Illinois Power plans sale of senior secureds; American Express gains on earnings

By Sheri Kasprzak

New York, Oct. 20 - Primary market activity remained light on Monday as issuers kept a steady eye on the volatile stock market, though the day did offer a ray of hope.

In the investment-grade secondary market Monday, advancing issues led decliners by a better-than seven-to-six ratio. Overall market activity, reflected in dollar volumes, rose 3% from Friday's pace.

Spreads in general were seen wider, in line with generally lower Treasury yields; for instance, the yield on the benchmark 10-year issue fell by 10 basis points to 3.83%.

In trading, American Express Co. came back from earlier weakness after the release of earnings late in the day.

With the Dow Jones Industrial Average surging 413 points, one market insider watching the primary said issuers may be more willing to step out with transactions - but not just yet.

"There's really not a lot to report today," he said.

"I will say, with the way stocks are going today, things might get better, but a lot of people are just sitting and watching what the stocks are doing. We may see a trickle of new deals in the next few weeks."

The Dow jumped 413.21 to send the day at 9,265.43.

In fact, one of those sales might be coming from Illinois Power Co.

The utility is hoping to price senior secured notes, according to a form 8-K filed Monday with the Securities and Exchange Commission.

The exact size of the sale and the pricing date were unavailable by press time Monday.

The Rule 144A notes are going to be aimed at institutional buyers and a limited number of institutional accredited investors, said the SEC filing.

eBay files shelf

In other news from the SEC, eBay, Inc. filed a shelf registration Monday for the potential sale of debt securities.

The timing of the potential sale could not be determined by press time.

Proceeds from the sale will be used for general corporate purposes, according to the shelf registration statement.

Spreads firm

With the corporate bond market drawing strength from the rebound on Wall Street, which saw the bellwether Dow Jones Industrial Average rise over 400 points as investor confidence increased, a trader said that "as the day went on, we got a little better across the board - not breaking any records but generically, the feel was a little bit better."

He said that there was "two-way flow" in the market.

American Express tighter as earnings beat estimates

He noted that American Express "had some very good earnings," which came out after the close of stock trading. He said that generically he had seen the New York-based financial giant's bonds better bid for, although he had not seen an offered side.

"It seemed to put some pop in the bonds, which were trading really wide" before the numbers came out, at spreads of some 740 bps early in the day on the 2018 notes; by day's end, "they were down in the 600s," tightening to as low as 670 bps bid after the earnings news and going out somewhat inside of the 690 bps marker.

While American Express' third-quarter earnings fell more than 20% after the company set aside more money to cover growing losses in its credit card business, its operating earnings beat analysts' estimates - 74 cents per share, versus Wall Street expectations of earnings between 55 and 60 cents per share.

New issues trade tighter

Another trader said that recent new issues were trading tighter.

He saw International Business Machines Corp.'s new bonds "ended up doing OK, with its 6.50% notes due 2013 improving to 330 bps bid, 325 bps offered and the 7.625% notes due 2018 at 345 bps. Both of those levels were well in from the 387.5 bps spread over comparable Treasuries at which those bonds had priced on Oct. 9. Its 8% bonds due 2038, which had priced at 400 bps tightened to 357 bps bid.

Occidental Petroleum Corp.'s 7% notes due 2013 were at 388 bps bid, versus the 437.5 bps level at which those bonds priced on Thursday.

Diageo Capital's 7.375 % notes due 2014, which had priced at 462.5 bps, also on Thursday, came in to 440 bps.

Pacific Gas & Electric Co.'s 8.25% notes due 2018 were also trading at 440 bps bid, versus Thursday's issue price of 455.7 bps.

The trader meantime said that he saw no trading in the bonds of Exelon Corp., despite the news that the Chicago-based power generating company offered to acquire NRG Energy Inc. in a $6.2 billion all-stock deal.

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