Lockheed taps market after two-year hiatus; Enbridge, utilities also price; financials widen

By Andrea Heisinger and Cristal Cody

New York, Sept. 6 - The high-grade bond market got the short week off to a healthy start on Tuesday with new deals from companies including Lockheed Martin Corp. and Enbridge Energy Partners, LP.

Lockheed had the largest sale of the day at $2 billion in three tranches. All of the maturities were priced at the tight end of guidance, and it was the first time the defense contractor had sold debt since 2009.

Enbridge priced a smaller $750 million in two parts, including a reopening of notes due in 2040.

Other sales for the day came from Detroit Edison Co. and Public Service Co. of New Hampshire.

Detroit Edison priced $140 million of 30-year mortgage bonds while Public Service sold $160 million of 10-year first mortgage bonds.

Unlike last week, this week has amassed a solid calendar.

"I think there's about $10 billion from what I'm hearing," one market source said late in the day. "The market wasn't great today, but since all of these got done [there] should be more tomorrow."

Sources have said that next week is set to be even busier as more people return from vacation and there's a full five days to work with.

The day's two largest sales from Lockheed and Enbridge weren't announced until mid-morning - a delay made so a temperature could be taken of the bond market after a disappointing open in stocks.

"We decided to go for it because investors were on board," a source who worked on Lockheed said.

Overall trading volume climbed higher than Friday's pre-holiday trading but stayed low at about $8 billion on Tuesday.

The Markit CDX Series 16 North American high-grade index eased 6 basis points to a spread of 127 bps.

In the secondary market, financials traded wider, including paper from Bank of America Corp. and Goldman Sachs Group Inc., sources said.

Confidence was lower in the sector, and bank and brokerage credit default swaps contract costs rose.

Bank CDS contract costs were seen 5 bps to 10 bps higher, and brokerage/investment bank CDS costs were 10 bps to 20 bps higher.

Treasuries ended the day mostly flat. The two-year note yield was unchanged at 0.19%. 10-year note yield fell 1 bp to 1.98%. The 30-year bond yield dropped 3 bps to 3.27%.

Lockheed's three tranches

Lockheed Martin sold $2 billion of notes (Baa1/A-) in three tranches, an informed source said.

A $500 million tranche of 2.125% five-year notes was priced at a spread of Treasuries plus 127 bps. They were priced at the low end of guidance in the 130 bps area.

There was $900 million of 3.35% 10-year notes sold at a spread of 142 bps over Treasuries. The tranche was sold at the tight end of talk in the 145 bps area.

A third part was $600 million of 4.85% 30-year bonds priced at Treasuries plus 167 bps. They were sold at the low end of guidance in the 170 bps area.

Citigroup Global Markets Inc. and J.P. Morgan Securities LLC were active bookrunners.

Proceeds are being used to redeem $500 million of 4.121% notes due 2013 and for general corporate purposes.

Lockheed last priced bonds in a $1.5 billion deal on Nov. 13, 2009. The 4.25% 10-year notes from that sale sold at 93 bps over Treasuries while a 5.5% 30-year tranche priced at 120 bps over Treasuries.

The security company is based in Bethesda, Md.

Enbridge offers $750 million

Enbridge Energy Partners sold $750 million of notes (Baa2/BBB) in two parts, according to a source close to the trade.

The $600 million of 4.2% 10-year notes priced at a spread of Treasuries plus 225 bps.

Enbridge also reopened its 5.5% notes due 2040 to add $150 million. The new notes were priced at 237.5 bps over Treasuries. Total issuance is $550 million including $400 million sold on Sept. 8 at 180 bps over Treasuries.

Citigroup, RBS Securities Inc. and Wells Fargo Securities LLC were bookrunners.

Proceeds will be used to repay a portion of outstanding commercial paper, to repay credit facility borrowings used to fund a portion of capital expansion projects and for general corporate purposes.

The energy transport and storage company is based in Houston.

PS N.H. prices debt

Public Service Co. of New Hampshire sold $160 million of 3.2% 10-year first mortgage bonds, series R, (A3/A-/A-) to yield Treasuries plus 128 bps, according to an FWP filing with the Securities and Exchange Commission.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were bookrunners.

Proceeds are being used to refinance short-term debt and for general working capital business including financing capital expenditures.

The subsidiary of Northeast Utilities is based in Manchester, N.H.

Detroit Edison's 30-year

Detroit Edison sold $140 million of 4.5% 30-year general and refunding mortgage bonds, 2011 series H, (A2/A/A-) to yield Treasuries plus 135 bps, according to an FWP filing with the SEC.

Bank of America Merrill Lynch, Barclays Capital Inc. and KeyBanc Capital Markets Inc. were bookrunners.

Proceeds are being used for general corporate purposes, including redemption of tax-exempt 5.45% bonds due Sept. 1, 2029.

The electric company is based in Detroit.

Bank of America wider

Bank of America's paper stayed wider on the weaker market tone. The bank's 7.625% notes due 2019 (A2/A) widened to 369 bps over Treasuries on Tuesday from 331 bps the previous week, a bond source said.

The investment services company is based in Charlotte, N.C.

Goldman Sachs cheaper

Goldman Sachs' long-dated paper was weaker in the secondary market, according to a source. Goldman's 6.75% bonds due 2037 (A2/A-) widened to 414 bps on Tuesday. The notes traded at 366 bps over Treasuries before the holiday.

The bank is based in New York.

Paul Deckelman contributed to this review

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