Paccar, Nstar, Oglethorpe Power, News America price bonds; financial names weak; new deals active

By Andrea Heisinger and Paul Deckelman

New York, Feb. 10 – Paccar Inc., Nstar Electric Co., Oglethorpe Power Corp. and News America Inc. each sold issues of bonds Tuesday as other markets swayed from the announcement of a banking plan from the Treasury secretary.

In high-grade bonds, financial names were mostly being watched for any fallout from the plan, which was negative in most other markets. The recent issue of bonds from Goldman Sachs Group Inc. that were sold without a government guarantee were being closely watched.

In the secondary sphere on Tuesday, a market source said the widely followed CDX Series 11 North American high-grade index was wider by 8 basis points on the day to a mid bid-asked spread level of 196 bps, versus 188 bps on Monday.

Advancing issues continued to lead decliners, by a better-than three-to-two ratio. Overall market activity, reflected in dollar volumes, was up 36% from the levels seen on Monday.

Spreads in general were seen wider, in line with lower Treasury yields; for instance, the yield on the benchmark 10-year issue tightened by 16 bps to 2.82%.

Financial names were seen wider in line with a fall in banking shares, on investor disappointment with the lack of detail in Treasury secretary Tim Geithner's presentation of the government's new plans to stabilize and improve the credit markets.

A key area of focus was trading in new or recently priced issues, with dealings seen in names such as Paccar, PepsiAmericas Inc., Cisco Systems Inc. and McKesson Corp.

Paccar upsizes deal

Truck maker Paccar sold an upsized $750 million of notes in two tranches, increased from $500 million.

The $250 million of 6.375% three-year notes priced at 99.892 to yield 6.415% with a spread of Treasuries plus 500 basis points.

The tranche of 6.875% five-year notes was increased to $500 million from $250 million.

These notes priced at 99.974 to yield 6.881%, also with a spread of Treasuries plus 500 bps.

Paccar plans to use the proceeds in its financial services subsidiary, which handles leasing and financing, to reduce its commercial paper borrowings.

Banc of America Securities LLC, Barclays Capital Inc. and Citigroup Global Markets Inc. ran the books.

Nstar reopens notes

Utility company Nstar Electric reopened an issue of 5.625% bonds due 2017 to add $100 million.

The issue now totals $400 million.

The reopened notes priced at 104.553 plus accrued interest from Nov. 15, 2008 to yield 4.976% with a spread of Treasuries plus 210 bps.

Banc of America Securities and Goldman Sachs & Co. were bookrunners.

The original issue priced in November 2007 at a spread of Treasuries plus 140 bps.

Oglethorpe Power sells 10-year bonds

Georgia-based electric cooperative Oglethorpe Power priced $350 million of 6.1% 10-year bonds under Rule 144A.

They sold at a spread of Treasuries plus 325 bps.

J.P. Morgan Securities Inc. ran the books.

News America sells $1 billion

News Corp. subsidiary News America Inc. sold $1 billion of notes in two tranches late Tuesday.

Because of the lateness of pricing, full terms were not available at press time.

The $700 million of 10-year notes priced at Treasuries plus 410 bps, while the $300 million of 30-year bonds sold at Treasuries plus 437.5 bps.

J.P. Morgan Securities was bookrunner.

New bank plan not hitting bonds

As the stock market sunk following the unveiling of a new banking rescue by Treasury secretary Timothy Geithner, the same could not be said of the bond market.

A few deals managed to price despite the negative reaction in other markets. A source in the primary market said "I would say it was positive," in reference to any reaction in the corporate bond market.

It's almost too soon to tell any effect, he said, and the financial names are being watched more than corporate names.

"We're watching for any leak to non-financials," he said. "So far we haven't seen any."

One issue that is being watched closely as a sort of litmus test, he said, is the Goldman Sachs Group Inc. $2 billion issue of 10-year notes that priced on Jan. 29 without a guarantee from the Federal Deposit Insurance Corp. It had a spread of 500 bps over Treasuries.

Spreads in general were weaker Tuesday, with those Goldman Sachs 10-years about 10 to 15 bps weaker, the source said.

"That's about as pronounced as we've seen," he said.

Issuance set to die down

A rush of new issues Monday and another handful of issues Tuesday will likely mean a dwindling number as the week nears its end, a source said.

Any backlog that was built up mostly came out Monday, he said.

"I think things are starting to thin out," he said. "People want to get things done before the long weekend."

An early market close Friday also gives companies limited opportunity to get a deal done.

New Paccar notes keep on truckin'

When the new Paccar Inc. 6.875% notes due 2014 were freed for secondary dealings, a trader saw the $500 million of bonds at a bid spread over comparable Treasuries of 475 bps. That contrasts favorably with the 500 bps over spread at which the Bellevue, Wash.-based truck manufacturer priced the bonds earlier in the session.

Paccar's $250 million of 6.375% notes due 2012, which also priced at 500 bps over, were not seen in the secondary immediately

There were no immediate levels seen on the day's other names, including NSTAR and Oglethorpe Power Corp.

Connecticut L&P powers up

Another utility operator, Connecticut Light and Power Co., was trading at 235 bps bid, 255 bps offered, versus the 250 bps over spread at which the New England-based utility priced its $250 million of the 5.50% notes due 2019 on Monday

Pepsi Americas has some fizz

PepsiAmericas' $350 million of 4.375% notes due 2014 were seen trading at 240 bps bid, 232 bps offered. The soft-drink bottler's bonds had priced Monday at 250 bps over.

McKeeson moves up

McKeeson Corp.'s $350 million of 6.50% notes due 2014 and its $350 million of 7.50% notes due 2019 each firmed smartly in Tuesday's dealings from the 450 bps level where they both had priced on Monday.

The 5-year notes tightened to 399 bps bid, 395 bps offered, while the 10-years did even better, coming in to 395 bps bid, 390 bps offered.

Cisco bonds mixed

Cisco Systems' $2 billion of 4.95% notes due 2019 firmed slightly to 195 bps bid, 190 bps offered from the 200 bps over level at which they priced on Monday/

But the high-tech company's $2 billion of 5.90% bonds due 2039 on the other hand, widened to 236 bps bid, 230 bps offered from their Monday pricing level at 225 bps over.

Financials widen out

Among the financials names, a trader said that the bonds "initially traded up" on expectations of concrete information on the bank bailout from Geithner, "but they have since given it all back."

Another source said the sector bonds were 10 bps to 20 bps wider pretty much across the board; Merrill Lynch & Co.'s 6.05% notes due 2012, for instance, were 20 bps out, at the 550 bps level.

Goldman Sachs Group. Inc.'s 7.50% notes due 2019 were seen a little easier, at 419 bps, on very busy volume of over $100 million, while Bank of America's 2.10% notes due 2012 traded at 82 bid, on volume of nearly $100 million.

Financial CDS costs widen

In the credit-default swaps market, a trader saw the cost of protecting paper issued by large banks and large brokerage companies wider, by anywhere from zero to 15 bps for the banks and 5 bps to 10 bps for the investment banks.

Citigroup's CDS were 15 bps wider at 285 bps bid, 295 bps offered, while B of A's were out 10 bps, to 170 bps bid, 180 bps offered.

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