National Australia Bank sells two tranches, EIB, Dexia Credit plan bond sales; spreads firm

By Andrea Heisinger and Cristal Cody

New York, Jan. 4 - National Australia Bank Ltd. was the sole seller of bonds in the investment-grade market on Monday, following the long holiday break.

The Australian bank priced $1.75 billion of notes in two tranches under Rule 144A.

Dexia Credit Local de France SA and the European Investment Bank each announced sales early in the day, but both are going overnight and expected to price in the first part of Tuesday.

Dexia is expected to sell two tranches in two- and four-year maturities, via Rule 144A.

The EIB sale is of five-year notes, which are rated AAA.

A split-rated deal to be jointly issued by Icahn Enterprises LP and Icahn Enterprises Finance Corp. started a road show starting Monday after being announced last week.

Issuance is expected to pick up in the coming days as companies become more confident with market conditions following the long holiday break during which virtually no deals were done.

In the secondary, the first day of trading in 2010 came in more like a whimper instead of a roar, though volume picked up from the last week of December, sources told Prospect News on Monday.

The bond market was closed Friday in observance of New Year's Day.

A source said the widely followed CDX Series 13 North American high-grade index moved relatively little over the holidays.

The index was seen Monday at a mid bid-asked spread level of 82 bps, versus 83 bps in the previous week.

Meanwhile Treasuries were mixed. For instance, the yield on the benchmark 10-year note tightened 1 basis point to 3.82%, while the yield on the 30-year bond eased 1 basis point to 4.64%.

"Spreads came in a little tighter but with limited volume," a source said.

Advancing issues outpaced decliners. Overall market activity, reflected in dollar volumes, zoomed up 500% from the levels seen on New Year's Eve.

High-grade trading volume by mid-Monday hovered near $6.6 billion before ending up at $9.8 billion.

"That's fairly light compared to where it was trading at the beginning of December," a source said. "The last week almost doesn't count because the flow was so light. On the 31st, $1 billion traded. The whole of last week, I don't think anything traded over $3 billion."

Meanwhile, attention was focused on a few names Monday, including bonds from Novartis AG, Kraft Foods Inc. and Goldman Sachs & Co., among others in the financials sector.

NAB prices two tranches

National Australia Bank priced $1.75 billion of notes in two tranches by mid-afternoon.

They were sold without the backing of the Australian government and were priced via Rule 144A.

A $500 million tranche of three-year floating-rate notes priced at par to yield three-month Libor plus 48 bps.

The $1.25 billion of 2.5% three-year notes priced at a spread of Treasuries plus 87.5 bps.

Bank of America Merrill Lynch and HSBC Securities ran the books.

The financial services company is based in Melbourne, Australia.

Deal flow set to increase

The remainder of the week is expected to be more active than the sleepy start and lack of activity on Monday.

One syndicate source said his desk had a "mix across the board" of deal sizes and issuers in the next few days.

"We don't have any specific times yet," he said, referring to which days these deals might price.

Another source also said his smaller desk had more action in the next couple of days.

Monday was "kind of another vacation day, I think," he said.

Some issuers needed a day to feel things out before jumping into the market, as "it's been a while" since deals have been priced, he added.

The last large sale was on Dec. 21, when JPMorgan Chase & Co. priced $4 billion of extendible notes.

France's Dexia to sell two tranches

Among deals announced Monday, Dexia Credit Local de France is planning a sale of notes in two tranches via Rule 144A, an informed source said.

The deal is expected to price Tuesday, the source said, and consists of tranches of two-year and four-year maturities.

Barclays Capital, Citigroup Global Markets, J.P. Morgan Securities and Morgan Stanley & Co. are bookrunners.

The issuer provides project financing for the public sector and is based in Paris, France.

EIB plans deal

European Investment Bank is expected to price five-year notes early on Tuesday off London syndicate desks.

A source close to the sale said he had not seen it price as of late Monday afternoon.

Bookrunners are Citigroup Global Markets, HSBC Securities and J.P. Morgan Securities.

