Darden Restaurants, Citigroup, AmEx, HCP, ERAC USA, VF price issues, increase volume

By Andrea Heisinger and Paul Deckelman

Omaha, Oct. 10 - A variety of issuers came to the investment-grade market Wednesday, including Citigroup, ERAC USA, HCP, Inc., VF Corp., American Express and Darden Restaurants, Inc.

Issuance for the day totaled more than $11 billion.

Citigroup priced $3 billion of 5.3% five-year notes at 99.813 at a spread of Treasuries plus 98 basis points.

In the secondary market on Wednesday, a somewhat firmer tone was seen, with advancing issues outpacing decliners by around a seven-to-six ratio.

Citigroup's new 5-year issue was seen having tightened several basis points after the bonds were freed for aftermarket dealings, while such recently priced bonds as New York Life Global Funding and Deutsche Bank continued to be fairly well-bid for.

Returning to primary deals, the issue from ERAC USA was $2.75 billion in three parts.

The $500 million tranche of 5.8% five-year notes priced at 99.923 to yield 5.818% at a spread of Treasuries plus 145 bps, while the $1 billion tranche of 6.375% 10-year notes priced at 99.825 to yield 6.399%, at a spread of Treasuries plus 175 bps.

The $1.25 billion of 7% 30-year notes priced at 99.137 to yield 7.07% at a spread of Treasuries plus 220 bps.

American Express priced $1.5 billion in two parts, each $750 million of 5.55% five-year notes with a price of 99.875 to yield 5.579%, at a spread of Treasuries plus 122 bps.

HCP priced $600 million in 6.7% notes due 2018 at 99.793 to yield 6.73%, at a spread of Treasuries plus 210 bps.

VF Corp priced a two part issue, with the first tranche of $250 million 5.95% 10-year notes at 99.831 to yield 5.972%, at a spread of Treasuries plus 133 bps.

The $350 million tranche of 6.45% 30-year notes priced at 99.391 to yield 6.496%, at a spread of Treasuries plus 163 bps.

Darden beats talk

Darden Restaurants priced $1.15 billion of senior notes in three tranches. The $350 million tranche of five-year notes priced at a spread of Treasuries plus 133 bps, while the $500 million tranche of 10-year notes priced at Treasuries plus 158 bps and the $300 million tranche of 30-year notes priced at Treasuries plus 200 bps.

The tranches in this issue were adjusted after it launched with tranches of five, seven and 10-year notes.

All of the tranches priced a couple of basis points tighter than price talk.

Also pricing was Korea Export-Import Bank with $1.5 billion of 5.55% five-year global notes at 99.909 with a spread of Treasuries plus 116 bps.

The notes were trading at 115 bps bid, 113 bps offered after pricing, a source said.

An issue from Icelandic bank Kaupthing is expected to price Thursday, a source said. The issue launched at $300 million, with upsizing possible. Bookrunners are Citigroup, Credit Suisse, Deutsche Bank and Merrill Lynch.

Stability draws new deals

The market continued its recent stability, sources said, and that is expected to bleed into Thursday.

"I think we could see about the same thing tomorrow," one source said.

Volume was up, as were the number of issuers compared to Tuesday, which had about $9 billion in new issues, one source commented.

"We saw pretty much all financials yesterday, which was not entirely the case today [Wednesday], but the volume actually went up," the source said.

New Citigroup notes tighten

A trader saw Citigroup's new 5.30% notes due 2012 trading at a spread of 96 bps bid, 94 bps offered over Treasuries, in 2 bps from the bonds' 98 bps issue price earlier in the session.

Among recently priced issues in the sector, he saw the New York Life Global Funding 5¼% notes due 2012, which had priced at 92 bps over Treasuries on Tuesday, "wrapped around 90 [bps]," while Deutsche Bank's 5 3/8% notes due 2012, which had priced at 105 bps on Tuesday, were trading around 101 bps bid, 98 bps offered, around the same level to which they had moved in initial secondary trading on Tuesday.

Market holds early gains

"Things are better across the board," he observed. "Regional bank paper traded up a little bit, probably 5 bps or so."

He said that while he had seen "a strong bid" for paper, "it didn't continue through the day."

However, he added, "while we didn't continue to tighten, we did tighten first thing in the morning, and we held levels through the course of the day."

Most financials seen better

A market source at another desk also saw bonds in the key financial sector continuing to tighten from recent levels, with Bear Stearns & Co.'s 5.55% notes due 2017 now trading around 169 bps over the 10-year Treasuries - a narrowing of some 14 bps from where those bonds had been seen at the tail end of last week.

He also saw J.P. Morgan Chase's 5.15% notes due 2015 having come in about 11 bps from recent levels, to 105 bps, while its 6 1/8% notes due 2017 has come in by about 8 bps to 111 bps over. One of the biggest gainers he has seen is Lehman Brothers' 6½% notes due 2017, which have tightened to 145 bps over the last few sessions, a 15 bps pickup from last week. Lehman's 4% notes due 2008, now trading at 42 bps over Libor, are 5 bps tighter during that time frame.

One of the few downsiders is Merrill Lynch's 6.05% notes due 2017, which have widened out by about 7 bps to 107 bps over the five-year Treasury after the big brokerage warned that it will likely post a 50 cent per share loss in the just-passed third quarter, versus a hefty year-earlier profit.

Sprint eases on warning, CEO ouster

Another loser, the source pointed out, is Sprint Nextel's 6% notes due 2016, which retreated to 192 bps over, from 185 bps previously, after the big wireless operator warned that it was continuing to lose subscribers - a situation which resulted in heads rolling in the executive suite, notably that of ousted chairman and chief executive officer Gary Forsee, abruptly forced out by the company's board, effective immediately.

Among other non-financial names, the source saw AT&T Broadband's 8 3/8% notes due 2013 having narrowed by 14 bps over the past two sessions to 126 bps over.

The DaimlerChrysler 5 7/8% notes due 2011 narrowed by 10 bps to 104 bps.

A trader said he had not seen any activity in the bonds of Alcoa Inc. which reported third-quarter earnings that came in below Wall Street's expectations. The aluminum giant said earnings for the three months ended Sept. 30 rose just above 3% to $555 million, or 63 cents a share. Earnings excluding discontinued operations came in at 64 cents a share, just under the 65 cents analysts had generally expected.

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