GE Capital, Husky Energy, Xerox, DTE Energy sell, market tone high; new deals gain in trading

By Andrea Heisinger and Paul Deckelman

New York, May 6 - New deals flooded into the high-grade market Wednesday from General Electric Capital Corp., Husky Energy Inc., Xerox Corp. and DTE Energy Co. South Korea's Kookmin Bank also priced an offering.

Some details of a sale from Dow Chemical Co. were given, with pricing expected Thursday.

The market's momentum is set to continue Thursday, sources said, in spite of the release of results from the government's stress tests on the nation's 19 largest banks. The leak of some information from those tests Wednesday may have helped.

In the secondary arena on Wednesday, a market source said the CDX Series 12 North American high-grade index was tighter by 12 basis points, at a mid bid-asked spread level of 145 bps.

Advancing issues led decliners by a ratio of almost nine to five.

Overall market activity, reflected in dollar volumes, rose about 5% from Tuesday's levels.

Spreads in general were seen little changed, in line with generally steady Treasury yields; for instance, the yield on the benchmark 10-year note edged down 1 bp to 3.15%.

The day's new issues were tighter - in some cases, sharply so - versus their issue price. Among the credits posting such gains were Xerox, Husky Energy and DTE Energy.

GE Capital offers non-FDIC notes

GE Capital sold $2 billion of five-year notes that are not backed by the Federal Deposit Insurance Corp. It is the latest in the string of such issues, which are mostly being used by financial names to pay back preferreds and warrants issued to the U.S. Treasury in 2008.

The Bank of New York Mellon Corp. sold such a deal on Tuesday.

GE's sale of 5.9% five-year notes priced at Treasuries plus 387.5 bps. This was at the low end of price guidance of the 400 bps area.

Husky Energy sells two tranches

Canadian petroleum company Husky Energy priced $1.5 billion in tranches of five- and 10-year notes. The $750 million of 5.9% five-year notes priced at a spread of Treasuries plus 387.5 bps, while the $750 million of 7.25% 10-year notes sold at Treasuries plus 412.5 bps.

Citigroup Global Markets, HSBC Securities and RBC Capital Markets ran the books.

DTE Energy upsizes deal

Detroit-based utility DTE Energy priced an upsized $300 million of 7.625% five-year senior notes at par to yield 7.625%. The deal was originally $250 million, a market source said.

It came at a spread of Treasuries plus 561.1 bps, although pricing was to the yield, the source said.

The subsidiary of Detroit Edison Co. is using proceeds to repay short-term borrowings, among other uses.

Barclays Capital, BNP Paribas Securities and J.P. Morgan Securities ran the books.

Xerox sale increased

As happened to a good portion of the day's deals, Xerox increased the size of its sale, in this case by $250 million, a source said.

The $750 million of 8.25% five-year senior notes sold at Treasuries plus 625 bps.

The proceeds are being used for general corporate purposes including repayment of a portion of borrowings under a 2007 credit facility.

The document management company, based in Norwalk, Conn., tapped Banc of America Securities, Citigroup Global Markets, Goldman Sachs & Co. and J.P. Morgan Securities as bookrunners.

Kookmin prices $1 billion

South Korean Kookmin Bank sold $1 billion of 7.25% five-year covered bonds at Treasuries plus 550 bps Wednesday.

It was done via Rule 144A and Regulation S.

Citigroup Global Markets and HSBC Securities ran the books.

Dow Chemical sale details announced

Some details of an upcoming sale from Dow Chemical were given Wednesday, although it did not price. The deal was tentatively announced Tuesday in a press release from the company about a common stock share sale.

The sale has become Thursday's business, a market source said late Wednesday.

The benchmark-sized offering will be in five-, 10- and 30-year tranches, a market source said Wednesday. He added that there did not appear to be a size fixed yet.

The proceeds are going to repay borrowings under a term loan agreement and for refinancing, renewals, replacements and refunding of debt, according to a filing with the Securities and Exchange Commission.

On April 1, Dow acquired specialty materials company Rohm and Haas.

The diversified chemical company is based in Midland, Mich., and named Banc of America Securities, Citigroup Global Markets, HSBC Securities and Morgan Stanley & Co. to run the books.

