International Paper, Niagara Mohawk Power offer bonds; new deals strengthen; spreads tighten

By Andrea Heisinger

New York, Aug. 3 - International Paper Co. and Niagara Mohawk Power Co. sold bonds Monday to begin a potentially busy week.

The day's deals were oversubscribed and priced well, a source said. The upbeat tone is expected to spill into the coming few days.

Although the International Paper deal was a star performer, tightening more than 30 basis points soon after selling, the Niagara Mohawk Power bond also improved nicely, a trader said.

A bond from Target Corp. was trading heavily and is a sign that investors love retailers at the moment, a trader said.

Spreads were tighter by late Monday as Treasury yields widened significantly. The 10-year note was 15 bps wider at 3.63% while the 30-year bond was 10 bps worse.

International Paper offers $1 billion

Memphis-based paper and packing company International Paper sold $1 billion in 7.5% 12-year senior unsecured notes to yield Treasuries plus 387.5 bps.

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. ran the books.

Proceeds will be used to fund the purchase of three notes in tender offers, with the remainder for debt repayment and for general corporate purposes.

Niagara Mohawk sells upsized 10-year

Niagara Mohawk Power sold an upsized $750 million 4.881% 10-year notes at Treasuries plus 125 bps, a source away from the deal said.

The size was initially $500 million, the source said.

The sale was done via Rule 144A.

Bookrunners were Bank of America Merrill Lynch, Barclays Capital Inc. and Morgan Stanley & Co. Inc.

The electric company does business as National Grid and is based in Syracuse, N.Y.

Slow start to busy week

Although there was a small amount of new deals in the high-grade primary Monday, it wasn't indicative of the remainder of the week, a source said.

Market conditions were ideal, he said, with "deals screaming tighter."

"Deals were oversubscribed and tighter than whispered," he said. "There's definitely a bid out there for corporate bonds."

Two other sources at desks away from the source said they were looking at an active calendar for the next few days.

"I would say it's going to be very active," a source said. "I would imagine the same for everyone else."

This prediction was in line with that of the previous week. Several corporations did shelf filings with the Securities and Exchange Commission at the end of the week.

"It looks good out there," a source said. "It's nice to be busy."

International Paper makes solid gain

The new 7.5% bond due 2021 from International Paper was more than 35 bps better soon after it hit the secondary, a trader said in late afternoon.

The bond sold at 387.5 bps over Treasuries and was seen at 353 bps bid, 348 bps offered, he said.

Niagara Mohawk slightly better

The 4.881% bond due 2019 from electric company Niagara Mohawk Power was improved once it hit the secondary, a trader said. The bond sold at 125 bps over Treasuries and was quoted at 119 bps bid, 116 bps offered.

Colgate bond improves

The 3.15% bond due 2015 priced Friday by Colgate-Palmolive continued to improve in trading, a trader said.

The bonds were sold at 67 bps over Treasuries and were quoted at 55 bps bid, 50 bps offered on Monday. This is better than the 63 bps bid, 58 bps offered at which the issue was quoted on Friday.

Safeway holds tighter

Grocery retailer Safeway Inc. saw its 5% bond due 2019 improve slightly from its level in trading Friday, a trader said. The bond was at 140 bps bid, 135 bps offered, well in from the Treasuries plus 158 bps price. It was also slightly better than the 142 bps bid, 139 bps offered at which it was quoted on Friday.

Target, Nexen bonds popular

An outstanding 10-year note from Target and a recent sale from Nexen Inc. were among the top trades by early Monday afternoon, a trader said.

A 6% due 2018 from Target sat atop trading, while the 7.5% due 2039 from Nexen followed behind. The sale from Canadian oil and gas company Nexen followed behind after pricing a week ago.

There was not a specific reason for the Target bond to be so popular, a trader said, adding that "Target paper has been pretty active recently. Coming out of a recession is good for retailers."

Bank, broker CDS in slightly

Credit-default swaps for bank and brokerage names were better by late Monday, a trader said. The bank names were 3 to 5 bps tighter, while the brokers were 5 bps better "across the board," he said.

Altria, Petrobras top movers

Bonds from Brazil's Petrobras International Finance and Altria Group were among the day's top movers late Monday, a source said.

A 7.875% bond due 2019 from Petrobras was nearly 195 bps tighter than a week ago. The state-run oil company had several headlines for the day, including that they are close to reaching a refinery deal with a Venezuelan company and that they are not expecting to reach oil output goals for the year.

An outstanding 7.4% bond due 2014 from International Paper, which did a new deal Monday, was nearly 100 bps better than the previous week.

Altria's 9.25% bond due 2019 was about 20 bps wider than a week ago. The tobacco company announced positive earnings two weeks ago.

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