Oracle brings large issue; Ontario, HSBC price as pace slows amid continued stability

By Andrea Heisinger and Paul Deckelman

Omaha, April 2 - The volume of new investment-grade deals slowed Wednesday, but not the issuance amount as Oracle Corp. sold a large deal alongside the Province of Ontario and HSBC Holdings plc.

In the investment-grade secondary market Wednesday, advancing issues led decliners by a narrow margin, while overall market activity, reflected in dollar volumes, rose about 25% from Tuesday's pace.

Spreads in general tightened, as Treasury yields continued to widen out, the yield on the benchmark 10-year issue, for instance, rising by 5 basis points to 3.60%

Verizon Communications Inc.'s huge new three-part issue began trading around, with all three tranches seen in anywhere from 15 bps to 20 bps from the levels at which they priced on Tuesday.

Financial names were mostly seen better, including Bear Stearns, Citigroup and Goldman Sachs.

In the credit-default swaps market, major bank and brokerage costs were seen tighter pretty much across the board, reflecting renewed investor confidence in the sector.

Oracle follows Verizon's pattern

The $5 billion issue from software company Oracle follows Tuesday's $4 billion one from Verizon Communications.

Sources said Oracle was similar not only in size, but also timing.

"I think anyone looking to do that much size was waiting," a market source said. "Things have been stable. They [Oracle] didn't want to come in on a day like yesterday where Verizon was the focus."

Oracle priced $1.25 billion 4.95% five-year notes at 99.964 to yield 4.958% with a spread of Treasuries plus 222 basis points.

The $2.5 billion 5.75% 10-year notes priced at 99.953 to yield 5.756% with a spread of Treasuries plus 215 bps.

The $1.25 billion 6.5% 30-year notes priced at 99.828 to yield 6.513% with a spread of Treasuries plus 212 bps.

Citigroup Global Markets Inc., Credit Suisse Securities LLC and Morgan Stanley & Co. Inc. ran the books.

The company is using proceeds to help fund the purchase of BEA and for general corporate purposes.

"I think Oracle was definitely the focus today," a source said. "People expected a center of gravity, in size, more like $2.5 to $4 billion. It was kind of surprising to see that size."

Ontario brings $1 billion

Ontario priced $1 billion of 3.5% five-year bonds at 99.685 to yield 3.567% with a spread of Treasuries plus 83.25 bps.

J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., RBC Capital Markets and CIBC Capital Markets were bookrunners.

HSBC sells capital securities

An issue from HSBC Holdings announced Monday also priced.

The company did $2 billion, or 80 million, of 8.125% perpetual preferred subordinated capital securities, exchangeable at the issuer's option into non-cumulative dollar preference shares.

This was increased from the standard $300 million.

The securities priced at par of $25 and are non-callable for five years.

HSBC Securities, Citigroup, Merrill Lynch, Morgan Stanley and UBS Investment Bank were bookrunners.

Terms were filed Wednesday on another deal announced earlier this week.

Questar Market Resources, Inc. priced $450 million 6.8% 10-year notes at 99.939 to yield 6.810% with a spread of Treasuries plus 325 bps.

Banc of America Securities LLC was bookrunner.

More deals expected

Thursday will likely resemble Wednesday in terms of number of deals coming into the market, sources said.

"I think we'll see a handful of people step in," a source said. "A lot of people who were intending to come this week already did Tuesday.

The continued stretch of stable conditions is meaning any recent backlog is being purged.

"We're definitely in an environment where credit spreads have stabilized, and things are more stable than they were a couple of weeks ago," a source said.

"It's a prime time to get in."

New Verizon bonds a bell-ringer

A trader said that Verizon Communications' new bonds - some $4 billion of which had priced on Tuesday afternoon - had passed into the secondary market and were proving attractive to investors.

He saw the 5.25% notes due 2013, which had priced at 270 bps over comparable Treasuries, having come in to 255 bps bid, 250 bps offered.

The other two tranches did equally well in secondary, with the 6.10% notes due 2018, which priced at 260 bps over, having firmed to 245 bps bid, 242 bps offered. Its 6.90% bonds due 2038, which had also priced at 260 bps over, were trading Wednesday at 241 bps bid, 238 bps offered.

Financial bonds continue to firm

Back among the established bonds, financial issues continued to mostly gain, riding investor optimism about the sector after Lehman Brothers was able to raise even more capital than it originally intended to to shore up its balance sheet - $4 billion rather than $3 billion - and UBS also moved to improve its liquidity.

In Wednesday's dealings, Bear Stearns bonds were better, with its 6.40% notes due 2017 seen having tightened all day to about the 270 bps level going home, versus 322 bps late Tuesday.

Other gainers included Citigroup, whose 6.50% notes due 2011 were seen 40 bps tighter around the 201 bps level, while Goldman Sachs' 4.50% notes due 2010 were also at that 201 bps level, in by some 35 bps on the day.

What losing issues there were mostly widened only marginally, such as Oracle - which brought a humongous $5 billion of new bonds to market; its existing 5.25% notes due 2016 were about 5 bps wider at 180 bps over.

Bank, broker debt-protection costs narrow

In the CDS market, debt-protection costs for major bank and brokerage names tightened by about 5 bps to 10 bps across the board, a trader said, representing the rebirth of investor confidence in the sector after a number of rocky weeks which had seen those costs balloon out sharply amid huge losses and writedowns connected to the credit crunch.

Lehman Brothers' debt-protection costs narrowed by some 20 bps to around the 220 bps level - the lowest they have been in the last month and a half.

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