Week ends with $3.275 billion in deals; banks eye senior debt guarantee; Thursday's issues tighten

By Andrea Heisinger

New York, Oct. 17 - Another volatile week, although a short one, came to a close Friday as all eyes were again on the stock market.

Syndicate sources in the investment-grade bond market said it was a quiet day, without the large swings that monopolized headlines for much of the week.

The secondary saw all of Thursday's issues tighten significantly from record-high pricing spreads.

Primary soldiers on

The primary market was mostly fixated on movements in the stock market this week. On Thursday things changed as some issuers decided to go for it and price a deal because, as a source said, things weren't as bad as they had been.

The day saw two $1 billion deals, but they priced at a steep cost. One source noted a significant change in the investment-grade new issue pricing, which is now focused on coupons instead of spreads because the latter are simply too high.

On Friday, a source said that Thursday was the first time three issues have priced in a single day since Sept. 25, calling the statistic "a little crazy."

It's difficult to predict what the coming week will look like, although with some pricing points out, sources said it's likely there will be more issuance than in the past few weeks.

"There's not an overwhelming amount," a source said of talking to potential issuers. "We have some things in the hopper."

The bigger question among syndicate desks, he said, was when FDIC-insured banks would begin taking advantage of a part of the financial bailout package that guarantees their senior debt issues.

"Everyone's wondering when people are going to take advantage of it," he said. "There are a lot of unknowns."

The provision protects issues made between now and June 30, 2009 for a three-year period.

"There are a lot of questions about how it works," the source said. Among those questions are who is going to buy the debt? And where will it price?

"No one wants to be the first to try it."

A backlog from regular issuers continues to price at a glacial trickle, with the amount growing since well before Labor Day.

Many have held off in recent weeks, waiting for "more normalized levels," a source said.

"That hasn't happened," he added.

Potential issuers are also looking at sky-high new issue concessions, with each new deal setting the bar of how high they'll go, the source said.

Among the consequences of the backed up investment-grade issuance is the clogged emerging-market issuance.

A source in emerging markets said earlier in the week that issuers were waiting for more high-grade issuance before they would come into the market.

Oxy gets extra cash

The proceeds from Thursday's upsized $1 billion issue from Occidental Petroleum will be used for general corporate purposes, a company spokesperson confirmed Friday.

"The offering was made because it is prudent for Oxy to have additional cash on hand," said spokesman Richard Kline.

The size of the issue was increased from $750 million.

Week sees $3.275 billion

The shortened trading week for U.S. credit markets ended with more than $3 billion in new issues, the bulk of which priced Thursday.

Most of the week's issues came from utility companies, with PPL Electric Utilities starting the week with its $400 million offering.

Other deals came from Occidental Petroleum Corp., Diageo Capital plc, Ohio Edison Co. and Pacific Gas & Electric Co.

Oxy Petroleum in 30 bps

Thursday's issue of 7% five-year notes from Occidental Petroleum was seen more than 30 basis points tighter in mid-afternoon trading Friday.

They were at 405 bps bid, 400 bps offered, from pricing at 437.5 bps, a trader said.

Diageo notes tighten

The 7.375% notes due 2014 from Diageo Capital were seen in by more than 25 bps Friday afternoon at 437 bps bid, 435 bps offered, a trader said.

This was in contrast to pricing at 462.5 bps Thursday.

PG&E in 20 bps

Pacific Gas & Electric's 8.25% 10-year notes priced Thursday at 455.7 bps and were seen at 435 bps bid, 430 bps offered Friday afternoon.

AT&T tops trading

AT&T Corp. was seen at the top of the trading list Friday afternoon. The Dallas-based telecommunications company's 7.3% notes due 2011 were seen having the most volume of the day. The company was cited Friday as one of the best to invest in during the market volatility.

Bank, broker CDS unchanged

Bank name credit-default swaps were unchanged to 3 bps to 4 bps wider Friday, a trader said.

Broker or investment bank CDS were similar although leaning in the other direction, seen unchanged to 3 bps to 4 bps tighter.

HSBC both widest, tightest

Bonds from HSBC Finance were seen at the top of the day's biggest movers in both the widening and tightening categories.

The financing arm of HSBC Bank saw its 6.375% notes due 2011 tighten more than 90 bps, while its 6.75% notes due 2011 were more than 160 bps wider.

The company has remained relatively unscathed throughout the recent financial turbulence and was in the news Friday over refinancing of its London headquarters, which was bought by a Spanish real-estate company.

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