Ryder, Lehman deals lead off quiet week; KeyCorp to price trust preferreds; Telecom Italia sinks

By Andrea Heisinger and Paul Deckelman

Omaha, Feb. 19 - It could be a slow week ahead, but Ryder System, Inc. and Lehman Brothers Holdings Inc. got their issues out of the way at the beginning of the week.

In the investment-grade secondary market Tuesday, declining issues led advancers by a better than eight-to-five ratio, while overall market activity, reflected in dollar volumes, jumped 60% from the levels seen Friday, when the market had an abbreviated session ahead of the three-day Presidents Day holiday break.

Ryder System's new bonds were seen having tightened solidly from the levels at which they had priced earlier in the session.

Among existing issues, Wal-Mart Stores Inc.'s bonds were seen little changed on the news that the retailing giant had posted stronger fourth-quarter profits. Telecom Italia Capital SA's bonds, on the other hand, were among the bigger losers on the session.

Among the financials, major bank and brokerage credit-protection costs were seen mostly unchanged to slightly wider on the session. And CDS costs were steady for the bonds of troubled monoline bond insurers like Ambac Financial Group Inc. and MBIA Inc. - even as the latter company announced an abrupt change in its top management ranks.

Ryder brings $250 million

Ryder priced $250 million in 6% five-year notes at 99.809 to yield 6.044% at a spread of Treasuries plus 312.5 basis points.

There was no formal price talk for the issue, a source close to the deal said.

Bookrunners were BNP Paribas Securities Corp., Citigroup Global Markets Inc. and RBS Greenwich Capital.

The issue went well and was five times oversubscribed, the source said.

"It went pretty quickly," he said. "There was no formal price guidance because it was kind of an expedited process. The books swelled very quickly."

The amount of the offering stayed the same from launch to pricing, he noted.

Lehman sells one-years

Lehman Brothers priced $300 million of one-year hybrid notes at par.

They have a coupon of 4.75188% until April 14, 2008, and then it changes to a floating rate of three-month Libor plus 40 bps.

Lehman Brothers Inc. was bookrunner.

KeyCorp plans trust preferreds

An upcoming issue from KeyCorp Capital X was announced.

The company plans to price enhanced trust preferred securities at $25 each.

Pricing is expected Wednesday afternoon, a source close to the issue said.

Citigroup and Wachovia Capital Securities LLC are running the books.

Quiet week expected

One thing everyone could agree on Tuesday was there wasn't much happening in the way of new issues.

"There's just really not much happening today," a market source said.

Volume likely won't pick up for the next few days.

"There are just not a lot of guys lined up for this week," a source said. "That was kind of expected. Next week should be the opposite assuming the markets are OK."

"I just don't see this week as being busy."

Another source also said he had nothing on his forward calendar, not including the upcoming KeyCorp issue.

"It should be quiet," he said. "I think it's a fair assumption it will pick up next week."

New Ryder bonds tighten

When the new Ryder System 6% notes due 2013 moved into the secondary arena, a trader said that the bonds "did a little better," tightening to a level around 302 bps bid, 296 bps offered from their 312.5 bps spread at the pricing.

He noted that at $250 million, "it wasn't a huge deal" that would attract a lot of market attention the way some recent billion-dollar-plus mega-deals such as Verizon Communications Inc., United Parcel Service Inc., AT&T Corp. or UnitedHealth Group Inc. might.

'That's really all there was," he added. "There wasn't a whole lot of activity going on," other than the market's continuing focus on the new Credit Suisse (New York branch) 5.75% notes due 2018, which priced last week at a 212.5 bps spread and which then firmed to bid levels between 204 bps and 208 bps.

Wal-Mart little changed

Among existing bonds, the trader said he saw "very little in Wal-Mart paper, " with the company's longer-dated issues, such as the 6.50% bonds due 2037 and the 5.25% bonds due 2035, trading at bid levels in the 170-175 bps area, but added that such levels "were really unchanged. There's really not much going on there. I don't think [the earnings] really affected the debt issues."

The Bentonville, Ark.-based retailer - the largest in the world - reported that its net income for the quarter climbed 4% to $4.1 billion, or $1.02 a share, from $3.94 billion, or 95 cents, a year earlier. However, Wal-Mart cautioned that amid a challenging retail environment, it expects to earn between $3.30 and $3.43 a share for the fiscal year that ends in early 2009 - less than the roughly $3.45 a share Wall Street has forecast.

Telecom Italia bonds off

Another market source did see the Telecom Italia Capital 4.95% notes due 2014 having widened out by 20 bps to around the 225 bps area, in fairly active trading. That bond retreat went hand-in-hand with a downturn of its stock on its home bourse in Milan on capital hike worries ahead of a business plan announcement; the company's CEO, Franco Bernabe, has denied reports of a planned capital hike and has said that he is not concerned about the group's debt levels.

Monolines little changed

A trader said that he saw little happening with the monoline bond insuers, quoting debt-protection costs for Ambac's AA-rated paper steady at an upfront cost of 12% to 13% plus 500 bps annually, while credit-default swaps costs for its AAA paper were likewise unchanged at 405 bps bid, 414 bps offered.

He saw MBIA's debt-protection cost on its AA paper also unchanged at between 12% and 14% up front plus 500 bps annually - apparently unmoved by the big news announced early in the session by the company. CEO Gary Dunton is out, and former CEO Joseph Brown is back in, retaking the reins of the company he left in 2004 and reportedly studying the idea of restructuring the Armonk, N.Y. -based industry leader by possibly splitting it into two entities. That's an idea that smaller rival FGIC Corp. is already pursuing and Number-Two industry player Ambac is also reportedly considering.

Despite the fact that such momentous change is in the air, junk market participants meantime said they hadn't seen much on Tuesday of MBIA's 14% surplus notes due 2033 - nominally investment-grade instruments which have been actively traded around in the junk market over the last month after having priced at par in mid-January. The bonds then plummeted all the way down to 70 in the subsequent weeks, before bouncing back late last month and in early February to current levels around 90 bid on speculation that banks and insurance regulators might craft a plan to give companies like MBIA and its rivals an infusion of billions of dollars of badly needed capital needed to keep their vaunted AAA financial strength ratings from the major agencies, allowing them to remain in business.

Elsewhere in the financials sphere, the second trader saw brokerage CDS costs unchanged, except for Bear Stearns, 5 bps wider at 270 bps bid, 280 bps offered, while major bank CDS spreads were 1 bp to 5 bps wider.

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