Verizon, Vivendi, ConEd, Union Electric, Illinois Power, MetLife, NuStar among issuers in busy market

By Andrea Heisinger and Paul Deckelman

Omaha, April 1 - Continuing stable conditions led to a busy Tuesday in investment grade as Vivendi, Verizon Communications Inc., Consolidated Edison Co. of New York, Inc., Union Electric Co., Illinois Power Co., MetLife Capital Trust X, NuStar Logistics, LP, Norfolk Southern Corp., John Deere Capital Corp. and Morgan Stanley priced issues.

In the investment-grade secondary market Tuesday, advancing issues trailed decliners by more than a five-to four ratio, while overall market activity, reflected in dollar volumes, rose about 27% from Monday's pace.

Spreads in general tightened solidly, as Treasury yields weakened, the yield on the benchmark 10-year note, for instance, gapping out by 14 basis points to 3.55%

Among the issues seen trading around was Norfolk Southern's new 10-year notes, which firmed a bit from their spread at pricing.

But much attention was turned to financial issues in general and Lehman Brothers in particular, after the investment bank successfully sold a big new upsized convertible preferred mega-deal, allowing it to bolster its balance sheet in an effort to stop market speculation heard recently in some quarters that Lehman could follow in the unfortunate footsteps of Bear Stearns. Debt-protection costs for Lehman, Bear, and other financial names like Goldman Sachs and Merrill Lynch were seen having tightened - an investor vote of confidence in the sector. Financial cash bonds such as Citigroup and JP Morgan, along with Lehman, were also seen higher.

ConEd brings a 'big one'

ConEd priced $1.2 billion of debentures in two tranches.

The $600 million of 5.85% 10-year notes priced at 99.956 to yield 5.856% with a spread of Treasuries plus 230 basis points.

The $600 million of 6.75% 30-year notes priced at 99.707 to yield 6.773% with a spread of Treasuries plus 240 bps.

Bookrunners were Bank of New York Capital Securities, Merrill Lynch, Pierce, Fenner & Smith Inc. and RBS Greenwich Capital.

"It was a big one for them," a market source said. "They usually do smaller ones."

Union's early bird

Union Electric, doing business as AmerenUE, priced $250 million 6% 10-year senior secured notes at 99.698 to yield 6.041% with a spread of Treasuries plus 250 bps.

Goldman Sachs & Co. and J.P. Morgan Securities Inc. ran the books.

The issue went well and was oversubscribed, a source close to the deal said.

"It was the first deal of the day," he said. "We knew it was going to be busy and decided to go in fresh out of the gates. It helps keep investors focused if you get in early on a day like today."

Verizon finds window

Verizon priced $4 billion of notes in three tranches.

The $1.25 billion of 5.25% five-year notes priced at 99.579 to yield 5.346% with a spread of Treasuries plus 270 bps.

This was in line with price talk, a market source said.

The $1.5 billion of 6.10% 10-year notes priced at 99.479 to yield 6.17% with a spread of Treasuries plus 260 bps.

The $1.25 billion of 6.9% 30-year notes priced at 99.724 to yield 7.002% with a spread of Treasuries plus 260 bps.

Both the 10 and 30-year tranches priced tighter than talk of 265 bps, the source said.

Banc of America Securities LLC, Lehman Brothers Inc. and Morgan Stanley & Co. Inc. rant the books for the five and 10-year tranches.

Banc of America, Barclays Capital Inc. and Credit Suisse Securities LLC were bookrunners for the 30-year tranche.

The issue had been rumored in recent weeks, sources said.

"They were holding onto that one for a while," a market source said. "They were waiting for the correct window."

An analysis based on what the company's outstanding notes were trading at Monday yielded somewhat normal new issue premiums, a source said.

The five-year tranche had about a 50 bps premium, while the 10 and 30-year tranches carried about 20 to 25 bps.

Illinois Power sells $337 million

Illinois Power was one of several deals priced via Rule 144A Tuesday.

The company priced $337 million of 6.25% 10-year notes at 99.767 with a spread of Treasuries plus 275 bps.

Barclays, BNP Paribas Securities Corp. and Lehman Brothers were bookrunners.

MetLife priced another private offering.

The company did an upsized $750 million of 60-year hybrid exchangeable trust securities.

