Delphi Financial sells bonds, SL Green plans preferred reopening; spreads ease amid 'malaise'

By Andrea Heisinger and Cristal Cody

New York, Jan. 14 - Volume in the high-grade market plummeted on Thursday as new deals were few and far between. Delphi Financial Group, Inc. was the only name to price bonds.

The Delphi sale went overnight from Wednesday and was $250 million of 10-year senior unsecured notes.

Sources said they were not sure why no one was selling bonds.

"I think there's just a lack of supply," a source said. "There wasn't a lot [expected] to price this week."

A market source said that spreads were "softer" for much of the day and that may have pushed companies on the fence about pricing away from the market.

SL Green Realty Corp. announced it will reopen an issue of 7.625% perpetual preferred stock. The shares will be priced at $25 each.

Barely a ripple was seen in the investment-grade secondary market on Thursday.

"It's just quiet," one trader said. "There's a general malaise hanging over the market right now."

On Thursday, the U.S. Treasury finished up the sale of $84 billion of bonds and Fannie Mae priced $4.5 billion in three-year Benchmark Notes at 29.5 basis points above U.S. Treasuries, a market source said.

The yield on the 10-year Treasury note tightened 5 bps to 3.74%. The yield on the 30-year bond also tightened to 4.63% from 4.71% a day earlier.

In secondary trading, Trace volume was "decent" at $8.5 billion by late afternoon, according to a source.

Overall trading dollar volume was reported down nearly 13% to more than $12 billion. Advancing issues stayed ahead of decliners.

The CDX Series 13 North American high-grade index was seen at a mid bid-asked spread level of 79.5 bps to 80 bps by one source. By the end of the day, the CDX Series 13 had eased 1 bp to 80 bps.

"Spreads are mostly a bit wider today," said one trader.

Delphi Financial sells 10-year

Delphi Financial Group priced $250 million of 7.875% 10-year senior unsecured notes to yield 7.875%, a source close to the sale said.

The notes have a spread of 414.1 bps over Treasuries.

The notes priced at a yield, and there was no price guidance, the source said. The sale was held overnight from Wednesday, and priced at a slight discount.

Bank of America Merrill Lynch and Wells Fargo Securities were bookrunners.

Proceeds are going for general corporate purposes and debt repayment, including that outstanding under a revolving credit facility.

The holding company for subsidiaries' employee benefit services is based in Wilmington, Del.

Deals dry up

Companies were not rushing to the high-grade market on Thursday, following three days of steady if unexciting issuance.

"We can blame the weekend," a syndicate source said, referring to the coming long weekend. "I think people are already kind of on vacation."

Friday is expected to have little to no issuance, with desks and companies regrouping in the coming week instead.

A preferred stock sale from SL Green Realty could price on Friday, a source away from it said. It's not likely it would be held over a three-day weekend, he said, adding that he hadn't seen it price by late on Thursday.

The market tone was "down a little," but hadn't made any major shifts from earlier in the week, the source said.

SL Green plans preferreds

SL Green Realty is planning a reopening of its issue of 7.625% perpetual cumulative preferred stock, according to a 424B5 filing with the Securities and Exchange Commission.

There are 6.3 million shares outstanding.

The shares will be priced at $25 each, with interest paid quarterly from Jan. 15 onward.

Bank of America Merrill Lynch is bookrunner.

Proceeds are being contributed to an operating partnership in exchange for additional units of limited partnership interest in an operating partnership with substantial identical terms as the preferred stock.

The real estate investment trust is based in New York City.

Brocade up in secondary

Brocade Communications Systems, Inc.'s new 6.625% notes due 2018 were quoted late Thursday at a price of 101.375 bid, 101.75 offered, according to a source. That was more than 2 points better than where they priced Wednesday, when they came to market at 99.239 to yield 6.75%, a spread of Treasuries plus 329 bps.

Brocade's 6.875% notes due 2020, which priced at 99.114 to yield 7% with a spread of 322 bps over Treasuries, were seen more than 3 points better in secondary trading at 102.5 bid 102.625 offered.

Despite its split ratings, the $600 million debt sale was done off the high-yield syndicate desks and was considered basically a junk deal.

One trader on Thursday saw Brocade's notes due 2018 at 102.5 bid, 102.75 offered.

he had the 2020 notes were quoted at 102.125 bid, 102.5 offered.

The San Jose, Calif.-based data networking solutions company plans to use the proceeds to retire $173 million in outstanding subordinated convertible notes originally issued by wholly owned subsidiary McDATA Corp.

Split-rated Icahn bonds gain, but slowly

A trader said that Tuesday's split-rated (Ba3/BBB-) mega-deal from Icahn Enterprises LP/Icahn Enterprises Finance Corp. "was up slightly today, but it still hasn't popped its head out of the water yet."

He said that the New York-based holding company's new $1.5 billion of 8% notes due 2018 got as good as 98.75 bid, 99 offered - still trading below the 99.275 level at which the bonds priced to yield 8.125% - while its $850 million of 7.75% notes due 2016 were in a 99 bid, 99.75 offered context, versus a 99.411 issue price to yield 7.875%.

After pricing on Tuesday, both tranches of bonds had tumbled down to 98-handle levels before firming slightly off those lows on Wednesday and again on Thursday.

The trader added that "they're slowly swimming to the surface - so maybe [Friday] will be the day" they get back above their respective issue prices.

- Paul Deckelman contributed to this report

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