Dell, HSBC, CoBank, Virginia Electric & Power price; tone weakens on bank earnings announcements

By Andrea Heisinger and Paul Deckelman

Omaha, April 14 - Investment-grade issues from Dell Inc., HSBC USA Inc., CoBank ACB and Virginia Electric & Power Co. priced Monday despite negativity about bank earnings.

In the investment-grade secondary market Monday, advancing issues trailed decliners by a narrow margin, while overall market activity, reflected in dollar volumes, rose about 9% from Friday's pace.

Spreads in general narrowed as Treasury yields rose, with the yield on the benchmark 10-year issue, for instance, moving out by 4 basis points to 3.51%.

Virginia Electric & Power's new bonds were seen to have tightened a little bit after their pricing earlier in the session.

The new Dell bonds came too late in the day for any meaningful aftermarket activity.

Wachovia Corp.'s swing to a loss and its plans to raise $7 billion essentially cancelled one another out - the big banking company's bonds were unchanged to actually a little firmer, while its credit-default swaps also narrowed a little.

Other financials including Goldman Sachs and Morgan Stanley were seen mostly firmer.

Dell prices at tight end

The issue from Dell was $1.5 billion in three tranches that priced via Rule 144A. It was right on target for getting into the market, a source close to the deal said.

The $600 million of 4.7% five-year notes priced at 99.943 to yield 4.713% with a spread of Treasuries plus 212 basis points.

The $500 million of 5.65% 10-year notes priced at 99.736 to yield 5.685% with a spread of Treasuries plus 217 bps.

The $400 million of 6.5% 30-year notes priced at 99.935 to yield 6.505% with a spread of Treasuries plus 217 bps.

All of the tranches priced on the tight end of talk which was 215 bps area for the five-year notes, and 220 bps area for the 10 and 30-year notes.

Barclays Capital Inc., Goldman Sachs & Co. and J.P. Morgan Securities were bookrunners.

HSBC sells floaters

Also pricing $1.5 billion was HSBC.

The bank priced extendible floating-rate notes with an initial maturity of 2009 and final maturity of 2013.

The notes have a coupon of three-months Libor plus 40 bps, stepping up 2 bps after the first year and each year until maturity.

They are priced at par and non-callable.

HSBC Securities was bookrunner.

CoBank, Vepco bring deals

CoBank priced $500 million 7.875% 10-year subordinated bank notes at par to yield 7.875%.

Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc. were bookrunners.

Virginia Electric & Power priced an upsized $600 million in 5.4% 10-year senior notes at 99.775 to yield 5.429% with a spread of Treasuries plus 195 bps.

The size was increased from $500 million.

Barclays, RBS Greenwich Capital and Wachovia Capital Securities LLC were bookrunners.

Unsteady start to week

The week started out slightly weak, sources said.

"The tone wasn't great, obviously, with some negative news coming out," a source said, referring to the Wachovia earnings announcement.

"There are more earnings to come and I think a lot of people viewed it [Monday] as a good opportunity to get things done."

Other banks such as Merrill Lynch and Citigroup are expected to release their earnings this week, with a handful coming out Tuesday.

Issuance is expected to be much the same as last week with more than $20 billion pricing.

One source said he was working on at least a couple of deals, and another said he was working on a handful. Nothing specific has been announced.

"I think we'll see a little boost in issues tomorrow," a source said. "Hopefully nothing crazy comes out between now and then to change that. "

"I think we could be set to exceed last week's issuance. Today was pretty busy already, at least for a Monday."

New Vepco tighter

A trader said the new Virginia Electric & Power 5.40% notes due 2018 tightened a little in quiet aftermarket dealings to a bid level 191 bps over comparable Treasuries, 190 bps offered, versus the spread when they were priced, 195 bps over.

He saw no trading in the new Dell five-year notes, which priced at 212 bps over, or the 10-year or 30-year paper, which each priced at 217 bps over.

Wachovia not much changed

The news that Wachovia Bank, the nation's fourth largest, has been the latest financial institution to rack up big losses thanks to the credit crunch didn't seem to affect debt investors too much.

A market source saw Wachovia's 5.75% notes due 2017 having tightened 2 bps to 214 bps over, while its 3.50% notes coming due in August were unchanged at 170 bps over. However, at another desk, the company's 4.875% notes due 2014 were pegged a couple of bps wider at 200 bps over.

A trader said that Wachovia's debt-protection costs were about 5 bps narrower on the day at 165 bps bid, 175 bps offered, reasoning that "so you lose $300 million [actually, $393 million, versus a year-ago profit of $2.3 billion], but you can go out and raise $7 billion," calling that a fair exchange.

While Wachovia was a little narrower, he saw the CDS costs for other major banking and brokerage firms unchanged to 5 bps wider.

Other financials firmer

Elsewhere among the financial names, a market source saw Goldman Sachs' 6.125% bonds due 2033 having come in by around a dozen bps to about the 240 bps level. Morgan Stanley's 6.625% notes due 2018 were also about a dozen bps tighter at the 270 bps level.

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