Whirlpool, John Deere, two crossover deals are sold, bank bonds mixed on headlines

By Andrea Heisinger

New York, June 2 - The steady, if unexciting, stream of new deals into the high-grade bond market continued on Thursday with Whirlpool Corp., John Deere Capital Corp. and two split-rated names in the primary.

Whirlpool priced $300 million of 10-year notes in its first sale since April 29, 2009.

The financing arm of Deere & Co., John Deere Capital, sold an upsized $850 million of notes in two parts. A tranche of two-year floating-rate notes was added at the launch, and the five-year notes were upsized.

Other deals came from split-rated issuers Southern Natural Gas Co. selling jointly with Southern Natural Issuing Corp., and Coventry Health Care, Inc.

Southern Natural Gas sold $300 million of 10-year senior notes under Rule 144A.

They were joined by Coventry Health Care which priced $600 million of 10-year notes.

There wasn't a lot of change in the market's tone for the day despite several headlines having to do with the banking sector.

When asked if there was any effect on the primary, a source said "Not really."

Friday is expected to be quiet as companies reassess the market and non-farm payroll numbers come out.

On the secondary side of the market there was some focus on trading in paper from big banks as several headlines emerged.

Bonds from Morgan Stanley, Bank of America Corp. and Goldman Sachs Group Inc. were being heavily traded. Moody's Investor Services announced that is was putting senior and senior subordinated debt from Bank of America, Citigroup Inc. and Wells Fargo & Co. under review for possible downgrade. The rating agency cited increasing political unwillingness to aid banks.

Also in the news was Goldman Sachs as it was subpoenaed by prosecutors in Manhattan over its role in the financial meltdown.

In the secondary market, notes from one of Wednesday's deals, Applied Materials Inc., were seen moving tighter in next-day trading.

The new Whirlpool bonds were seen wrapped around their issue price while Coventry Health Care's 10-year notes quickly moved tighter.

Overall Trace volume was seen a little better than the previous day at $9.2 billion.

It was "not a very exciting day," according to one trader, who said that it fell between Wednesday when stocks took a hit and Friday when payroll numbers come out.

"We have a lot of new issues - high quality and borderline - and all-in yields are down," he said.

The source also mentioned Goldman and the Moody's bank downgrade news as perhaps affecting trading.

Goldman Sachs bonds seemed largely unaffected by the headlines, maybe about 4 bps wider than the 10-year benchmark, he said.

Some banks' credit default swaps took a hit, a trader said.

Whirlpool increases 10-year

Whirlpool sold an upsized $300 million of 4.85% 10-year notes (Baa3/BBB-/BBB) to yield Treasuries plus 183 bps, according to an FWP filing with the Securities and Exchange Commission.

The size was increased from $250 million, a source said. The notes priced in line with talk in the "high hundreds," according to a source.

BNP Paribas Securities Corp., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and RBS Securities Inc. were bookrunners.

Proceeds are being used for general corporate purposes including repayment of 6.125% debt maturing on June 15.

They were seen trading slightly wider on the bid side at 184 bps, a source said. They were slightly better on the offer side at 181 bps.

The appliance maker is based in Benton Harbor, Mich. Its April 2009 sale was made up of $850 million of bonds in two parts.

John Deere upsizes

John Deere Capital upsized its sale to $850 million of notes (A2/A) in two maturities late in the day, an informed source said.

A tranche of two-year floating-rate notes was added to the deal at the launch, and the original five-year note size was increased, a source said.

That $350 million of two-year floaters priced at par to yield three-month Libor plus 15 bps.

The second part was $500 million of 2.25% five-year notes priced at a spread of Treasuries plus 65 bps. The size of the tranche was increased from $300 million, the source said, and it priced at the tight end of guidance in the 70 bps area.

Bookrunners were Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC.

Proceeds are being used for general corporate purposes.

The financing arm of heavy equipment maker Deere & Co. is based in Reno, Nev.

Coventry offers $600 million

Coventry Health Care sold $600 million of split-rated 5.45% 10-year senior notes (Ba1/BBB-/BBB-) at a spread of Treasuries plus 245 bps, an informed source said.

It priced at the low end of guidance in the 250 bps area, the source said. The source added that there was about $2 billion in demand on the books.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds will be used for the repayment, redemption or repurchase of debt and for general corporate purposes.

The 10-year notes almost immediately moved tighter in trading, with a source quoting them 4 bps better at a bid of 241 bps in the gray market. Later, after pricing, another source quoted them much tighter at a bid of 231 bps and offer of 223 bps, or about a 15 to 20 bps gain.

The managed healthcare company is based in Bethesda, Md.

Southern Natural's split deal

Southern Natural Gas and Southern Natural Issuing sold $300 million of split-rated 4.4% 10-year senior notes to yield Treasuries plus 140 bps, according to a press release and market source.

The notes (Baa3/BB/BBB-) were sold under Rule 144A and Regulation S.

Bookrunners were BNP Paribas Securities Corp., J.P. Morgan Securities LLC, RBS Securities Inc. and Scotia Capital (USA) Inc.

Proceeds are being used for general partnership purposes.

The notes were not immediately seen trading, a source said.

The natural gas pipeline unit of El Paso Corp. is based in Birmingham, Ala.

Bank names trade heavily

Bonds from banking giants like Morgan Stanley, Bank of America and JPMorgan Chase & Co. saw heavy trading in certain issues as of early afternoon, a source said.

A 5.75% note due 2021 from Morgan Stanley was one of the most heavily-traded.

Bank of America's 5% notes due 2021 came in right behind in volume.

Multiple bonds from JPMorgan Chase were among the day's biggest traders with its 4.625% due 2021 and 2.05% due 2014 changing hands the most.

Goldman Sachs watched its 6% notes due 2020 and newer 3.625% bonds due 2016 trade heavily.

Applied Materials tightens

The three new bonds from the Applied Materials sale were seen tighter across the board, a market source said.

The biggest movement came from the 2.65% notes due 2016 which were 8 to 10 bps tighter at 99 bps bid, 97 bps offered.

The 5.85% bonds due 2041 were seen between 6 and 9 bps better than their 175 bps price. They were quoted at a bid of 169 bps and offer of 166 bps.

The tranche of 4.3% notes due 2021 were also tighter at a bid of 135 bps and offer of 130 bps. They priced at 138 bps over Treasuries.

Bank CDS seen weaker

A trader who watches the credit default swaps market said that "the banks took a little licking" after Moody's said that it would review the ratings for Bank of America, Citigroup and Wells Fargo for a possible downgrade.

Moody's said that its ratings review will "focus on whether these ratings should be adjusted to remove this unusual uplift and include only pre-crisis levels of government support."

The trader said that the cost of protecting holders of bonds issued by Bank of America against a possible event of default via CDS contracts rose as much as 7 bps on the day, a sign of lessened investor confidence, before coming off that peak level and going out 4 bps higher on the day at 153 bps bid, 156 bps offered.

He said that Citigroup's CDS costs widened out by as much as 8 bps on the day before ending at 131 bps bid, 135 bps offered, out 5 bps on the day, while Goldman Sachs also ended out 5 bps on the day at 154 bps bid, 159 bps offered.

However, J.P. Morgan's CDS cost actually went down by several basis points, a sign of improved investor sentiment, finishing at 77 bps bid, 80 bps offered. He cited statements by the company's chief executive officer, Jamie Dimon,

-Paul Deckelman contributed to this review

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