Lorillard, Capital One, Commonwealth Bank offer bonds amid weakness; spreads in, Lorillard up

By Andrea Heisinger and Paul Deckelman

New York, June 18 - Issuance picked up speed Thursday as more deals were announced and launched as the day progressed. Lorillard Tobacco Co. was first out of the gate, followed by sales from Commonwealth Bank of Australia and, right at the end of the session, an offering from Capital One Bank.

"That one was announced late," a source away from Capital One said. "They must have seen others and jumped in."

A private sale of senior notes was also announced by Cardinal Health subsidiary CareFusion Corp., according to a Securities and Exchange Commission filing.

What issuance made it to pricing Thursday is likely it for the week, a source said.

Among the established issues in the secondary arena on Thursday, a market source said the CDX Series 12 North American high-grade index widened by 3 basis points to a mid bid-asked spread level of 143 bps.

Advancing issues - which on Wednesday had held an eight-to-seven edge over decliners - fell behind them Thursday by around a nine-to-seven margin.

Overall market activity, reflected in dollar volumes, was down 12% from Wednesday's levels.

Spreads in general were seen tighter, in line with higher Treasury yields; for instance, the yield on the benchmark 10-year issue rose by 13 bps to 3.82%.

The new deal brought to market Thursday by Lorillard Tobacco was seen having firmed from its pricing spreads. Upside on the new Capital One Finance Corp. bonds was more limited.

Capital One prices $1.5 billion

Capital One Bank sold $1.5 billion of 8.8%10-year subordinated notes late Thursday at Treasuries plus 500 bps, an informed source said.

The deal came in line with guidance for a spread in the 500 bps area, the source said. It was launched at 500 bps.

There was "north of $3.75 billion on the books," he said, adding that there were 175 accounts. The sale was announced somewhat late, at about 11 a.m. ET and took a couple of hours to get going.

Bookrunners were Citigroup Global Markets and Goldman Sachs & Co.

The subsidiary of bank holding company Capital One Financial Corp. is based in McLean, Va.

Lorillard sells 10-year

Cigarette maker Lorillard Tobacco priced $750 million 8.125% 10-year senior notes to yield 8.125%. They have a spread of Treasuries plus 428.9 bps.

The company, based in Greensboro, N.C., tapped Barclays Capital and J.P. Morgan Securities as active bookrunners.

The deal is guaranteed by parent company Lorillard, Inc.

CareFusion offering private sale

Cardinal Health, Inc. subsidiary CareFusion announced Thursday that it plans to issue up to $1.4 billion senior notes in a private offering via Rule 144A, according to an 8-K filing with the Securities and Exchange Commission.

Proceeds will be used for a special cash distribution to Cardinal in connection with a planned spin-off of CareFusion.

Cardinal and its subsidiaries including CareFusion provide products and services to the health care sector. It is based in Dublin, Ohio.

Commonwealth Bank sells guaranteed notes

The Commonwealth Bank of Australia sold $2.5 billion notes in two tranches that are backed by the Australian government, an informed source said.

The $1.5 billion of five-year floating-rate notes priced at par to yield three-month Libor plus 50 basis points.

The $1 billion of 3.625% five-year notes priced at Treasuries plus 90.3 bps.

Bookrunners were Barclays Capital and Morgan Stanley & Co.

The retail bank and financial services company is based in Sydney.

Weakness scares issuers away

The primary continued its streak of a weak tone Thursday, causing some deals to be shelved, a market source said.

By late morning there were only a couple of deals announced, with the Capital One sale coming at the fairly late hour of 11 a.m. ET.

"It was a bit softer starting out," he said of the tone. "There were some go, no-go calls to make and some were delayed until later in the morning."

There were at least a couple of "no go" calls, he said. It's likely they will wait until the coming week to price until going Friday.

"Those [that priced] did fine," he said.

Friday is expected to have little to no issuance, due in part to the ailing tone but also because it is the end of the week.

Things will start back up Monday, a source said.

New tobacco bonds are smokin'

When Lorillard Tobacco's new 8.125% notes due 2019 were freed for secondary dealings, a trader saw those bonds at a spread over comparable Treasuries of 405 bps bid, 395 bps offered.

That was in solidly from the 428.9 bps level at which the Greensboro, N.C.-based cigarette manufacturer, a division of Lorillard Inc., had priced the $750 million offering earlier in the session.

Capital One mildly better

A trader meantime saw Capital One Financial's new 8.8% notes due 2019 at 495 bps bid, 490 bps offered, just slightly firmer than the 500 bps over level at which the McLean, Va.-based financial services company had priced its $1.5 billion offering earlier in the day.

The trader said that a lot of the focus in the financial sector was on Treasury secretary Timothy Geithner's Capitol Hill testimony in support of the Obama administration's proposals for increased financial industry oversight.

GE Capital widens

He saw spreads unchanged to a little better, "except for GE paper, which has been widening out." He noted the heavy activity in General Electric Capital Corp.'s 5.625% notes due 2018 and 6.875% bonds due 2039. "They're the most liquid," he added.

The 2018s saw over $100 million traded by mid-afternoon said a market source, who quoted the bonds at a spread of 227 bps over - wider than the 219 bps over level they were trading at on Wednesday.

Meanwhile, its 6.875% bonds due 2039 were quoted at 305 bps over, on volume of some $80 million.

GE Capital's 5.625% notes due 2017 were seen having widened by more than 20 bps to about the 250 bps level.

Valspar remains little changed

Back among the non-financial names, a trader saw Valspar Corp.'s 7.25% notes due 2019 continuing to trade at 365 bps bid 355 bps over, pretty much unchanged from Wednesday. The Minneapolis-based paint manufacturer's $300 million of paper - upsized from $250 million originally -- had priced on Tuesday at 362.5 bps over.

Bank, broker CDS costs unchanged to tighter

A trader who tracks the credit-default swaps market said that the cost of protecting a holder of big-bank paper against a possible event of default was unchanged to 15 bps tighter, depending on the underlying credit involved.

He also saw investment bank/brokerage institutions' CDS costs unchanged on the day.

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