Verizon takes $4 billion chunk out of market, Sysco, ACE INA Holdings, British Sky also price

By Andrea Heisinger and Paul Deckelman

Omaha, Feb. 7 - New issues continued to come into the market Thursday, with Verizon Communications Inc. pricing a large issue and Sysco Corp., ACE INA Holdings Inc. and British Sky Broadcasting contributing smaller offerings.

In the investment-grade secondary market Thursday, declining issues led advancers by about a seven-to-five ratio, while overall market activity, reflected in dollar volumes, fell nearly 14% from Wednesday's levels.

Much of the day's activity was centered around newly priced issues, particularly Verizon Communications' new $4 billion multi-part mega-deal.

Other new issues seen moving around in the aftermarket included Sysco Corp. and BskyB.

Among the established issues, the MBIA Inc. 25-year notes - which were seen having firmed sharply on Wednesday on news the company would raise capital through the equity market - were little seen, even as it raised more capital than originally planned.

Verizon sees big demand

Verizon priced $4 billion in three tranches.

The $750 million of 4.35% five-year notes priced at 99.724 to yield 4.412% at a spread of Treasuries plus 163 basis points.

Credit Suisse Securities LLC, J.P. Morgan Securities Inc. and RBS Greenwich Capital were bookrunners for the tranche.

The $1.5 billion of 5.5% 10-year notes priced at 99.756 to yield 5.532% at a spread of Treasuries plus 178 bps.

Goldman Sachs & Co., J.P. Morgan and UBS Investment Bank ran the books.

The $1.75 billion of 6.4% 30-year notes priced at 99.051 to yield 6.472% at a spread of Treasuries plus 195 bps.

Barclays Capital Inc., Citigroup Global Markets Inc and J.P. Morgan were bookrunners.

The issue went well, sources close to the deal said.

"There was really strong demand," a source said.

In regard to the 30-year tranche, he said the company's outstanding notes were seen at Treasuries plus 182 bps Thursday morning, and this offering priced at Treasuries plus 195 bps.

"They could have done a ton more at that level," he said.

Another source noted that the issue was multiple times oversubscribed.

Sysco sells $750 million

Sysco priced $750 million in two tranches.

The $250 million of 4.2% five-year notes priced at 99.835 to yield 4.237% at a spread of Treasuries plus 145 bps.

The $500 million of 5.25% 10-year notes priced at 99.310 to yield 5.340% at a spread of Treasuries plus 160 bps.

Both tranches had price talk up to 5 bps wider than where they priced, a source said.

Goldman Sachs, Merrill Lynch, Pierce, Fenner & Smith Inc. and J.P. Morgan were bookrunners.

This issue went well and was also oversubscribed, a source close to the issue said.

A market source said the issue could have gone up to $1 billion.

British Sky, ACE bring deals

British Sky priced $750 million of 6.10% 10-year notes at 99.889 to yield 6.115% at a spread of Treasuries plus 240 bps.

The Rule 144A deal was run by Barclays and Deutsche Bank Securities Inc.

ACE priced $300 million 5.8% 10-year senior notes at 99.916 to yield 5.81% at a spread of Treasuries plus 215 bps.

Banc of America Securities LLC was bookrunner.

Firm spreads encourage deals

Spreads were firm to open the day, which may have encouraged some issuers to price, a market source said.

"The market's not down, and Treasuries are at a good level," he said. "It's not looking too bad."

The CDS was wider to begin the day, and "the market was kind of crappy coming in," another source countered.

Despite this, issuers are still going to come into the market, he said.

"As long as the market's not falling apart, people don't care. If it's a good name, if it's good quality, they'll still get things done."

Responding to this comment, another market source said "people aren't sensitized" to the fluctuations anymore.

There are no known issues coming into the market Friday, sources said.

New Verizon issue a little firmer

A trader said that the new-deal names seemed to be the main focus in Thursday's secondary market.

Chief among them was Verizon.

He saw movement mainly in its 5.50% notes due 2018, which firmed to 174 bps bid, 173 bps offered from a spread over comparable Treasuries of 178 bps at the pricing. He also saw its 4.35% notes due 2013 bid at 160 bps over, in from the 163 bps at which they priced. He saw the 6.40% notes due 2038, which priced at 195 bps over, offered at 184 bps, although he had not seen a bid level on those bonds.

Another trader saw the 10-year notes at 176 bps bid, 175 bps offered.

Verizon's existing 6.25% bonds due 2037 meantime widened out to around 186 bps, in keeping with the recent trend of secondary market activity involving new issues - the newer bonds, which have usually been priced relatively cheaply in order to just get the deal done in a still-nervous and wary market, have generally firmed in price once they hit the aftermarket, while a company's existing bonds, usually trading at considerably tighter levels than the new deal, widens out to bring its spread closer to the new-issue level.

Sysco, BSkyB better

The first trader also saw a tightening in the new Sysco five-year bonds, which priced at 145 bps over and then tightened in the secondary to 143 bps bid, 140 bps offered.

Its 10-year bonds meantime tightened to 154 bps bid, 151 bps offered from a 160 bps spread at pricing.

And he saw BskyB's 6.10% notes due 2018 tighten to 230 bps bid, 226 bps offered, from their pricing level of 240 bps over.

Ecolabs, Kinder Morgan tighten

Among recently priced issues, Ecolab Inc.'s 4 7/8% notes due 2015, which priced at 175 bps over on Tuesday, tightened to 172 bps.

The trader saw Kinder Morgan Energy Partners LP's 5.95% notes due 2018 trading at 233 bps bid, 230 bps offered, versus their 240 bps spread at Tuesday's pricing. He saw the company's 6.95% bonds due 2038 having come in to 252 bps bid, 245 bps offered, versus their 260 bps spread when the bonds priced.

MBIA slips

Elsewhere, a trader saw MBIA's 14% surplus notes due 2033 "right around 90-91," off slightly from the 91-92 context to which those bonds had risen on Wednesday on the news that the embattled New York-based bond insurer would tap the equity markets for $750 million of fresh capital with which to support its AAA financial strength ratings.

However, he said that it was "no great change," with far less activity on Thursday - when the company, in fact, announced that it had increased its stock offering to the $1 billion level.

Another trader said he had not seen those bonds, whose move upward on the equity-sale news had been the dominant feature in Wednesday's junk bond market dealings (the bonds trade actively off the junk desks at a number of shops despite their nominally investment-grade ratings).

He otherwise saw credit-protection costs for major banks 1 bp to 10 bps wider, while major brokerage credit-default swaps spreads were out by 2 bps to 10 bps. However, he said, overall, it was "a pretty quiet day."

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