Market tone improves

Wednesday showed its favorable market tone in the number of deals that were priced. One syndicate source said the fact that the bank stress test results are being released Thursday may have actually encouraged more deals, despite some unsavory numbers being leaked Wednesday.

Despite earlier reports of a lower number, news headlines Wednesday stated that Bank of America Corp. needs nearly $34 billion in capital. As of late in the day, many banks, including B of A, saw their credit-default swaps tighten significantly.

This baffled the source. "The B of A results don't make sense," he said referring to the more than 30 bps swing in the company's CDS.

Many of Wednesday's issuers did not intentionally try to get in ahead of the stress test results, he said, as evidenced by Dow Chemical holding off until Thursday with its deal.

"We expect the momentum to continue tomorrow," he said. The leaks of some of the bad information from the stress tests may have helped ease fears from investors and companies looking to issue debt.

"Now that they know, people are back in," the source said. "I think it helped that a lot of it was slowly leaked today so there won't be so many surprises."

As a result, Thursday may be equally busy.

The market tone was good all day Wednesday, leading to many "go" calls in the morning. "It was very good in credit - very good all around," a source said.

New Xerox bonds take off

When the new Xerox 8¼% notes due 2014 were freed for secondary dealings, a trader saw the Norwalk, Conn.-based copier and office machines giant's new issue having firmed to a bid level of 565 bps over comparable Treasuries, offered at 560 bps, versus the 625 bps over level at which the company had priced its $750 million of bonds - upsized from the original $500 million - earlier in the session.

Energy operators power upward

The trader also saw DTE Energy's new 7.625% notes due 2014 trading at 514 bps bid, 510 bps offered. That was well in from the 561.1 bps level at which the Detroit-based electric utility priced its $300 million issue, which had been upsized from $250 million earlier.

Meanwhile, Husky Energy's two-part offering was seen by a trader as having tightened moderately. He saw the Calgary, Ata.-based independent energy exploration and development company's $750 million of 5.90% notes due 2014 tighten to 370 bps bid, 365 bps offered. Earlier in the session, those bonds had priced at a 387.5 bps spread.

The other part of that deal, the $750 million of 7.25% notes due 2019, tightened to 375 bps bid, 370 bps offered, versus the 412.5 bps level at which those bonds had priced.

International Paper firms smartly

Among other recently priced deals, International Paper Co.'s $1 billion of 9.375 notes due 2019 continued to firm, being seen as high as 101 bid.

The Memphis-based paper producer had priced its bonds on Monday at a dollar price of 97.634, and they had moved up after that in initial secondary dealings to 98.75 bps bid, 99. 625 bps offered.

If quoted on a spread basis, the bonds have come in to 587 bps over, well in from the 658.7 bps level at which they had priced.

Volume of $128 million of the bonds was the heaviest of any high-grade issue on Wednesday.

Whirlpool swirls higher

Whirlpool Corp.'s 8% notes due 2012 were quoted by a market source as trading at 565 bps over. That was well in from the 662.5 bps spread at which the $350 million of those bonds priced on April 29.

The other part of that two-tranche deal, its $500 million of 8.60% notes due 2014, traded Wednesday at 570 bps over, versus the same 662.5 bps level at which the Benton Harbor, Mich.-based appliance maker had priced those bonds.

Bank bonds strengthen

In the financial sector, investors appeared unafraid of Thursday's pending release by government regulators of "stress test" results for the 19 largest U.S. banks, parts of which were leaked to the media and made the rounds on Tuesday and Wednesday.

Despite the news that Bank of America will likely be required to raise $34 billion of new capital to meet the regulatory requirements, the Charlotte, N.C.-based banking giant's bonds firmed; its 5.42% notes due 2017 were quoted having tightened some 60 bps to about the 700 bps over mark.

Bank, broker CDS costs tighten

In the credit-default swaps market, a trader said that CDS costs to protect holders of big-bank paper against a possible default were anywhere from 20 bps to as much as 80 bps lower on the day, reflecting investor belief that the banks are less likely to default.

He saw Bank of America's CDS cost 35 bps narrower at 240 bps 250 bps offered. Citigroup's debt-protection costs narrowed to 465 bps bid, 485 bps offered, an 80-bps tightening.

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