Ingersoll-Rand, Citigroup, Wells Fargo, Brunswick, MetLife price; market weakens in afternoon

By Andrea Heisinger and Paul Deckelman

New York, Aug. 12 - Two large new issues from Ingersoll-Rand Global Holding Co. Ltd. and Citigroup Inc. priced late Tuesday and added to other deals done earlier in the day by Wells Fargo Capital XIV, Brunswick Corp. and MetLife, Inc.

It was another in a continuous string of productive days the primary market has seen lately, and sources said it could continue Wednesday.

The market weakened Tuesday afternoon, but barring any more setbacks there should be more companies pricing new issues, a source said, adding they had one strong possibility for Wednesday.

In the investment-grade secondary market Tuesday, advancing issues led decliners by a three-to-two ratio, while overall market activity, reflected in dollar volumes, jumped 48% from Monday's pace.

Spreads in general were seen wider, in line with notably lower Treasury yields; for instance, the yield on the benchmark 10-year note tightened 8 basis points to 3.99%.

Ingersoll-Rand prices wide

A $1.6 billion new issue from a unit of Ingersoll-Rand priced at the wide end of price talk late Tuesday, a source close to the deal said.

The market had weakened from the flat start to the day by the time the issue priced.

Despite this, the size of the issue was increased from two tranches to three, with $250 million of two-year floating-rate notes added due to demand, the source said.

These notes priced at par to yield three-month Libor plus 100 basis points.

The $600 million of five-year notes priced at a spread of 287.5 bps, which was at the wide end of guidance of 275 to 287.5 bps.

The third tranche was $750 million of 10-year notes priced at a spread of Treasuries plus 300 bps.

This was also at the wide end of talk, which was 287.5 to 300 bps.

Full terms for the issue were not available at press time.

The diversified industrial manufacturer wanted to get the larger size done, and there was demand for the two-year floaters, a source said, so the size was increased.

"We definitely had a couple of people interested in the two-year notes, so we decided to go for it," he said.

Proceeds from the issue will at least partially be used to pay for acquisition financing, so the company wanted to raise the money despite the weaker conditions later in the day, he added.

Bookrunners were Credit Suisse Securities, Goldman Sachs & Co. and J.P. Morgan Securities Inc.

Citi sells $3 billion

Citigroup also priced its issue late in the day, selling $3 billion of 6.5% five-year senior notes.

They priced at 99.941 to yield 6.514% with a spread of Treasuries plus 337.5 bps.

Citigroup Global Markets Inc. was bookrunner.

MetLife priced a previously announced issue of remarketed senior debt securities.

The $1.029805 billion of 6.817% 10-year notes priced at 100.35 to yield 6.768% with a spread of Treasuries plus 284 bps.

A source said they were talked at 287.5 bps.

The company remarketed the notes due to the terms of a previous offering of common equity units. The securities were originally marketed as 4.82% junior subordinated notes due 2039.

A financing unit of Wells Fargo priced $600 million, or 24 million, of 8.625% 60-year enhanced trust preferred securities at par of $25.

The preferreds priced at the tight end of talk, which was 8.625% to 8.75%, a source said.

They are non-callable for five years.

Citigroup, Merrill Lynch, Pierce, Fenner & Smith Inc. and Morgan Stanley & Co., Inc. ran the books.

Brunswick prices split-rated issue

Boat and leisure equipment manufacturer Brunswick priced a $250 million issue of split-rated notes Tuesday.

The 9.75% five-year senior notes priced at par to yield 9.75% with a spread of Treasuries plus 657.2 bps. There was no official price talk, a source close to the deal said.

They are rated Baa3 by Moody's and BB+ by Standard & Poor's.

Merrill Lynch, Banc of America and J.P. Morgan ran the books.

Issuance set to continue despite weakness

Primary market conditions weakened Tuesday afternoon, in part due to happenings in the secondary market, a source said.

"The market this morning was unchanged, so there was nothing to discourage [issuers]," a source said, but added that later: "It definitely deteriorated."

A strong equity market recently has buoyed the new issue market, partly because of lower oil prices. With those on the rise, along with some negative headlines, the streak may be over.

"Equities definitely had a strong week, but it's going downhill," a source said. "It was enough to spark a broader sell off."

The market open Wednesday will dictate the day's business, sources said.

"Things have been good for two days running, but we didn't have the strongest close today," one source said.

He said the secondary market, or more specifically the performance of Deutsche Telekom's recent notes, have signaled weaker conditions.

The company's 10-year notes were seen wider a day after pricing, he said. The wide pricing of Ingersoll-Rand's notes was also an indicator of a weak market, he said.

"Anyone looking at tomorrow is going to see these weaker data points and think twice [about pricing}," he said.

There is one potential "fairly high quality" issuer looking at tomorrow's market, but whether it prices depends on those opening conditions, the source said.

New Citi bonds key factor in secondary

In the secondary market, a trader saw "very little" on the new MetLife 6.817% notes due 2018, which priced at a spread over comparable Treasuries of 284 bps.

Instead, he said, "what has been driving the market more" was the new Citigroup 6.59% notes due 2013. He noted that the 337.5 bps bid spread at which the $3 billion of bonds priced was "about 50 [bps] behind where the original secondary piece was trading this morning.

After the new bonds had been freed for secondary dealings, he saw them move to a spread of 335 bps bid in the grey market.

The new bonds "widened [existing] Citi paper, obviously," he said, and widened out other financials "slightly. For the former, Citi's 5% notes due 2013 ballooned out to 311 bps on Tuesday versus their Monday finish at 270 bps - a 41 bps deterioration. In dollar-price terms, the bonds dropped more than 1½ points to just under 97, in very active mostly round-lot dealings.

Among other financials, Lehman Brothers Holdings' 5.25% notes due 2012 widened by 15 bps on the session to 400 bps.

New deals not much changed

Among the non-financials, a trader said that the new Southern California Edison 5.50% first mortgage bonds due 2018 were slightly tighter, at 153 bps bid, 152 bps offered, versus the 155 bps over at which the $400 million of bonds had priced on Monday.

He saw Entergy Louisiana LLC's $300 million of 6.50% notes due 2018 tighten to 245 bps bid, 243 bps offered from the 248 bps level at which they priced Monday.

There was no tightening seen in Deutsche Telekom's new issue; its 5.875% notes due 2013, which priced Monday at 265 bps over stayed there Tuesday, quoted at 265 bps bid, 262 bps offered, while its 6.75% notes due 2018 bonds moved out to 277 bps bid, 274 bps offered from their 275 bps level at Monday's pricing.

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