The lending bank for the European Union is based in Kirchberg, Luxembourg.

Icahn to price split-rated bonds

Icahn Enterprises and Icahn Enterprises Finance began a road show Monday for their $2 billion two-part offering of senior notes, an informed source said.

The deal includes tranches of six-year notes and eight-year notes.

The offering, via bookrunner Jefferies & Co., is expected to come with split ratings. Moody's Investors Service is expected to assign a Ba3 rating to the notes. Standard & Poor's is expected to rate the notes BBB-.

The road show for the Rule 144/Regulation S with registration rights deal wraps on Jan. 11.

Proceeds from the sale will be used to refinance the master limited partnership's 7.125% senior notes due 2013 and its 8.125% senior notes due 2012 and to fund general corporate purposes.

The New York City-based holding company is primarily engaged in the investment management, automotive, metals, real estate and home fashion businesses.

Secondary slow to restart

Back in the secondary, trading continued to stay light with little by way of new deals to spur action on Monday, a market source said.

"It's kind of slow. I'm wading back in."

Another trader hoped "spreads would be wider and entice people to buy, but they weren't. It was relatively light today."

"Some people were thinking there may be some big deals today to start the new year, but that didn't happen," a source said. "It looks like people are trying to get things done."

In fact, secondary trading is expected to pick up quickly. One trader heard there is "supposed to be a lot of money on the sidelines with earnings season to come. Once the new issue calendar starts, it'll get more active and secondary by nature will become more active. Maybe even later in the week."

No 'flow' in Novartis' notes

Novartis said Monday that it would pay $39.3 billion for the remaining shares to take Swiss eye-care company Alcon Inc. private.

Novartis' 5.125% notes due 2019 were quoted by one source at 70 bps over Treasuries on a volume of about $38 million early Monday.

But by late in the day, a trader told Prospect News that there wasn't "much flow" in the Swiss drug giant's bonds.

"They were offered at 63 bps last week and they were offered at 62 bps today."

Financials pick up new year's pace

Meanwhile, the financials sector showed activity in secondary trading.

A trader said that Goldman Sachs' 10-year bonds were "up 20 basis points" on Monday from before the holidays.

Goldman Sachs' 7.5% bonds due 2019 tightened 25 basis points from pre-Christmas Day trading to 115 bps over on Monday.

According to reports, Goldman Sachs said Monday it would review its operations for overseas consolidations to gain tax benefits.

Looking at other financial services companies, Wells Fargo & Co.'s 3.75% four-year bonds were quoted by one source as fairly unchanged at 112 bps over and its 5.625% seven-year bonds at 134 bps.

"There doesn't seem to be any big move away from what I was seeing."

Meanwhile, a source reported that trading in Bank of America Corp.'s 7.375% four-year bonds tightened to 128 bps over Treasuries from 155 bps over in late December as the new chief executive officer started on Monday.

Also, the bank's 6.5% bonds due 2016 tightened to 117 bps over from 130 bps over. In addition, Bank of America's 7.625% bonds due 2019 tightened 13 basis points to 160 bps over from pre-holiday trading.

Takeover rumblings move Kraft notes

Also on Monday, Kraft's 6.125% eight-year notes and its 7% notes due 2037 moved on reports the U.S.-based food manufacturer plans to raise its hostile takeover bid for U.K. confectioner Cadbury plc.

According to one source on Monday, Kraft Foods' 6.125% notes tightened to 135 bps over from 140 bps in trading before the holidays. Kraft's 7 % notes due 2037 tightened to 175 bps over from 185 bps.

But, for the most part, the notes' spreads are little changed, one trader said.

"In the last week, it doesn't look like they've been affected as much."

Bank CDS levels tighter

In other activity, one indicator showed improved market confidence ahead.

A trader who follows the credit-default swaps market said that the cost of insuring holders of big-bank paper against a possible event of default tightened by about 3 bps to 12 bps on Monday, with Citigroup Inc.'s CDS price narrowing the most, by 12 bps, to 145 bps bid, 155 bps offered.

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