5.734%.

The deal is guaranteed by the same subsidiaries that guarantee the company's senior unsecured revolver.

Active bookrunners were Goldman Sachs & Co. Inc., J.P. Morgan Securities Inc. and Wells Fargo Securities LLC.

Proceeds are being used to repay borrowings under a revolving credit facility.

According to Prospect News data, the company has not issued any bonds recently.

The senior unsecured notes due 2020 tightened in the secondary market, a trader said. The notes firmed 10 bps on the offer side to 290 bps.

The holding company for hotels is based in Silver Spring, Md.

New deals flag

After a flood of new financial deals on Tuesday, the market was quiet again with only one substantial deal from Choice Hotels pricing. There was also a $50 million sale of first-mortgage bonds from Empire District Electric Co.

"It wasn't necessarily the market," a source said of why there weren't more issuers. "I think we're just seeing a slowdown."

The summer has been fairly active in new deals following rocky market conditions in April and May that kept many companies from selling bonds.

The past few weeks have been especially busy following second-quarter earnings.

"Rates are still there [low], but I don't know how much volume there is," the source said. "We only have so many opportunistic [issuers]."

There isn't much expected for the rest of the week, with a possible $250 million sale from GFI Group Inc. one of the only possibilities. That may not price until the coming week, sources said.

GE Capital reopens notes

General Electric Capital reopened an issue of five-year fixed- to floating-rate notes to add $100 million, according to an FWP filing with the Securities and Exchange Commission.

The notes priced at par and have a fixed rate of 2.5% from and including Aug. 11 of this year until Aug. 11, 2011. After that, they have a floating rate of three-month Libor plus 75 bps until maturity.

Total issuance is $300 million, including $200 million priced in three previous issues.

The agent for the sale was Morgan Stanley & Co. Inc.

The funding arm of General Electric is based in Fairfield, Conn.

Goldman tighter

Goldman's longer-dated paper firmed in afternoon secondary trading, a source said.

The 5.793% bonds due 2043 tightened to 336 bps on Wednesday from 349 bps the previous day.

The financial services company is based in New York City.

Kraft active

Kraft Foods' notes have been active in the secondary market since Monday, according to a source.

The company's 5.375% notes due 2020 firmed 2 bps on Wednesday to 142 bps over Treasuries, the source said.

Warren Buffet's Berkshire Hathaway Inc. disclosed in a regulatory filing on Monday that it continues to trim its stake in Kraft.

Kraft is a Northfield, Ill.-based food manufacturer.

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