Jefferies sells bonds as coming week up in the air; Gap, Telstra tighten in trading

By Andrea Heisinger and Cristal Cody

New York, April 8 - Jefferies Group Inc. was the lone seller in the high-grade bond market Friday ending a week of sporadic issuance.

The investment bank sold an upsized $800 million of seven-year notes in line with price guidance. The size was initially $500 million.

The estimate of deal volume for the coming week increased from the previous day although sources said everything hinges on whether the U.S. Congress can pass a budget.

"It should be busyish...if a budget gets through," a syndicate source said. "We've been monitoring the situation, but from what we're being told, it should get resolved."

The question for the high-grade market would come from being able to file with the Securities and Exchange Commission - or not.

Those with auto-file and shelfs are OK, the source said, but others may not be if the government shut down does take place.

That could put a damper on the $15 to $20 billion in possible sales for the coming week. This was increased from the $10 to $12 billion predicted on Thursday.

According to a memo from a source, the SEC would only have staff members on hand for emergency situations and otherwise would not operate.

In the secondary market, clothing retailer Gap, Inc.'s new 10-year split-rated notes, sold on Thursday, firmed about 15 bps in trading on Friday, a source said.

The notes from Australia's Telstra Corp. Ltd. also were stronger, a trader said.

The Markit CDX Series 14 North American investment-grade index was flat at a spread of 94 bps, according to Markit Group Ltd.

Overall investment-grade Trace volume fell more than 10% to just under $12 billion, according to a market source.

Treasuries edged lower on Friday, sending yields up across the mid to long range of the bond curve. The 10-year Treasury note yield rose 4 basis points to 3.58%. The 30-year bond yield rose 3 bps, ending the day at 4.64%.

Jefferies upsizes seven-years

Jefferies Group priced an upsized $800 million of 5.125% seven-year senior notes (Baa2/BBB/BBB) to yield 220 bps over Treasuries, said a source away from the deal.

They sold in line with guidance earlier in the day at 220 bps area. The deal size was increased from $500 million and then again from $750 million.

Bookrunner was Jefferies & Co.

Proceeds, along with those from a common stock offering, are being used for general corporate purposes including the acquisition of Global Commodities Group from Prudential and for further business development.

No secondary activity was immediately seen in the new notes, a trader said.

The investment bank is based in New York City.

Essex Property's preferreds

Essex Property Trust, Inc. sold an upsized $65 million, or 2.6 million shares, (BB+/BB+) of 7.125% perpetual cumulative preferred stock at par of $25, a source close to the sale said.

The offering was talked in the range of 7.125% to 7.25% and sold at the tight end of that. The size was increased from an initial $50 million, or 2 million shares announced on Thursday before the sale went overnight to allow in Asian and European investors.

Wells Fargo Securities LLC and Raymond James & Associates were bookrunners.

Proceeds are being contributed to the operating partnership to repurchase its series B preferred stock and will also be used for general corporate purposes.

The real estate investment trust for apartment communities is based in Palo Alto, Calif.

Gap firms

The $1.25 billion of 5.95% split-rated 10-year notes (Baa3/BB+/BBB-) that the Gap priced the previous day firmed in the secondary market, a trader said.

A trader saw the new Gap bonds tightening to 230 bps over Treasuries from 245 bps at pricing.

Another trader saw the notes at 238 bps bid, 235 bps offered.

The notes priced at a spread of Treasuries plus 245 bps.

The clothing retailer is based in San Francisco.

Telstra tighter

Telstra priced $1 billion of 4.8% notes due 2021 (A2/A/A) to yield Treasuries plus 133 bps the previous day. In the secondary market late Friday, a trader saw the notes at 127 bps.

The telecommunications and media company is based in Melbourne.

Paul Deckelman contributed to this review

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