Honeywell, Union Pacific, Coca-Cola Enterprises, DuPont sell bonds, Roche plans large deal; fears send banks wider

By Andrea Heisinger and Paul Deckelman

New York, Feb. 17 - A long holiday weekend and faltering stock market didn't stop deals from Honeywell International Inc., Union Pacific Corp., Coca-Cola Enterprises Inc. and E.I. du Pont de Nemours and Co. from getting done.

Another sale was announced by Roche, and will go overnight. It is expected to be large and in as many as four tranches.

In the secondary sphere on Tuesday, a market source said the CDX Series 11 North American high-grade index was wider by 13 basis points on the day to a mid bid-asked spread level of 212 bps, versus 199 bps on Friday.

Advancing issues continued to lead decliners, though by only a narrow margin.

Overall market activity, reflected in dollar volumes, jumped by 45% from the levels seen on Friday, when there was an abbreviated and lightly-staffed session ahead of the Presidents Day three-day legal holiday weekend.

Spreads in general widened markedly Tuesday as Treasury yields declined sharply; for instance, the yield on the benchmark 10-year issue declined by 25 bps to 2.65%.

The newly issued paper from the busy primary session dominated secondary activity, with trading observed in the new Honeywell, Coca-Cola Enterprises, DuPont and Union Pacific issues.

Among established issues, paper of such banks as JP Morgan Chase & Co., Wells Fargo & Co. and Goldman Sachs Group Inc. was being quoted about 10 bps to 15 bps wider, on renewed investor nervousness about the viability of the banking companies.

Honeywell prices $1.5 billion

Technology and manufacturing company Honeywell sold $1.5 billion bonds in two tranches.

The $600 million of 3.875% five-year notes priced at 99.736 to yield 3.934% with a spread of Treasuries plus 225 basis points.

The $900 million of 5% 10-year notes priced at 99.643 to yield 5.046% with a spread of Treasuries plus 237.5 bps.

It was about four times oversubscribed, a market source said, with books of $6 billion.

J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. were active bookrunners.

Both tranches came "at the tighter end of the scale" of price talk, a source close to the deal said.

Union Pacific upsizes

Union Pacific was one of two issuers to increase the size of their deal Tuesday.

The railroad company sold $750 million of bonds, increased from $700 million.

The $350 million of 5.125% five-year notes priced at 99.975 to yield 5.131% with a spread of Treasuries plus 345 bps.

The $400 million of 6.125% 11-year notes priced at 99.607 to yield 6.175% with a spread of Treasuries plus 350 bps.

Citigroup Global Markets Inc., J.P. Morgan Securities and Morgan Stanley & Co. ran the books.

Coca-Cola increases sale

Coca-Cola Enterprises sold $600 million of bonds Tuesday - an increase of $100 million from what was planned.

Full terms were not available from the bookrunners at press time.

The deal included $350 million of 3.75% three-year notes priced at 99.812 and $250 million of 4.25% six-year notes priced at 99.227.

Bookrunners were Banc of America Securities, Citigroup Global Markets, HSBC Securities and J.P. Morgan Securities.

DuPont sells $900 million

Chemical company DuPont sold $900 million of bonds in two tranches.

The $400 million of 4.75% six-year notes priced at 99.714 to yield 4.804% with a spread of Treasuries plus 312.5 bps.

The tranches priced flat to each other, with the $500 million of 5.75% 10-year notes pricing at 99.646 to yield 5.796% with an equal spread of Treasuries plus 312.5 bps.

Bookrunners were Banc of America Securities LLC, Morgan Stanley and RBS Greenwich Capital.

Roche plans large offering

Roche, the pharmaceutical and healthcare company, is planning a large multi-tranche issue that is expected to price Wednesday, a market source said.

The deal was announced early Tuesday.

It is expected to have tranches of three-, five-, 10- and 30-year notes totaling $8 billion.

Demand is strong, the source said.

Banc of America Securities, Citigroup Global Markets and J.P. Morgan Securities are running the books.

Primary busy, but down

Two market sources said the primary market was busy Tuesday, although the tone was down by the end of the day.

"It started off kind of bad and went downhill during the day," a syndicate source said. "You can't really tell because of the deals that got done."

With the exception of the Union Pacific sale, the day's issues were heavy on the A rated and AA rated names.

The high-grade market "had a heavy tone," as one source said earlier in the day.

The pace is somewhat set to continue Wednesday, with the large deal from Roche expected to price and have a multi-billion-dollar total.

Many of the sources were working on the deal late Tuesday and said it was part of the reason many of the day's offerings got done reasonably early.

"We were just trying to get things off our plate," a syndicate source said. "The day's deals were all big, but this one's bigger."

Roche is expected to come to market in as many as four tranches.

The woes in the stock market may have bled into the bond market, but it was unclear how much impact the faltering banks had on the high-grade sector.

"We have people who still need funding, so they're getting in now," a market source said.

Honeywell bonds tighten, slightly

When the new Honeywell, International bonds were freed for secondary dealings, the company's $600 million of 2014 notes were seen having firmed slightly to 221 bps bid, 218 bps offered, from 225 bps at the pricing.

However, its $900 million of 2019 bonds, which had priced at 237.5 bps over, a trader said, were essentially unchanged at that mark, at 237 bps bid, 232 bps offered.

DuPont bonds little changed

A trader saw Du Pont's $400 million of 4.75% notes due 2015 at an offered level of 308 bps, while its $500 million of 5.75% bonds due 2019 were offered at 310 bps. No bid levels were initially seen. The giant chemical manufacturer priced both tranches of bonds at 312.5 bps over.

Union Pacific issue goes nowhere

A trader saw Union Pacific's $350 million of 5.125% notes due 2014 unchanged at the 345 bps level at which the bonds had priced.

And its $400 million of 6.125% notes due 2010 were likewise steady at 350 bps.

Coke enterprises a little fizzy

Coca-Cola Enterprises' new $350 million of 3.75% notes due 2012 were seen by a trader to have firmed to 240 bps from the 258 bps level around which the bonds were expected to price.

And its $250 million of 4.25% notes due 2015, which were expected to price at some 270 bps over, were seen at 260 bps bid in early secondary dealings.

Bank bonds widen out

A trader in financial issues meanwhile said that big-bank bonds were "weaker across the board," in line with a fall in the shares of major banks on continuing investor fears that the measures the government has been taking to strengthen the beleaguered banking business would not be enough.

He saw J.P. Morgan's 6% notes due 2018 push above the 300 bps mark, trading as wide as 305 bps bid, 290 bps offered at one point, with the bonds out about 10 bps to 15 bps on the day.

He said that Wells Fargo's 5 5/8% notes due 2017 were also trading around 305 bps, also about 10 bps to 15 bps wider than their levels during Friday's truncated session.

He saw Goldman Sachs' 7½% notes due 2019 trading at 430 bps bid, 440 bps offered, a 20 bps widening from their recent levels, although those latter bonds remain well in from the 500 bps over level at which the New York-based banking and securities company priced $2 billion of them -- one of the rare financial issues priced without the backing of the FDIC - on Jan. 29.

Financial CDS costs rose

A trader who follows the credit-defaults swaps market meantime said that the cost of protecting holders of big-bank paper against an event of default widened anywhere between 7 bps and 20 bps.

He also saw investment-bank CDS 15 bps wider "across the board."

Paul Harris contributed to this report

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