They were priced at par with a spread of Treasuries plus 490.5 bps. They have a coupon of 9.25% until 2038, and then it switches to a floating rate of three-months Libor plus 554 bps.

The issue was increased from $500 million.

Deutsche Bank, J.P. Morgan and UBS Investment Bank ran the books.

Norfolk Southern also priced via Rule 144A.

The company did $600 million of 5.75% 10-year notes priced at 99.723 to yield 5.787% with a spread of Treasuries plus 225 bps.

Barclays, Deutsche Bank and Merrill Lynch were bookrunners.

Vivendi brings $1.4 billion

French entertainment company Vivendi priced $1.4 billion of notes in two tranches.

The $700 million of 5.75% five-year notes priced at 99.397 to yield 5.891% with a spread of Treasuries plus 325 bps.

The $700 million of 6.625% 10-year notes priced at 99.675 to yield 6.67% with a spread of Treasuries plus 312.5 bps.

Barclays, Banc of America and Citigroup Global Markets Inc. were bookrunners.

NuStar priced $350 million of 7.65% 10-year senior notes at 99.802 to yield 7.678% with a spread of Treasuries plus 412.5 bps.

Bookrunners were Barclays, J.P. Morgan and SunTrust Robinson Humphrey.

Deere, Morgan Stanley reopen

Those that reopened issues Tuesday included Morgan Stanley and John Deere Capital.

John Deere reopened Monday's five-year notes to add $250 million.

Total issuance is now $500 million.

The 4.5% notes priced at 98.982 to yield 4.731% with a spread of Treasuries plus 208 bps.

Deutsche Bank and Merrill Lynch were bookrunners.

Morgan Stanley reopened its 10-year medium-term senior notes priced last week to add $250 million.

Total issuance is now $2.5 billion, including the $2.25 billion priced on March 27.

The notes priced at a spread of Treasuries plus 300 bps, a market source said.

Morgan Stanley was agent.

HSBC expected Wednesday

The HSBC Holdings plc issue of price perpetual subordinated capital securities that can be exchanged at the issuer's option into non-cumulative dollar preference shares that was announced Monday is expected to price Wednesday, a source close to the deal said.

They will be priced at par of $25.

HSBC, Citigroup, Merrill Lynch, Morgan Stanley and UBS are bookrunners.

More deals seen Wednesday

With a number of successful issues Tuesday, combined with continued stability, there should be another handful of issuers Wednesday, sources said.

"We're definitely not finished for the week," one source said. "Treasuries are holding, and the [stock] market was up something like 300 points today." In fact the Dow Jones Industrial Average rose 391.47.

"We could see some brokers or a bank or two tomorrow if conditions hold up."

Another source said he doubted Wednesday would be as busy simply because many issuers took advantage of Tuesday's conditions.

"I would imagine most people went today since the open was strong and indices looked good," he said.

Norfolk Southern better in trading

A trader said that he saw the new Norfolk Southern 5.75% notes due 2018 come in to levels around 219 bps bid, 215 bps offered, while the bonds had priced earlier in the session at 225 bps over comparable Treasuries.

Lehman gains

The news that Lehman Brothers had sold an upsized $4 billion of new convertible preferred paper gave the company's existing bonds a jump; its 5.625% notes due 2013, for instance, narrowed to a spread of about 355 bps going home, versus 369 bps at the close Monday.

Lehman's credit-default swap spread costs meantime came in solidly; they fell by as much as 55 bps to 230 bps, from 285 bps late Monday, before widening a little from that low but still finishing 45 bps improved at 240 bps.

Other brokerage CDS spread costs likewise narrowed, with a trader seeing Merrill Lynch ending at 240 bps bid, 250 bps offered, Goldman Sachs at 132 bps bid, 137 bps offered, and Bear Stearns at 153 bps bid.

Back among the cash bonds, financial names were among the big gainers, including Citigroup's 6% notes due 2017 which narrowed by 30 bps to around the 245 bps mark, while JP Morgan Chase's 4.875% notes due 2014 came in by more than 20 bps to finish at 150 bps over.

iStar Financial's 6.50% notes due 2013, which have recently been trading in distressed territory more than 1,000 bps over Treasuries, improved Tuesday to about 985 bps over, a better-than 30 bps pickup.

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