McCormick prices deal, Korail reopens notes; quiet secondary sees McCormick tighter, Rio Tinto wider

By Andrea Heisinger

New York, Aug. 26 - A new issue from McCormick & Co., Inc. priced Tuesday, along with a reopening from Korea Railroad Corp.

Frequent issuer Toyota Motor Credit Corp. also priced a small issue of floaters.

This was the most action the investment-grade primary market had seen in several days as the summer lull is at its peak.

The secondary market had minimal volume, as sources again reported how quiet it was, with many desks virtually deserted.

McCormick prices notes

Spice company McCormick priced $250 million of 5.25% five-year senior unsecured notes Tuesday.

They had a price of 99.814 to yield 5.293% with a spread of Treasuries plus 223 basis points. This was where the issue launched, and was at the tight end of price talk for a spread in the 225 bps area, a source close to the deal said.

The company is using the proceeds to repay a portion of its outstanding commercial paper.

Banc of America Securities LLC and BNP Paribas Securities ran the books.

Korail reopens notes

Korea Railroad, a government-owned company, reopened its 5.375% five-year notes to add $200 million.

The Rule 144A deal brings the total issuance to $500 million.

The reopened notes priced at 97.813 to yield 5.9125% with a spread of Treasuries plus 284.76 bps.

Citigroup Global Markets Inc., HSBC Securities and Morgan Stanley & Co., Inc. were bookrunners.

Toyota Motor Credit prices floaters

Toyota Financial Services' funding branch priced $200 million in one-year floating-rate notes Tuesday at par to yield Federal Funds plus 50 bps.

Agents for the medium-term notes were J.P. Morgan Securities Inc. and Citigroup Global Markets Inc.

Slow pace to continue

Issuance is likely to get even more scarce in the next couple of days as trading desks and companies alike thin out ahead of the long Labor Day weekend, sources said.

Any large issues are largely out of the question, one source said, unless it's a very good name that needs the money before September.

As a source said Monday, this week is largely a judgment call for companies that may need the money sooner rather than later.

"If they don't think the market's going to get any better, they may go for it," one source said.

"It's more likely they're going to wait until at least next week, though."

There were no particularly damaging headlines out Tuesday to keep any companies from pricing a new issue, but the tone is still not solid.

"We had the house numbers out, and everyone's still watching Fannie and Freddie," a source said.

He was referring to the decline in home prices that was reported Tuesday by the Case-Shiller Index.

A separate report said more Americans bought homes in July, following a decline in June.

McCormick bonds seen tighter

The new issue of 5.25% five-year McCormick bonds was seen slightly tighter after pricing, a secondary source said.

They were seen at 220 bps bid, 216 bps offered in mid-afternoon trading after pricing at 223 bps.

This was about the only thing worth watching in the secondary, a source said., commenting that it was otherwise "very quiet."

Rio Tinto slightly wider after earnings

Mining company Rio Tinto plc posted a record profit for the first half of the year, which was not apparent by where some of its outstanding bonds were trading.

The company's bonds due 2013 were seen at 260 bps bid, 250 bps offered Tuesday afternoon, from about 255 bps Monday.

Bank CDS remain wide

A trader said credit-default swaps for major banks were 3 to 10 bps wider Tuesday afternoon.

Washington Mutual Inc.'s debt-protection costs were about 40 bps wider, with an upfront percentage of 24% to 25%, plus 500 bps annually.

Major brokerage CDS costs were unchanged to 5 bps wider, the source said.

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