J.M. Smucker does its largest deal yet; new deals gain in trading as bank names struggle

By Andrea Heisinger

New York, Oct. 13 - One new corporate bond and a sovereign deal priced on Thursday in the investment-grade bond market as issuance wound down from the previous day.

J.M. Smucker Co. did its first and largest debt sale outside the private placement market, selling $750 million of 10-year notes. The notes are guaranteed by various subsidiaries.

There was also a deal from the European Bank for Reconstruction and Development. The London-based lender priced $1.25 billion of five-year paper.

The market was more subdued than Wednesday due to a morning earnings announcement from JPMorgan Chase & Co. that showed a 4% drop since the same quarter a year earlier.

There was a lack of supply and issuers were mostly waiting for another window to open like it did on Wednesday.

"I don't know that we had much supply, and with banks reporting [earnings] I think a lot [of companies] are going to hold off," a syndicate source said.

That led to a slight widening of bank paper overall in the secondary market, traders said.

Bank and brokerage credit-default swaps were wider with Bank of America Corp. and JPMorgan each moving out significantly from the previous day.

Overall trading volume was about $9.3 billion for the day.

"Not too bad at all," a trader said.

Issues priced the previous day, including those from Time Warner Inc. and Kohl's Corp., were trading tighter than their pricing spreads, sources said. A trade from General Electric Capital Corp. was seen flat to slightly better.

Treasury paper gained from the previous day. The five-year notes were 5 bps better at 1.1% while the 10-year notes were 3 bps better at 2.18%. The 30-year bonds also came in 5 bps to 3.15%.

Smucker's largest deal

J.M. Smucker priced $750 million of 3.5% 10-year senior notes (A3/BBB+) at a spread of Treasuries plus 135 bps, a market source said.

This was the first bond sale outside of the private placement market for Smucker and its largest in size. The deal was priced in line with guidance, which was in the 135 bps area.

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

Proceeds will be used to repay borrowings under a revolving credit facility used to fund recent acquisitions, for capital expenditures and other working capital requirements and for general corporate purposes.

The notes are guaranteed by subsidiaries that guarantee the company's revolver and others, including J.M. Smucker LLC and Folgers Coffee Co.

Smucker last priced paper in the private placement market in a $400 million issue of 4.5% 15-year notes on June 15, 2010.

In the secondary market, the new 10-year paper was quoted as tightening nicely. A trader said they were 5 to 10 bps better off the bat at 130 bps bid, 125 bps offered. Later a second trader quoted the notes at 127 bps bid, 123 bps offered.

The food products company is based in Orrville, Ohio.

EBRD's five-year

European Bank for Reconstruction and Development priced $1.25 billion of 1.375% five-year notes (Aaa/AAA/AAA) early in the day after going overnight, a market source said.

The notes priced at mid-swaps minus 1 bp, in line with talk in the mid-swaps minus 1 bp area.

Goldman Sachs International, HSBC Holdings plc and Morgan Stanley & Co. LLC were the bookrunners.

The lender to banks, businesses and industries is based in London.

Time Warner bonds improve

One of the best-performing deals from Wednesday in the secondary market was Time Warner's $1 billion of notes, which were split evenly between two tranches.

The 4% notes due 2022 were trading between 11 bps and 14 bps tighter than their price of 200 bps over Treasuries. A trader quoted them at 189 bps bid, 186 bps offered.

The company's 5.375% bonds due 2041 were quoted 10 bps to 15 bps better at 215 bps bid, 210 bps offered. The bonds priced at 225 bps over Treasuries.

The media and entertainment company is based in New York City.

Kohl's 10-year tightens

A 4% 10-year note priced by department store chain Kohl's the previous day was seen holding gains in next-day trading, a source said.

The paper was priced at Treasuries plus 183 bps and was seen trading at 181 bps bid, 180 bps offered for a gain of 2 bps to 3 bps.

Kohl's is based in Menomonee Falls, Wis.

GE Capital trades flat

Out of the three bonds seen trading from Wednesday's deals, GE Capital showed the least gain, traders said. The notes had tightened slightly in the gray market soon after pricing but lost some of those gains.

The financing arm of General Electric Co. priced $3 billion of notes in two parts.

The 3.35% notes due 2016 were priced at 222 bps over Treasuries and were seen flat on the bid side and slightly better at 217 bps on the offer side.

The 4.65% notes due 2021 were also flat on the bid at 247 bps and tighter on the offer side at 242 bps.

Bank/broker CDS lose gains

After improving slightly for a couple of days, the bank and brokerage names saw their credit-default swaps widen as confidence wavered in the sector.

On the bank side, among the hardest hit were Bank of America and JPMorgan Chase, which have been in the news lately for debit card fees and earnings, respectively.

Bank of America's CDS costs were 20 bps worse than the previous day at 355 bps bid, 365 bps offered.

JPMorgan fared slightly better as its CDS costs were out 10 bps to 138 bps bid, 143 bps offered.

Major brokerage names did worse with Morgan Stanley and Goldman Sachs Group Inc. each seeing their CDS costs widen by 35 bps. Morgan Stanley was quoted at 380 bps on the bid side and 390 bps offered while Goldman was at 335 bps bid, 345 bps offered. Merrill Lynch's costs were 15 bps wider at a bid of 395 bps and offer of 415 bps.

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