Quest Diagnostics, Zimmer, Raytheon, Waste Management among day's sales; spreads ease

By Andrea Heisinger and Paul Deckelman

New York, Nov. 12 - Quest Diagnostics Inc., Zimmer Holdings, Inc., Raytheon Co., Waste Management, Inc., NStar and Ameren Energy Generating Co. priced mostly smaller deals on a full Thursday in the high-grade bond market.

Nearly all of the sales were done by early afternoon. Only Zimmer Holdings priced later.

The Quest Diagnostics sale totaled $750 million in two tranches of 10- and 30-year senior notes.

Zimmer also sold two tranches, but with a slightly larger total of $1 billion. The tranches were split evenly between 10- and 30-year notes.

The rest of the sales were smaller and from a variety of industrial names.

Defense contractor Raytheon sold $500 million of notes due in 2020. Waste Management priced a $600 million deal of 30-year bonds that are guaranteed by a subsidiary.

Two utilities priced notes, with NStar selling $350 million of 10-year debentures, and Ameren Energy Generating offering $250 million of notes due in 2020.

The primary market should quiet down on Friday, with volume set to increase at the top of the coming week.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 13 North American high-grade index was rose 2 basis points, to a mid bid-asked spread level of 100 bps, after having held steady at 98 on Tuesday.

Advancing issues continued to lead decliners, by around a 10-to-nine ratio.

Overall market activity, reflected in dollar-volume totals, fell by 13% from Tuesday's pre-holiday pace.

Spreads in general were seen a little wider, in line with modest tightening in Treasury yields; for instance, the yield on the benchmark 10-year notes pushed downward by 3 bps Thursday to 3.44%.

The secondary market was once again dominated by new-deal paper trading around, with a trader noting that "everyone is trying to cram [their new deals in] before Thanksgiving," now just two weeks away, adding that "I would imagine that the new-issue market will dry up pretty much after Thanksgiving" and heading into the homestretch of the current year.

Quest Diagnostics sells two tranches

Medical testing company Quest Diagnostics sold $750 million of senior unsecured notes in two tranches, an informed source said.

The $500 million of 4.75% 10-year notes priced at a spread of Treasuries plus 150 bps. The tranche was initially talked in the 165 bps area, the source said, and then revised to the 155 bps area, plus or minus 5 bps. It launched at 150 bps.

A second tranche was $250 million of 5.75% 30-year notes priced at Treasuries plus 155 bps. This tranche also came in at the tight end of talk that was originally in the 170 bps area, and then revised to the 160 bps area, with a margin of plus or minus 5 bps. It was launched at 155 bps.

Orders totaled about $6 billion, putting the deal at more than seven times oversubscribed.

Bank of America Merrill Lynch, Morgan Stanley, RBS Securities and Wells Fargo Securities ran the books.

The deal is guaranteed by certain domestic subsidiaries of the company that is based in Madison, N.J.

Proceeds are going to repurchase notes tendered under a concurrent tender offer and for general corporate purposes.

Zimmer prices $1 billion

Zimmer Holdings priced $1 billion of senior notes in two tranches. It was the last deal of the day to price, but was done by mid-afternoon, a source said.

The $500 million of 4.625% 10-year notes priced at a spread of Treasuries plus 118 bps.

A $500 million tranche of 5.75% 30-year notes priced at Treasuries plus 135 bps.

Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities ran the books.

Proceeds will be used to repay the balance of a $1.35 million credit facility, and for general corporate purposes including the financing of a stock repurchase program.

The medical products company is based in Warsaw, Indiana.

Waste Management prices long bond

Houston-based Waste Management priced $600 million of 6.125% 30-year senior notes at Treasuries plus 175 bps by early afternoon.

They were talked in the 187.5 bps area, the source said, and priced at the tight end of the margin of plus or minus 12.5 bps either side.

The sale was roughly five times oversubscribed with books of $2.5 billion, the source said.

The deal is guaranteed by the issuer's subsidiary, Waste Management Holdings, Inc.

BNP Paribas Securities, J.P. Morgan Securities, Scotia Capital and Wells Fargo Securities were bookrunners.

Proceeds will be used by the waste services company to fund an equity investment and for other acquisitions and investments.

Market to quiet - briefly

Nearly all of the deals done on Thursday were priced by early afternoon and totaled less than $1 billion.

The large quantity of smaller sales is set to continue in the coming week, after inundating the market in the three days it has been open this week.

"It was busy today, but not too bad," a syndicate source said. "They [the deals] were pretty simple - nothing too exciting."

Despite that, investor interest remained as strong as in the two days prior to the Veteran's Day break. Two of the day's deals saw their modest amounts multiple times oversubscribed.

The success of the offerings is likely to encourage other companies to come into the market if they need to in the coming weeks.

"We should see some solid names issue before the end [of November]," a second syndicate source said. "We don't have anything for Friday, though."

Raytheon sells $500 million notes

Defense technology contractor Raytheon sold $500 million of 4.4% notes due in 2020 early in the day at Treasuries plus 95 bps.

Bookrunners were Bank of America Merrill Lynch and J.P. Morgan Securities.

Proceeds will be used by the Waltham, Mass.-based issuer to fund the redemption of 4.85% notes due in January of 2011.

NStar offers 10-year notes

Energy company NStar sold $350 million of 4.5% 10-year debentures early on Thursday at Treasuries plus 112.5 bps.

Bank of America Merrill Lynch and Goldman Sachs & Co. ran the books for the Boston-based issuer.

Proceeds will be used in part to repay $169.5 million in short-term debt, with the remainder going for working capital.

Ameren unit sells $250 million

Ameren Energy Generating priced $250 million of 6.3% senior unsecured notes due in 2020 at Treasuries plus 285 bps, a source close to the sale said.

The deal came in at the tight end of price guidance in the 287.5 bps area, the source said.

Barclays Capital, Morgan Stanley, RBS Securities and Scotia Capital ran the books.

Proceeds are going to repay short-term debt incurred to finance capital expenditures and to fund other corporate requirements, as well as general corporate purposes.

The indirect subsidiary of utility company Ameren Corp. is based in St. Louis.

Quest Diagnostics comes in

A trader saw Quest Diagnostics' new two-part issue having firmed a bit, with the $500 million of 4.75% notes due 2020 offered at 144 bps over, versus the 150 bps at which the bonds had priced earlier in the session, although the trader pointed out that the 10-year had priced well in from the 165 bps level envisioned by pre-deal market price talk.

Meantime, the other half of Qwest's new deal - the $250 million of 5.75% bonds due 2040 tightened to 152 bid, 150 offered, versus the 155 bps over level at which they had priced. Those bonds also priced better than pre-deal talk, in this case, 170 bps over. "So both of these did pretty good."

Another trader saw the 10-year Quests at 146 bps bid, 141 offered, and the 30-year issue at 155 bps bid, 150 bps offered.

Ameren a little tighter

A trader said that Ameren Energy Generating's 6.30% notes due 2020 were being offered at 278 bps over, versus the 285 bps over level at which the $250 million deal priced a little earlier.

NStar's issue narrows

NStar's 4.50% notes due 2019 were seen having come in to 105 bps bid, 100 bps offered; the $350 million of the notes had priced at 112.5 bps. A trader said that there had been an "early offer" around 95 bps, but added that the 105 bps/100 bps level was "more realistic."

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