Valero, Sysco, ING Bank, FPL unit, Goldman Sachs Group sell notes; spreads wider but financials gain

By Andrea Heisinger and Paul Deckelman

New York, March 12 - New deals kept rolling out in the high-grade primary Thursday with Valero Energy Corp., Sysco Corp., ING Bank, FPL Group Capital and Goldman Sachs Group Inc. taking advantage of a decent market tone.

Some optimism came from Bank of America Corp., which, like Citigroup Inc. earlier in the week, announced it is turning a profit so far in 2009.

Companies could take advantage of market conditions on Friday, a source said.

In the secondary sphere on Thursday, a market source said the CDX Series 11 North American high-grade index was tighter by 10 basis points on the day to a mid bid-asked spread level of 235 bps from 245 bps on Wednesday.

Advancing issues remained ahead of decliners, by around a nine-to-seven ratio.

Overall market activity, reflected in dollar volumes, fell by about 4% from the levels seen on Wednesday.

Spreads in general were seen wider, in line with falling Treasury yields; for instance, the yield on the benchmark 10-year issue declined by 5 bps to 2.85%.

Valero's new 10-year bonds were seen to have tightened solidly versus the spread over comparable Treasuries at which the issue had priced. There was less tightening seen in its 30-year bonds.

Sysco Corp's two tranches of new bonds were seen not much changed from their respective pricing spreads.

Financial paper was seen better across the board, buoyed by a less drastic than expected rating cut by Standard & Poor's against General Electric Co. and its General Electric Capital Corp. subsidiary, as well as bullish statements from Bank of America Corp. chief Kenneth Lewis.

Valero offers two tranches

San Antonio-based oil refining and products company Valero Energy priced $1 billion of notes in 10 and 30-year tranches.

The $750 million of 9.375% 10-year notes priced at a spread of Treasuries plus 650 bps.

A $250 million tranche of 10.5% 30-year notes priced at a spread of Treasuries plus 687.5 bps.

Both tranches priced 70 bps cheaper than existing paper, a source said.

They also came in under price guidance, a source close to the deal said.

The 10-year tranche was talked at 662.5 bps area, and came in 12.5 bps under that.

The 30-year notes also did well, with guidance in the 700 bps area, and pricing also 12.5 bps below that level.

The company is using proceeds for general corporate purposes.

Barclays Capital Inc., BNP Paribas Securities, Citigroup Global Markets, J.P. Morgan Securities and UBS Investment Bank were bookrunners.

Sysco prices upsized offering

Foodservice company Sysco priced $500 million of senior notes in two tranches, upsizing from a single tranche.

The deal was initially announced in a Securities and Exchange Commission filing as only 10-year notes.

The $250 million of 5.375% 10-year notes were priced at Treasuries plus 260 bps.

The added $250 million of 6.625% 30-year notes sold at 315 bps over Treasuries.

Proceeds will be used for general corporate purposes including acquisitions, refinancing debt, working capital, and for share repurchase and capital expenditures.

Goldman Sachs & Co. Inc. was active bookrunner.

Goldman Sachs prices FDIC deal

Goldman Sachs Group priced $5 billion notes backed by the Federal Deposit Insurance Corp. in four tranches late Thursday.

Full terms were not available because of the lateness of pricing, a source said, although he confirmed that it had sold.

The size of the deal was increased at least once throughout the pricing process, a market source said.

It was a mix of two- and three-year fixed- and floating-rate notes.

There was $1 billion of two-year floaters and $2 billion of three-year floaters. The remaining tranches were $1 billion each of two- and three-year fixed-rate notes.

Goldman Sachs & Co. was bookrunner.

ING Bank sells guaranteed notes

Amsterdam-based ING Bank sold $2 billion of 3.9% five-year senior unsecured bonds at Treasuries plus 145 bps, according to a press release from the company.

The bonds, which are guaranteed by the Credit Guarantee Scheme of the State of the Netherlands, were sold via Rule 144A. Various world-wide financial institutions took part in the sale.

Banc of America Securities LLC, J.P. Morgan Securities Inc., Morgan Stanley & Co. Inc. and ING Bank were bookrunners.

FPL unit prices small deal

FPL Group Capital sold $350 million of 8.75% junior subordinated debentures at par of $25.

The deal was announced in a Securities and Exchange Commission filing Wednesday and went overnight.

The capital holding subsidiary of FPL Group Inc., which guaranteed the notes, is based in Juno Beach, Fla.

It plans to add the proceeds to the general funds, which will be used to repay a portion of commercial paper issued to fund investments in independent power projects including renewable energy.

Books were run by Banc of America Securities, Citigroup Global Markets Inc., Morgan Stanley, UBS Investment Bank and Wachovia Capital Markets.

Wave of FDIC-backed issues hits

Although not as overwhelming as the months of December 2008 and January of this year, FDIC-backed deals have again started cropping up.

Names like General Electric Capital Corp., Morgan Stanley, State Street Corp., Union Bank, U.S. Bancorp, KeyCorp, Bank of America Corp. and Goldman Sachs Group have all sold deals under the government's guarantee in the past two weeks.

A syndicate source said he wasn't sure exactly why there was a wave of these issues recently.

"It's hard to say for sure," he said. "Most of them have been doing them quietly on their own, so it's hard to get a read. I think - and this is speculation - if the market is bad, then the guaranteed stuff looks good."

Market conditions have improved this week, but it's possible many of the financial institutions that had these deals on the horizon went ahead because of that.

"They probably got a better price," he said. "I guess they all just need money."

Some, like GE Capital, Morgan Stanley and Bank of America have dipped into the FDIC-guaranteed issues several times since companies began doing the deals at the end of November 2008.

Week's calendar not empty

Although Friday is normally a light day of little to no issuance, there could be a couple of deals selling in the remaining day of this week, a source said.

"It's another day of 'go, no go' calls," he said. "We have a couple to make in the morning."

The market tone was up at the end of Thursday, he said, making it likely the "go" calls will take place.

Valero 10-years all pumped up

When they were freed for secondary dealings, Valero's new $750 million of 9.375% notes due 2019 were seen by a trader to have tightened handsomely to 620 bps bid. 610 bps offered, from the 650 bps level at which the petroleum refiner's bonds had priced earlier in the session.

However, the company's $250 million of 10.50% bonds due 2039, which had priced at 688 bps over, were seen at a wide 685 bps bid, 660 bps offered level.

A market source meantime saw Valero's established 6.625% bonds due 2037 having widened to 586 bps, losing more than 2 full points on a dollar-price basis to finish below 70 bid. The issue was among the more actively traded on the session.

Sysco little moved in secondary

Sysco Corp.'s $250 million of 5.375% notes due 2019, which had priced at 260 bps over, were seen anchored to that level as a bid, with no offered levels seen.

The food service supplier's other tranche of new bonds, its $250 million of 6.625% bonds due 2039, tightened modestly to 310 bps bid, with no offer levels seen, versus the 315 bps spread at which they had priced earlier.

GE bonds jump despite downgrade

The not-unexpected news that Standard & Poor's had downgraded General Electric and its GE Capital Corp subsidiary not only had no negative impact on the giant Fairfield, Conn.-based industrial conglomerate's bonds - they actually firmed smartly on the day, likely out of a sense of investor relief that the one-notch downgrade to AA+ from AAA previously, was not bigger.

On top of that the ratings agency declared a "stable" outlook on GE and GE Capital, up from "negative," signaling to investors that another downgrade is not likely to happen any time soon.

Despite his company's loss of its coveted and long-held AAA status, GE CEO Jeff Immelt asserted that "we will continue to run GE with the disciplines of a triple-A company."

GE Capital bonds were among the most actively traded paper in high-grade on Thursday. A market source saw the company's 4.80% notes due 2013 tightening by nearly 100 bps to about the 620 bps level.

Another source saw GE Capital's 5.25% notes due 2012 some 51 bps tighter on the day, also at the 620 bps level, with over $50 million of those bonds changing hands. Its 6% notes due 2012 tightened by nearly 30 bps to the 620 level.

B of A better on Lewis statement

Another actively traded name was Bank of America. Its 2.375% notes due 2012 were seen having firmed to about the 80 bps level, in several basis points, in line with a surge in the Charlotte, N.C.-based banking giant's share price after B of A's CEO, Kenneth Lewis, declared that his bank was profitable in January and February and should be able to ride out the recession without any new federal help.

Lewis said that B of A will make money for all of 2009, even with currently challenging industry conditions and even after reporting the its first quarterly loss in 17 years during the 2008 fourth quarter.

Lewis' optimistic take echoed similarly bullish statements recently by his counterpart at Citigroup Inc., Vikram Pandit, and at JPMorgan Chase & Co,, Jamie Dimon.

Citi's 5.30% notes due 2012 were meantime seen 50 bps tighter on the day at 850 bps over, while its 5% notes due 2014 were quoted by another market source having tightened 70 bps on the session.

Financial CDS levels tighten

With bank stocks and bonds improving, a trader who watches the credit-default swaps market saw the cost of protecting holders of big-bank paper and investment brokerage bonds against a possible event of default anywhere from unchanged to 5 bps tighter.

He saw B of A's CDS cost come in by 5 bps to 295 bps bid, 310 bps offered.

Meanwhile the up-front cost of protecting $10 million of GE Capital's bonds against a default for five years dipped by a percentage point to 8%, plus $500,000 annually, from 9% plus $500,000 before the S&P downgrade.

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